ITO, Ward - 5(1) , Kolkata V. M/s. Subhavani Projects Pvt. Ltd., , Kolkata

ITA 2609/KOL/2018

AI Insights

The case revolves around an appeal by the Income Tax Officer, Ward-5(1), Kolkata against M/s Subhavani Projects Pvt. Ltd concerning the assessment year 2012-13. The primary issue was the addition of Rs.3,40,00,000 as unexplained cash credit under section 68 of the Income Tax Act, due to the share capital and premium raised by the respondent company. The Assessing Officer had initially made this addition following the non-appearance of the company's directors in response to summons under section 131. However, the CIT(A) reversed this decision after examining the evidence, which included confirmations and documents from the share subscribers, and noted that the subscribers were assessed under the Income Tax Act and had sufficient net worth. The Tribunal agreed with the CIT(A)'s findings, emphasizing that the same amount cannot be taxed twice under section 68.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 128253 (ITAT-KOLKATA)
• Duration Of Justice: 4 year(s) 3 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-04-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 15-02-2023
• Assessment Year: 2012-2013
• Appeal Filed On: 16-12-2018
• Other Referred Cases: Mahacol Tie Up (P) Ltd. vs ITO, DCIT vs. M/s Maa Amba Towers Ltd., Steelex India (P) Ltd vs. ITO, Ward-3(2), Kolkata, PCIT, Panji vs. Paradise Inland Shipping Pvt. Ltd, Crystal networks (P) Ltd. vs CIT
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Source of fund
• Section: 131; 68; 143(3); 133(6); 250

