Dharmik Cement Merchants Pvt. Ltd., Kolkata V. ITO, Ward-3(3), Kolkata

ITA 331/KOL/2022

AI Insights

Dharmik Cement Merchants Pvt. Ltd. appealed against the order of the Commissioner of Income-tax (Appeals) which confirmed the addition of Rs. 57,77,00,000 as unexplained share capital and share premium under section 68 of the Income Tax Act, 1961. The case was initially selected for scrutiny due to the receipt of a large share premium. Despite multiple opportunities, the assessee failed to substantiate the genuineness and creditworthiness of the share transactions. The Tribunal dismissed the appeal, supporting the lower authorities' decisions and directed the revenue authorities to take necessary actions regarding the company's 'struck off' status.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 128694 (ITAT-KOLKATA)
• Duration Of Justice: 8 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-02-2023
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 04-01-2023
• Assessment Year: 2012-2013
• Appeal Filed On: 01-06-2022
• Other Referred Cases: H.M Esufali H.M Abdulali (1973) 90 ITR 271 (SC)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Bogus Share capital; Period of limitation; Time period of passing order
• Section: 68; 143(3); 250

Judgement Text

आयकर अपीलीय अधिकरण कोलकाता 'ए' पीठ, कोलकाता म ें IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA ‘A’ BENCH, KOLKATA श्री संजय गग ग , न्याधयक सदस्य एवं डॉ. मनीष बोरड, ल े खा सदस्य क े समक्ष Before SRI SANJAY GARG, JUDICIAL MEMBER & DR. MANISH BORAD, ACCOUNTANT MEMBER I.T.A. No.: 331/KOL/2022 Assessment Year: 2012-13 Dharmik Cement Merchants Pvt. Ltd........................Appellant [PAN: AADCD 7332 A] Vs. CIT (Appeals)-7, Kolkata.......................................Respondent Appearances by: None appeared on behalf of the Assessee. Sh. Subhrajyoti Bhattacharjee, CIT (D/R), appeared on behalf of the Revenue. Date of concluding the hearing : January 5 th , 2023 Date of pronouncing the order : February 21 st , 2023 ORDER Per Manish Borad, Accountant Member: This appeal filed by the assessee pertaining to the Assessment Year (in short “AY”) 2012-13 is directed against the order passed u/s 250 of the Income Tax Act, 1961 (in short the “Act”) by ld. Commissioner of Income-tax (Appeals)-7, Kolkata [in I.T.A. No.: 331/KOL/2022 Assessment Year: 2012-13 Dharmik Cement Merchants Pvt. Ltd. Page 2 of 8 short ld. “CIT(A)”] dated 08.08.2017 arising out of the assessment order framed u/s 143(3) of the Act dated 10.03.2015. 2. Registry has informed that the appeal filed by the assessee is time barred by 747 days. Condonation application has been filed by the assessee by way of Affidavit dated 26 th May, 2022 (copy of which is placed on record) stating that the impugned order was served on 17.03.2020 by the office assistant who failed to bring it in the knowledge of managers. Perusal of the same shows that the delay is mainly on account of COVID-19 restrictions. We, therefore, in view of the reasoning therein in the affidavit and judgment of the Hon'ble Supreme Court vide Miscellaneous Application No. 21 of 2022 find that the limitation period in filing appeal between 15.03.2020 till 28.02.2022 has been excluded for calculating the limitation period and since the period of limitation in the case of the assessee falls during this period, the same deserves to be extended, therefore, condone the delay and admit the appeal for adjudication on merits. 3. When the case was called for, none appeared on behalf of assessee. A perusal of file shows that the assessee’s case was fixed on various occasions from 04-10-2022 onwards. It shows that the assessee is not interested to prosecute its appeal. We, therefore, deem it fit and proper to adjudicate the appeal on merits ex-parte qua the assessee on the basis of material available on record and the assistance of ld. D/R. 4. The assessee has raised the following grounds of appeal for the AY 2012-13: I.T.A. No.: 331/KOL/2022 Assessment Year: 2012-13 Dharmik Cement Merchants Pvt. Ltd. Page 3 of 8 “1. That under the facts & circumstances of the case, the Ld. CIT(A) erred in passing order ex-parte without considering the grounds of natural justice under the law. 2. That under the facts & circumstances of the case, the Ld. CIT(A) erred in confirming the addition of a sum of Rs. 57,77,00,000/- under sec.68 of the Income Tax Act, 1961 for the share capital along with premium raised by the assessee during the year. The addition is whimsical, arbitrary, unjustified and hence need to be deleted. 