ITO, Ward-5(1), KOlkata V. Shreen Hire Purchase (P) Ltd, Kolkata

ITA 22/KOL/2021

AI Insights

The case revolves around an appeal by the Income Tax Officer against the order of the CIT(A) which had deleted the addition made by the Assessing Officer on account of share capital and premium received by Shreen Hire Purchase (P) Limited. The Assessing Officer had treated the share capital and premium of Rs.85,61,00,000 as unexplained under section 68 of the Income Tax Act due to non-compliance with summons under section 131. However, the CIT(A) found that the assessee had provided sufficient evidence to prove the genuineness of the transactions and the creditworthiness of the investors. The Tribunal, after considering the submissions and evidence, upheld the CIT(A)'s decision, dismissing the Revenue's appeal.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 129050 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 6 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-08-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 08-06-2023
• Assessment Year: 2012-2013
• Appeal Filed On: 02-02-2021
• Other Referred Cases: Pr. CIT(Central)-1, Kolkata vs NRA Iron & Steel Pvt. Ltd(412 ITR 161), CIT-vs.- Orissa Corporation Pvt. Limited (1986) 159 ITR 78 (SC), CIT \\u2013vs.- Sagun Commercial (P) Limited, Cheminvest Ltd. CIT 378 ITR 33 (Del)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Earning of tax free income; Source of fund; Rule 8D
• Section: 131; 68; 143(3); 14A; 133(6); 143(1); 250

Judgement Text

ITA No. 22/KOL/2021 Assessment Year: 2012-2013 Shreen Hire Purchase (P) Limited 1 IN THE INCOME TAX APPELLATE TRIBUNAL, ‘C’ BENCH, KOLKATA Before Shri Rajesh Kumar, Accountant Member & Shri Sonjoy Sarma, Judicial Member I.T.A. No. 22/KOL/2021 Assessment Year: 2012-2013 Income Tax Officer,................................Appellant Ward-5(1), Kolkata AayakarBhawan, P-7, Chowringhee Square, Kolkata-700069 -Vs.- Shreen Hire Purchase (P) Limited,...........Respondent 89, N.S. Road, Kolkata-700001 [PAN: AAMCS4023L] Appearances by: Shri Manoj Kataruka, Advocate, appeared on behalf of the assessee Shri Vijay Kumar, Addl. CIT, Sr. D.R., appeared on behalf of the Revenue Date of concluding the hearing :June 09, 2023 Date of pronouncing the order :8 th August, 2023 O R D E R Per Rajesh Kumar, Accountant Member:- The Revenue is in appeal before the Tribunal against the order of ld. Commissioner of Income Tax (Appeals)-7, Kolkata dated 19.08.2020 passed under section 250 of the Income Tax Act, 1961 for A.Y. 2012- 13. ITA No. 22/KOL/2021 Assessment Year: 2012-2013 Shreen Hire Purchase (P) Limited 2 2. The Revenue has raised the following grounds of appeal:- “(1) That on the facts and in the circumstances of the case, Ld, CIT(A) was justified in the deleting the addition of Rs.85,61,00,000/--made by the Assessing Officer on account of share capital and premium in the course assessment in absence of identity of the creditors, genuineness and creditworthiness of the entire transactions. (2) That on the facts and in the circumstances of the case, Ld, CIT(A) was justified in the deleting the addition of Rs.85,61,00,000/- made by the Assessing Officer where no personal attendance was made by any director of the share allottee companies during the course of assessment proceedings and as such identity & creditworthiness of the creditors and genuineness of transactions could not be verified. (3) That on the facts, the principles which has been laid down by the Hon'bleSuprement Court in the case of Pr. CIT(Central)-1, Kolkata vs NRA Iron & Steel Pvt. Ltd(412 ITR 161) suggests that "the assessee is under a legal obligation to prove the receipt of share capital/premium to the satisfaction of the A.O., failure of which, would justify addition of the said amount to the income of the assessee". In the facts and under the circumstances of the case, the assessee company has failed to do so other than submission of mere statements of various kinds. Thus, the decision of the Ld. CIT(A) is erroneous in holding that the raised share capital was not the assessee's own income. (4) That on the facts, the principle which has been laid down by the Hon'ble Supreme Court in the case of Pr. CIT(Central) -1, Kolkata vs NRA iron & Steel Pvt. Ltd. (412 ITR 161) also suggests that the Assessing Officer is duty bound to investigate the creditworthiness of the creditor /subscriber, verify the identity of the subscribes, and ascertain whether the transaction is genuine, or these are bogus entries of name lenders,. In the facts of the case, in spite of best efforts made by the assessing officer, he could not verify the same as there was no response from the companies to whom share were allotted on private placement basis. Thus, the decision of the Ld. CIT(A) is ITA No. 22/KOL/2021 Assessment Year: 2012-2013 Shreen Hire Purchase (P) Limited 3 erroneous in holding that the raised share capital was not the assessee's own income. (5) That on the facts, the principles which has been laid down by the Hon'ble Supreme Court in the case of Pr. CIT(Central)-l, Kolkata vs NRA Iron & Steel Pvt. Ltd. (412 ITR 161) also suggests that if the enquiries and investigations reveal that the identity of the creditors to be dubious or doubtful, or lact credit-worthiness. Then the genuineness of the transactions would not be established. In such a case, the assessee would not have discharged the primary onus contemplated by Section of the act, In the facts of the case, the Ld. CIT(A) completely ignored this aspect, thus he has erred in giving relief to the assessee. (6) That on the facts of the present case, clearly the Assessee Company failed to discharge the onus required under section 68 of the Act, the Assessing Officer was justified in adding back the amounts to the income of the Assessee and the Ld. CIT(A) has erred in allowing relief to the assessee. (7) That on the facts, in absence of verification, Ld. CIT(A) should have remanded the matter to A.O. for fresh verification. Thus, he has violated the provisions of Rule 46A of the I. T. Rules (8) That on the facts, the appellant craves to add, alter, amend, delete or substitute any of the grounds and/or take additional grounds before or at any time of hearing of this appeal. (9) That on the facts, further the Assessing Officer made disallowance of Rs. 4,50,892/-as u/s. 14A r.w. Rule 8D which has been deleted by the CIT(A)-7, Kolkata. The CIT(A) was not justified denying the findings of the Assessing Officer. 3. At the time of hearing, we observe that the Registry has pointed out that there is a delay of 12 days in filing the appeal and the assessee has not filed any petition for condonation of delay. We observe that the order of ld. CIT(Appeals) was received on November, 2020, whereas ITA No. 22/KOL/2021 Assessment Year: 2012-2013 Shreen Hire Purchase (P) Limited 4 the appeal was filed on February, 2021, which is covered by the decision of the Hon’ble Supreme Court in Miscellaneous Writ Petition vide order dated 10.01.2022, whereby the period of limitation is extended from 15.03.2020 to 28.02.2020. Since the above period falls within the period as mentioned in the above order, the Revenue’s appeal is deemed to have been filed within the due date. 4. The common issue raised by the Revenue in various grounds of appeal from ground Nos. 1 to 7 is against the deletion of addition of Rs.85,61,00,000/- by the ld. CIT(Appeals) as made by the ld. Assessing Officer on account of share capital/ share premium being unexplained under section 68 of the Act. 5. The facts in brief are that the assessee filed its return of income on 21.09.2012 showing total income of Rs.7,818/-, which was processed under section 143(1) of the Act. The case of the assessee was selected for scrutiny assessment under CASS and statutory notices were duly issued and served upon the assessee. In compliance to the said notice, Shri V.K. Jain, A.R. of the assessee appeared and filed various details as called for alongwith the books of accounts, which were test checked by the ld. Assessing .Officer during the assessment proceedings. On perusal of the balance-sheet of the assessee, the ld. Assessing Officer observed that the ITA No. 22/KOL/2021 Assessment Year: 2012-2013 Shreen Hire Purchase (P) Limited 5 assessee had issued 4,28,050 equity shares at the rate of Rs.1/- each and a premium of Rs.1,999/- and thereby received Rs.85,61,00,000/- as share capital and share premium. The ld. Assessing Officer, in order to verify the genuineness of the said transactions and to verify the identity and creditworthiness of the shareholders of the assessee-company, issued notices under section 131 of the Income Tax Act to the Directors of all the shareholder/share subscribers companies in the assessee and they were