Judgement Text

आयकर अपीलȣय अͬधकरण, कोलकाता पीठ ‘बी’, कोलकाता IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH KOLKATA Įी संजय गग[, ÛयाǓयक सदèय एवं Įी मनीष बोरड, लेखा सदèय के सम¢ Before Shri Sanjay Garg, Judicial Member and Dr. Manish Borad, Accountant Member I.T.A No.2609/Kol/2018 Assessment year: 2012-13 ITO, Ward-5(1), Kolkata..........................................................Appellant vs. M/s Subhavani Projects Pvt. Ltd..............................................Respondent Baid Mansion, 10 th Floor, Room No.1515, 4, Synagogue Street, Kol-1. [PAN: AARCS1202Q] Appearances by: Shri P. P. Barman, Addl. CIT-DR, appeared on behalf of the appellant. Shri Rajeeva Kumar, Adv., appeared on behalf of the Respondent. Date of concluding the hearing : February 16, 2023 Date of pronouncing the order : April 05, 2023 आदेश / ORDER संजय गग[, ÛयाǓयक सदèय ɮवारा / Per Sanjay Garg, Judicial Member: The present appeal has been preferred by the revenue against the order dated 17.08.2018 of the Commissioner of Income Tax (Appeals)-7, Kolkata [hereinafter referred to as the ‘CIT(A)’] passed u/s 250 of the Income Tax Act (hereinafter referred to as the ‘Act’). 2. The brief facts of the case are that the appellant, during the year, raised share capital of share capital of Rs.7,78,000/- along with the share premium of Rs. 3,32,22,000/- (Rs.3,40,00,000/- in aggregate) from the 6 share applicants by issuing 67,800 number of shares having face value of Rs.10/- on premium of Rs.490/-. A sum of Rs.1,00,000/- was invested by the promoters of the assessee company. In the course of the assessment proceedings, the Assessing Officer made requisite I.T.A No.2609/Kol/2018 Assessment year: 2012-13 M/s Subhavani Projects Pvt. Ltd 2 enquiries in respect of the capital raised by the assessee. Notices u/s 133(6) were issued to all the share applicants and in response, they all confirmed the transactions & furnished details/documents as called for. The share applicants also submitted the details of their source of fund. Later, the AO issued summons u/s.131 of the Act to Directors of the assessee as well as of subscriber companies to appear before him in person and in response, only certain requisitions were submitted but the directors could not appear in person. Due to the non-appearance of the directors before the AO in person in response to the summons u/s.131 of the Act, it was held that the identity & creditworthiness of the shareholders and the genuineness of the transactions couldn't be proved. Ultimately, the Assessing Officer framed assessment on 31.03.2015 u/s 143(3)/144 determining total income of Rs.3,40,02,930/- inter-alia making addition of the entire share capital of Rs.3,40,00,000/- raised from 6 parties as unexplained cash credit in terms of section 68 of the Act. 3. However, the ld. CIT(A) examined the details and evidences furnished by the assessee. It was submitted before the CIT(A) that all the share subscribers were duly assessed under the Income Tax Act and they were having sufficient net worth to make investment in the assessee company. The ld. CIT(A), considering the detailed submissions and evidences furnished by the assessee, deleted the additions so made by the Assessing Officer, observing as under: “3. Conclusion: Ground No.1: I have considered the order of the A.O as well as the submission of the appellant. I have also considered the judicial decisions relied upon by the appellant. The facts of the case have already been discussed as above. It is observed that in the year under consideration the appellant company had raised share capital of Rs.3,40,00,000/- from 6 I.T.A No.2609/Kol/2018 Assessment year: 2012-13 M/s Subhavani Projects Pvt. Ltd 3 parties. In the course of the assessment proceedings, to verify the receipt of share capital, the AO issued notices u/s.133(6) to all the 6 share applicants and in response, they all confirmed the transactions and submitted the details/documents in respect of the subscription of shares of the appellant. In the course of the appellate proceedings, the appellant filed copy of each of the assessment orders passed in all the 6 cases of the shareholders. Besides, the income-tax return filing acknowledgments, Audited Balance Sheets as on 31.03.2012, relevant bank statements, confirmation of subscription of shares & source of fund, copy of the notices issued u/s.133(6) to the share holders and reply thereof were also submitted. It is observed from the details & documents furnished by the appellant that in the cases of 5 share holders, the Assessment Orders for the AY 2012-13 were passed u/s.143(3) without taking any adverse view. Therefore, it can be assumed that the respective Assessing Officers have all verified the accounts and therefore any amount that is credited from these five companies to the assessee company is fully explained. The assessment in the case of the 6th share holder, i.e. M/s. Genistra Construction (P) Ltd was also passed u/s.143(3) where additions u/s 68 & u/s.14A of the Act were made. Therefore, the entire capital of M/s. Genistra Construction (P) Ltd had been added its hands u/s 68 of the I.T. Act. Thus, once an amount is already taxed, whatever investment is being made out of it in the assessee company can be treated as explained and the same cannot be taxed again. Further, it is apparent from the records that the notices u/s.133(6) issued to the shareholders were served on their respective address by the postal authorities and in response, they confirmed the transactions and also submitted the details of the source of funds for making investments. Hence, the identity & creditworthiness of the shareholders are not in doubt. There is no doubt over the genuineness of the transactions as well since all the share application money was received through banking channel. As such, the issue for my consideration is -whether the share capital of Rs.3,40,00,000/- raised during the year by the appellant can be treated as unexplained cash credit u/s. 68 of the Act. Therefore, the identity & creditworthiness of the shareholders & the genuineness of the transactions are not in doubt and merely for the failure of the directors of the assessee & the shareholders to appear before the AO in person in response to the summons issued to them u/s.131 of the Act, the addition was made which in my considered view was unjustified. In view of the facts and circumstances of the case, it is held that the addition of Rs.3,40,00,000/- for the share capital raised by the appellant from 6 share applicants as unexplained cash credit u/s 68 of the Act was I.T.A No.2609/Kol/2018 Assessment year: 2012-13 M/s Subhavani Projects Pvt. Ltd 4 not justified and the same is directed to be deleted. Ground No.1 is allowed.” 