3.That the assessee appellant craves leave to add, alter, amend or withdraw any ground or grounds of appeal before or at the time of hearing.” 5. Perusal of records shows that the assessee has challenged the findings of ld. CIT(A) confirming the additions made u/s 68 of the Act at Rs. 57,77,00,000/-. 6. Brief facts of the case are that the assessee is a private limited company, engaged in the business of trading in shares and securities. Income at Rs. NIL declared in e-return of income filed for AY 2012-13. Case selected for scrutiny through CASS for the reason that the assessee received ‘large share premium’. Thereafter, valid notices u/s 143(2)/142(1) of the Act were issued and served upon the assessee to submit submissions/explanation in this regard. In response, ld. Counsel for the assessee appeared from time to time. On perusal of records/statements of accounts, ld. AO found that the assessee company came into existence on 25.02.2011 and during FY 2011-12 (AY 2012-13) i.e. the year under consideration issued shares at high premium to different private companies. For justification of high rate of premium the assessee filed copy of Memorandum & Article of Association, name of shares allotted companies, PAN and other supporting documents in respect of such huge amount of share transaction I.T.A. No.: 331/KOL/2022 Assessment Year: 2012-13 Dharmik Cement Merchants Pvt. Ltd. Page 4 of 8 along with some case laws. For looking into the three limbs of section 68 of the Act i.e. to prove the identity, genuineness and creditworthiness of the share transaction, the assessee was asked to produce the alleged share subscribers of the company for examination/verification of such transaction. But there was complete noncompliance on behalf of the assessee. Finally, ld. AO completed the assessment assessing the income at Rs. 57,77,00,00/- after making the addition a sum of Rs. 57,77,00,000/- for unexplained share capital and share premium u/s. 68 of the Act. 7. Aggrieved, the assessee preferred appeal before ld. CIT(A) only challenging the impugned addition made u/s 68 of the Act at Rs. 57,77,00,000/- made towards unexplained cash credit. During the appellate proceedings ld. CIT(A) fixed the case for hearing. But on such appointed date neither any one attended nor any submission in support of its claim/grounds was filed before him. The assessee remained absent on the dates of hearing. Therefore, ld. CIT(A) passed ex-parte order respectfully following the judgment of the Hon’ble Supreme Court in the case of H.M Esufali H.M Abdulali (1973) 90 ITR 271 (SC) dismissing the appeal of assessee. 8. Aggrieved, the assessee is now in appeal before this Tribunal challenging the impugned additions made u/s 68 of the Act at Rs. 57,77,00,00/-. Apart from filing appeal, the assessee had not made any further efforts to pursue it case, file any other documentary evidence or paper book and written submissions in support of its claim. Nobody has appeared on behalf of the assessee. On the I.T.A. No.: 331/KOL/2022 Assessment Year: 2012-13 Dharmik Cement Merchants Pvt. Ltd. Page 5 of 8 other hand, ld. D/R vehemently argued supporting the orders of lower authorities and prayed for confirming the order of ld. CIT(A). 9. We have heard ld. D/R and perused the material placed on record before us. The assessee has challenged the finding of ld. CIT(A) confirming the addition made u/s 68 of the Act at Rs. 57,77,00,00/- by ld. AO for unexplained cash credits of share capital and share premium received during the year. We notice that the assessee company had offered Nil income for the AY 2012- 13. The assessee company was incorporated on 25.02.2011, but without having any sound business activity or establishment of any project, within two months of its incorporations, the assessee company has been able to procure huge amount of share capital/share premium to the tune of Rs. 57,77,00,00/-. It creates doubt about the genuineness of the alleged transaction of share application and creditworthiness of the share applicants, as to how such company with no asset and poor track record has been able to procure share capital/share premium totalling to Rs. 57,77,00,00/-. 