asked to appear personally before the ld. Assessing Officer and to produce/furnish necessary details/ documents in support of the investments made in the assessee-company. However, none of them appeared before the ld. Assessing Officer. Thereafter the ld. Assessing Officer issued show-cause notice to the assessee on 13.03.2015 informing the assessee that the summons issued under section 131 of the Act were not complied with and accordingly issued show-cause as to why share application money received should not be treated as bogus and unexplained under section 68 and added to the income of the assessee. Accordingly the ld. Assessing Officer held that the assessee has failed to furnish any plausible explanation and, therefore, the entire money received amounting to Rs.85,61,00,000/- was treated as unexplained and added to the income of the assessee in the assessment framed under section 143(3) of the Act dated 29.03.2015. ITA No. 22/KOL/2021 Assessment Year: 2012-2013 Shreen Hire Purchase (P) Limited 6 6. Aggrieved, the assessee preferred an appeal before the ld. CIT(Appeals) challenging the addition made by the ld. Assessing Officer. The ld. CIT(Appeals) in the appellate proceedings allowed the appeal of the assessee after taking into consideration the contentions and submissions made by the assessee and also after examining the evidences furnished in support of the money received from 31 shareholders. The ld. CIT(Appeals) while allowing the assessee on this issue observed and held as under:- ITA No. 22/KOL/2021 Assessment Year: 2012-2013 Shreen Hire Purchase (P) Limited 7 ITA No. 22/KOL/2021 Assessment Year: 2012-2013 Shreen Hire Purchase (P) Limited 8 ITA No. 22/KOL/2021 Assessment Year: 2012-2013 Shreen Hire Purchase (P) Limited 9 ITA No. 22/KOL/2021 Assessment Year: 2012-2013 Shreen Hire Purchase (P) Limited 10 ITA No. 22/KOL/2021 Assessment Year: 2012-2013 Shreen Hire Purchase (P) Limited 11 ITA No. 22/KOL/2021 Assessment Year: 2012-2013 Shreen Hire Purchase (P) Limited 12 ITA No. 22/KOL/2021 Assessment Year: 2012-2013 Shreen Hire Purchase (P) Limited 13 ITA No. 22/KOL/2021 Assessment Year: 2012-2013 Shreen Hire Purchase (P) Limited 14 ITA No. 22/KOL/2021 Assessment Year: 2012-2013 Shreen Hire Purchase (P) Limited 15 7. The ld. D.R. vehemently submitted before the Bench that the ld. CIT(Appeals) has allowed the appeal of the assessee by ignoring the fact that the share subscribers, who invested in the share capital of the assessee- company have failed to comply the summons issued under section 131 of the Act and, therefore, necessary verification as to identity, creditworthiness of the subscribers and genuineness of the transactions could not be carried out. The ld. D.R. submitted that mere filing of the documents in respect of share subscribers would not per se proves the three ingredients as provided ITA No. 22/KOL/2021 Assessment Year: 2012-2013 Shreen Hire Purchase (P) Limited 16 under section 68 of the Act. The ld. D.R. submitted that though the assessee has filed the requisite details, such as Master Data of the subscribers, reply to 133(6) notices issued, certificate of source of funds, copy of bank statements, allotment letters, Board Resolutions, share application forms, audited financial statements and copies of the assessment orders under section 143(3)/147 in the case of subscribers. However, the fact remains that these could not be verified on account of non-appearance of the Directors of the investor companies. The ld. D.R., therefore, prayed that since the three ingredients as provided under section 68 of the Act have not been satisfied, therefore, the order passed by the ld. CIT(Appeals) is incorrect and may be reversed by restoring the order of ld. Assessing Officer. 