4. We have heard the rival contentions and gone through the records. We find that the Assessing Officer mainly made the additions on the ground that the assessee has received share application and high premium from the investor companies, whereas, the assessee company was having negligible business activity during the year. However, the ld. CIT(A) has deleted the additions observing that all the six share applicants had responded to the notices u/s 133(6) and furnished the relevant documents and confirmed the transactions and that the Assessing Officer could not point out any defect in the evidences furnished by the share subscribers proving their identity and creditworthiness and genuineness of the transaction. The ld. CIT(A) has further observed that all the share subscribers were subjected to scrutiny assessment u/s 143(3) of the Act and that out of six share subscribers, in cases of five shareholders, no additions were made by the Assessing Officer and therefore, the source of their funds was accepted by their respective Assessing Officers and hence, under the circumstances, the amounts credited from these five companies to the assessee company was fully explained. That, in respect of 6 th share subscribers namely M/s Genistra Construction (P) Ltd., the additions were made u/s 68 of the Act and that once the additions were made in the hands of the said share subscribing company, the investment of the same amount in the hands of the assessee company stood fully explained and that no additions were warranted in the hands of the assessee company of the said amount as it would amount to double addition of the same amount. I.T.A No.2609/Kol/2018 Assessment year: 2012-13 M/s Subhavani Projects Pvt. Ltd 5 5. We also find that the issue is squarely covered by the decision of the Coordinate Bench in the case of Mahacol Tie Up (P) Ltd. vs ITO in I.T.A No.2269/Kol/2019 decided on 12.10.2022, wherein, the Hon’ble Tribunal, by placing reliance on the decision of the Coordinate Kolkata bench of the Tribunal in the case in the case of DCIT vs. M/s Maa Amba Towers Ltd. in ITA No.1381/Kol/2015 vide order dated 12.10.2018, has held as under: “We find no merit in the Revenue's instant grievance in the light of relevant facts on record. There is no dispute about the assessee's having declared its share subscription premium from M/s Agrani Credit & Finvest Pvt. Ltd., Crown Mansion Pvt. Ltd., Liberal Infrastructure Pvt. Ltd., Darshan Enclave Pvt. Ltd., Snow Fall Impex Pvt. Ltd. involving corresponding sums of ₹27,60,000/-, ₹55,20,000/-, ₹82,80,000/- in case of third and fourth and ₹48,30,000/- in last entity's case; respectively totalling to ₹3,01,00,000/-. Case file suggests that the assessee has placed on record their income tax acknowledgement of the impugned assessment year 2012- 13, directors' report alongwith audited financial statements, explanation regarding source of investments, bank statements, share application forms and board's resolution(s) followed by their respective regular assessment orders pertaining to very assessment year u/s. 143(3) of the Act. Their Assessing Officer(s) made u/s 68 unexplained cash credits additions of share premium amounting to ₹67,03,00,000, ₹44,85,00,000/-, ₹24,42,00,000/- & ₹21,70,00,000/- in case of first four entities and accepted similar credits of ₹20,45,00,000/- to be genuine satisfying all parameters of identity, genuineness and creditworthiness. It can therefore be safely assumed that all these additions sums forming subject-matter of the impugned additions to be accepted as genuine in respective investors entities' end as the source of the amount(s) in issue totalling to ₹3,01,00,000/-. Learned Departmental Representative fails to dispute that the same very amount cannot be added twice in payees and recipients' hands u/s 68 of the Act. We therefore see no reason to accept Revenue's instant former substantive ground. We affirm CIT(A)'s findings under challenge qua the instant former issue.” The aforesaid decision has been further relied upon by the coordinate Kolkata bench of the Tribunal in the case of “Steelex India (P) Ltd vs. ITO, Ward-3(2), Kolkata” I.T.A. No.2666/Kol/2019 decided vide order dated 09.09. 2022. I.T.A No.2609/Kol/2018 Assessment year: 2012-13 M/s Subhavani Projects Pvt. Ltd 6 6. The ld. CIT(A) has given a categorical findings that it would apparent from records that not only the notices were delivered at the concerned addresses of the share subscribing companies but they have accepted the share transactions. So far as the non-compliance of the summons issued u/s 131 of the Act was concerned, the ld. CIT(A) has observed that when the identity and creditworthiness of the shareholders and genuineness of the transaction was not in doubt then merely for the failure of the directors of the assessee company and the shareholders to appear before the Assessing Officer in person, the making of the addition was not justified. 7. In this case a perusal of the Assessment order would reveal that the AO has duly acknowledged the receipt of the relevant documents/evidences not only from the assessee, but also from the subscriber companies. However, he insisted for personal appearance of the directors of the subscriber companies without even going through and discussing about the discrepancies, if any, in the documents furnished by the assessee as well as by the share subscriber companies to prove the identity and creditworthiness of the subscribers and the genuineness of the transaction. The AO has not pointed out in the Assessment Order as to what further enquiries he wanted to make from the directors of the subscribers to insist for their personal presence. The Assessee in this case, as noted above, explained about the identity, creditworthiness and financials etc. of each of the share subscriber company individually. However, we note that in the assessment order that the AO has not even mentioned the names of the share subscriber companies and even has not mentioned a word as to which of the share subscriber company or the corresponding transaction thereof was not genuine and on what grounds. The AO, in our view, could have taken I.T.A No.2609/Kol/2018 Assessment year: 2012-13 M/s Subhavani Projects Pvt. Ltd 7 an adverse inference, only if, he would have pointed out the discrepancies or insufficiency in the evidences and details received in his office and pointed out as to on what account further investigation was needed by way of recording of statement of the directors of the subscriber companies. Even if the directors of the subscriber companies have not come personally in response to the summons issued by the AO, in our view, adverse inference cannot be taken against the assessee solely on this ground as it is not under control of the assessee to compel the personal presence of the directors of the shareholders before the Assessing Officer. The Ld. Counsel for the assessee has rightly placed reliance upon the decision of the Hon’ble Bombay High Court in the case of PCIT, Panji vs. Paradise Inland Shipping Pvt. Ltd. reported in (2017) 84 taxman.com 58 (Bom) wherein the Hon’ble High Court has held that once the assessee has produced documentary evidence to establish the existence of the subscriber companies, the burden would shift on the revenue to establish their case. Further the jurisdictional Calcutta High Court in the case of “Crystal networks (P) Ltd. vs CIT” (supra) has held as under: “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 CIT(Appeals) 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 produce of the assessee or not. When it was found by the CIT(Appeal) on fact having examined the documents that the advance given by the creditors have been established the Tribunal should not have ignored this fact finding.” I.T.A No.2609/Kol/2018 Assessment year: 2012-13 M/s Subhavani Projects Pvt. Ltd 8 8. In view of the above discussion, we do not find any infirmity in the order of the CIT(A) and the same is upheld. 9. In the result, the appeal of the revenue stands dismissed. Kolkata, the 5 th April, 2023. Sd/- Sd/- [डॉÈटर मनीष बोरड /Dr. Manish Borad] [संजय गग[ /Sanjay Garg] लेखा सदèय /Accountant Member ÛयाǓयक सदèय /Judicial Member Dated: 05.04.2023. RS Copy of the order forwarded to: 1. ITO, Ward-5(1), Kolkata 2. M/s Subhavani Projects Pvt. Ltd 3. CIT(A)- 4. CIT- , 5. CIT(DR), //True copy// By order Assistant Registrar, Kolkata Benches