10. Further, we notice that the company having able to secure such huge magnitude of share capital and share premium must be having proper business set up. Statutory notices u/s 143(2)/142(1) of the Act were duly served upon the assessee but, there was no proper compliance to the notices. The assessee failed to produce the alleged parties who had subscribed to the equity shares of the assessee company and did not file any documentary evidence to explain/justify the alleged credit by way of share capital transaction u/s 68 of the Act. The assessee was asked to I.T.A. No.: 331/KOL/2022 Assessment Year: 2012-13 Dharmik Cement Merchants Pvt. Ltd. Page 6 of 8 explain the cash credits received by it during the year. The assessee failed to file necessary details to explain the source of alleged cash credit u/s 68 and also unable to prove identity, creditworthiness of the cash creditors as well as genuineness of the transaction. The assessee company has miserably failed to explain the source of alleged cash credits. If the assessee had sufficient details to explain the alleged sum, it could have certainly filed those details at any stage. Consistently escaping from appearing/producing the documents and alleged parties before ld. AO and the appellate authority [ld. CIT(A)] indicates that the assessee has no plausible reply to explain the source of alleged sum of share capital and security premium and, therefore, the provisions of section 68 of the Act has rightly been invoked by ld. AO treating the alleged sum as the unaccounted income of assessee, which seems to be routed in the books through bogus/accommodation entry in the form of share capital and security premium. Thus, ld. CIT(A) is fully justified in conforming the same. Therefore, under these facts and circumstances, we find no infirmity in the finding of ld. CIT(A) confirming the addition of Rs. 57,77,00,00/- made u/s 68 of the Act. This ground raised by the assessee is dismissed. 11. Further, we notice that on the last date of hearing on 30.11.2022 Mr. Rajeeva Kumar, Advocate, ld. Counsel for the assessee appeared and filed a sheet downloaded from the website of Ministry of Corporate Affairs office showing company master data and as per this sheet the company categorizes as unlisted and active non-compliance and as per company status for (e-filing) it is shown as ‘struck off’. The details of directors are mentioned I.T.A. No.: 331/KOL/2022 Assessment Year: 2012-13 Dharmik Cement Merchants Pvt. Ltd. Page 7 of 8 namely Manju Bhotika (DIN. 03343418) and Sanjay Kr. Prasad (DIN. 07428176). On 30.11.2022 opportunity given to the legal heirs/Directors of the company to implead. But, on the next date of hearing i.e. 05.01.2023 none appeared. Under these facts since the company is ‘struck off’ as active non-compliant, we direct the revenue authority(ies) to approach the office of the Registrar of Companies, Kolkata and move necessary application for restoring the company under active mode and also issue notices to the directors on the basis of address in the details filed for obtaining directors identification number (DIN) and, initiate the proceedings in accordance with law. 12. Ground no. 3 is general in nature, which requires no adjudication. 13. In the result, appeal filed by the assessee is dismissed. Kolkata, the 21 st February, 2023 Sd/- Sd/- [Sanjay Garg] [Manish Borad] Judicial Member Accountant Member Dated: 21.02.2023 PP/SPS & Bidhan (P.S.) I.T.A. No.: 331/KOL/2022 Assessment Year: 2012-13 Dharmik Cement Merchants Pvt. Ltd. Page 8 of 8 Copy of the order forwarded to: 1. Dharmik Cement Merchants Pvt. Ltd., 1A, Grant Lane, Kolkata-700 012. 2. Commissioner of Income Tax-7, Kolkata. 3. CIT(A)-7, Kolkata. 4. CIT- 5. CIT(D/R), Kolkata Benches, Kolkata. //True copy // By order Assistant Registrar ITAT, Kolkata Benches Kolkata