8. The ld. A.R., on the other hand, relied heavily on the order of ld. CIT(Appeals) by submitting that the assessee has filed all the documents as called for by the ld. Assessing Officer in support of its claim evidencing the receipt of money from the share subscribers along with the books of account. The ld. A.R. also submitted that the documents as required by the ld. Assessing Officer were duly furnished and copies thereof were also filed before the ld. CIT(Appeals) as well as before the AO, which are attached from pages no. 102 to 1164. The ld. A.R. stated that the ld. Assessing Officer has issued notices under section 133(6) of the Act to the share ITA No. 22/KOL/2021 Assessment Year: 2012-2013 Shreen Hire Purchase (P) Limited 17 subscribers and which were duly responded explaining the source of funds and also confirming the investments have not been made in the assessee-company. The ld. A.R. also pointed out that there is no bar in issuing shares at a premium or high premium as this is a management decision to decide as to how the shares were to be allotted and at what price to be issued. The ld. A.R. argued that in most of the cases, the assessments have been framed under section 143(3) of the Act and in some cases under section 143(3)/147 of the Act and copies of the assessment order are placed in the paper book. The ld. A.R. while referring to the appellate order, which refers to the decision of the Hon’ble Supreme Court in the case of CIT-vs.- Orissa Corporation Pvt. Limited reported in (1986) 159 ITR 78 (SC), argued that where the assessee has filed all the evidences comprising names and addresses of the alleged creditors and it was in the knowledge of Revenue that the said creditors were income-tax assessees and their PANs were available with the Revenue and the Revenue not pursing the matter apart from issuing summons under section 131 of the Act, then the addition cannot be made on the basis of non-compliance made to the summons under section 131 of the Act thereby upholding the decision of the Hon’ble High Court, which has ,in turn, affirmed the decision of the Tribunal. The ld. A.R. referred to the para 4.3 of the appellate order and submitted that in each case, the ld. 1 st Appellate Authority analysed the source of money of ITA No. 22/KOL/2021 Assessment Year: 2012-2013 Shreen Hire Purchase (P) Limited 18 the investor companies and detailed findings were recorded that the investments were within the resources available to the investor companies. The ld. A.R. while referring to para 4.4 of the appellate order submitted that in the case of 36 share subscribers, their cases were either scrutinized under section 143(3) or under section 147 or their returned income have been accepted and thereafter the ld. A.R. referred to the profiles of the of the subscriber companies as discussed by the appellate authorities in the appellate order in the same paragraph. The ld. A.R. therefore, prayed that since the assessee has proved all the parameters as required under the Act, therefore, the order passed by the ld. CIT(Appeals), which is otherwise a very speaking and reasoned one may kindly be upheld by dismissing the appeal of the Revenue. 9. We have heard the rival contentions, perused the relevant material placed before us and the impugned order passed by the ld. CIT(Appeals). We observe that the assessee has raised share application money from 36 subscribers and during the assessment proceedings, the ld. Assessing Officer has issued notices under section 133(6) of the Act to the subscribers, which were duly responded by furnishing the necessary evidences and also confirming the investments having been made in the assessee-company. We also notice that the assessee has also furnished all the information before the ld. ITA No. 22/KOL/2021 Assessment Year: 2012-2013 Shreen Hire Purchase (P) Limited 19 Assessing Officer with necessary evidences comprising PANs, addresses, source of funds, bank statements, allotment letters, Board Resolutions, share application forms, ITRs and audited financial statements, copies of assessments framed by the Department in the cases of subscribers and all these are part of the record before both the authorities below. Besides, the ld. Assessing Officer issued summons under section 131 of the Act to all the subscribers to enforce the personal appearance of the Directors of the investor companies, however, the same were not complied with by the subscribers. The ld. Assessing Officer came to the conclusion that on the basis of above non-compliance of the subscribers to the summons issued under section 131 of the Act that the identity and creditworthiness of the investors and genuineness of the transactions could not be substantiated and therefore, treated the entire share capital as unexplained under section 68 of the Act and added to the income of the assessee. The ld. CIT(Appeals) by appreciating the same facts and evidences as are placed before the ld. Assessing Officer and also before the Tribunal, copies thereof are comprised in the paper book from pages no. 102 to 1164, allowed the appeal of the assessee by holding that the assessee has proved the identity and creditworthiness of the investors and also the genuineness of the transactions. We observe that the ld. CIT(Appeals) has referred to the decision of the Hon’ble Supreme Court in the case of Orissa Corporation ITA No. 22/KOL/2021 Assessment Year: 2012-2013 Shreen Hire Purchase (P) Limited 20 Pvt. Limited (supra),wherein the Hon’ble Apex Court has held that the assessee has given the necessary evidences in the form of PAN, addresses etc. of the alleged creditors to the ld. Assessing Officer and it was in the knowledge of the Revenue that the said creditors were income tax assessees. The Hon’ble Apex Court has held that there was no effort made to pursue the so-called alleged creditors and the assessee could not do any further. Under these circumstances, the Hon’ble Apex court, has held that the sundry creditors cannot be said to be unexplained and added to the income of the assessee. A perusal of para 4.3 of the appellate order reveals that the ld. CIT(Appeals) has analysed the share capital reserves, net worth of the subscribers and their investments in the assessee-company and also the percentage which the investment made in the assessee-company holds to be total net worth of the subscribers and also appended the observation that in case of 36 investors, their assessments were either framed under section 143(3)/147 or their returns of income have been accepted by the ld. Assessing Officer, Thereafter in para 4.4, the ld. CIT(Appeals) discussed the profiles and the assessment status of each subscriber company. The ld. CIT(Appeals) also referred to the decision of the Hon’ble Jurisdictional High Court in the case of CIT –vs.- Sagun Commercial (P) Limited (supra), wherein the Hon’ble High Court has held that where the assessee has filed before the ld. Assessing Officer the evidences of Permanent ITA No. 22/KOL/2021 Assessment Year: 2012-2013 Shreen Hire Purchase (P) Limited 21 Account Numbers, payment details of shareholding and other bank transactions relating to those payments and the ld. Assessing Officer failed to consider these documentary evidences produced by the assessee, then the addition cannot be made in the hands of assessee by upholding the order of the CIT(Appeals). Similarly the ld. CIT(Appeals) has discussed several decisions in the appellate order and finally recorded a finding that the identity, genuineness and c were duly filed by the assessee and deleted the addition. Having considered the above facts and circumstances, we are inclined to uphold the order of the ld. CIT(Appeals) as the Revenue could not bring any evidence to the contrary before us. Accordingly, ground no. 1 to 7 of the revenue appeal are dismissed by upholding the order of ld. CIT(Appeals) on this issue. 10. The ground no. 8 is general. 11. The issue raised in ground no. 9 is against the deletion of addition of Rs. 4,50,892/- by the ld CIT(A) as made by the ld AO u/s 14A t.w. rule 8D. 12. The facts in brief that the assessee did not have any exempt income during the year which is undisputed. The the AO invoked provisions of section 14A of the Act and calculated the disallowance at Rs. 4,50,892/-.The ld CIT(A) deleted the disallowance on the ground that since there was no exempt income earned during the year , no ITA No. 22/KOL/2021 Assessment Year: 2012-2013 Shreen Hire Purchase (P) Limited 22 disallowance can be made by relying on the decision of Hon’ble Delhi High Court Cheminvest Ltd. CIT 378 ITR 33 (Del)which is the correct position of law as on date. Accordingly we uphold the order of ld CIT(A) on this issue by dismissing ground no. 9 of the revenue appeal. 13. In the result, the appeal of the Revenue is dismissed. Order pronounced in the open Court on 8 th August, 2023. Sd/- Sd/- (SonjoySarma) (Rajesh Kumar) Judicial Member Accountant Member Kolkata, the day of 8 th August, 2023 Copies to : (1) Income Tax Officer, Ward-5(1), Kolkata AayakarBhawan, P-7, Chowringhee Square,Kolkata-700069 (2) Shreen Hire Purchase (P) Limited, 89, N.S. Road, Kolkata-700001 (3) Commissioner of Income Tax(Appeals)-7, Kolkata; (4) Commissioner of Income Tax-; (5) The Departmental Representative (6) Guard File TRUE COPY By order Assistant Registrar, Income Tax Appellate Tribunal, Kolkata Benches, Kolkata Laha/Sr. P.S.