M/s Mahalakshmi Vinimay (P) Ltd., Kolkata V. I.T.O.,Ward-4(2), Kolkata

ITA 35/KOL/2020

AI Insights

The case revolves around the appeal by M/s Mahalakshmi Vinimay (P) Ltd against the order of the Commissioner of Income Tax (Appeals)-17, Kolkata, which confirmed the addition of Rs.9,67,00,000 as unexplained cash credit under section 68 of the Income Tax Act, 1961. The addition was initially made by the AO during reassessment proceedings, which were prompted by a revision order under section 263 of the Act. The AO had questioned the identity, creditworthiness, and genuineness of the transactions related to the share capital raised by the assessee. The Tribunal, after reviewing the submissions and evidence, including the compliance with notices under sections 133(6) and 131 of the Act, found that the assessee had sufficiently proved the legitimacy of the transactions and that the AO's insistence on the personal appearance of the directors of the subscriber companies was unreasonable.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 128281 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 4 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-05-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 21-02-2023
• Assessment Year: 2008-2009
• Appeal Filed On: 08-01-2020
• Other Referred Cases: Crystal networks (P) Ltd. vs CIT, M/s Satyam Smertexpvt. ltd. vs. DCIT, CIT vs Raj Kumar Agarwal, Commissioner of Income-tax vs. Manish Build Well (P.) Ltd, PCIT, Panji vs. Paradise Inland Shipping Pvt. Ltd.
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Source of fund; Set aside
• Section: 147; 131; 68; 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 सदèयएवं Įी मनीष बोरडलेखा सदèय के सम¢ , Before Shri Sanjay Garg, Judicial Member and Dr. Manish Borad, Accountant Member I.T.A No.35/Kol/2020 Assessment year: 2008-09 M/s Mahalakshmi Vinimay (P) Ltd...............................Appellant 7/1, Lord Sinha Road, 4 th Floor, Kolkata-700071. [PAN: AAFCM2116D] vs. ITO, Ward-4(2), Kolkata............................................Respondent Appearances by: Shri Rajeeva Kumar, Adv., appeared on behalf of the appellant. Shri Sudipta Guha, CIT-DR, appeared on behalf of the Respondent. Date of concluding the hearing :February 22, 2023 Date of pronouncing the order :May 18, 2023 आदेश / ORDER संजय गग[, ÛयाǓयकसदèयɮवारा/ Per Sanjay Garg, Judicial Member: The present appeal has been preferred by the assessee against the order dated 29.05.2017 of the Commissioner of Income Tax (Appeals)-17, 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 assessee, in this appeal, has taken the following grounds of appeal: “1. That under the facts and circumstances of the case the Ld. CIT(A) erred in confirming addition of a sum of Rs.9,67,00,000/- for the share capital raised by the assessee during the year, holding the same to be unexplained cash credit in terms of section 68 of the Income Tax Act, 1961. The addition is unjustified and need to be deleted. I.T.A No.35/Kol/2020 Assessment year: 2008-09 M/s Mahalakshmi Vinimay (P) Ltd 2 2. The assessee craves leave to add, alter or amend the ground or grounds of appeal before or at the time of hearing.” 3. The brief facts of the case are that the case of the assessee was reopened u/s 147 of the Act and the reassessment was completed by the Assessing Officer for A.Y 2008-09 on 28.05.2010 determining the total income at Rs.47,280/-. Subsequently, the Commissioner of Income Tax- II, Kolkata (hereinafter referred to as ‘CIT’) passed order on 28.03.2013 u/s 263 of the Act exercising his revision jurisdiction holding the assessment order in the reopened proceedings u/s 147/143(3) of the Act as erroneous and prejudicial to the interest of revenue and directed the assessing officer to make enquiries and verifications on the share capital issue and pass the assessment order a fresh. 4. In the set aside assessment proceedings, The Ld. Assessing Officer noted that the assessee, during the year, has shown receipt of share capital along with the premium of Rs.9,67,00,000/- which consists of Rs.25,15,000 being issued, subscribed and paid up shares and Rs.94,185,000/- being share premium. To verify the identity and creditworthiness of the shareholders and also about the genuineness of the transaction, the assessing Officer issued notices u/s 133(6) to the shareholders calling for various details including the source of fund. Further, summons u/s 131 of the Act were issued to the directors of the assessee company. Since the said summons u/s 131 were not complied with, the AO held that the assessee had failed to discharge the burden of proof to substantiate the identity and creditworthiness of the shareholders and genuineness of the transaction. The learned AO, therefore, passed fresh assessment order u/ss 143(3)/263/147/143(3) and made the impugned additions treating the share capital received by the assessee as I.T.A No.35/Kol/2020 Assessment year: 2008-09 M/s Mahalakshmi Vinimay (P) Ltd 3 unexplained income of the assessee. The ld. CIT(A) confirmed the additions so made by the Assessing Officer. 5. We have heard the rival contentions and gone through the record. The Ld. Counsel for the assessee has contended that in this case, the assessee had filed all evidences to prove the identity and creditworthiness of the subscribers and genuineness of the transaction including the address, PAN & Form 2 & Form 5 filed with Registrar of Companies of the share subscriber companies, their audited financial statements, acknowledgement of filing their Income Tax Return, copy of bank statement of the allottee company highlighting the payment of the entire amount of share capital . That all the transactions were done through banking channel and duly confirmed by the share subscribers. That even the notices u/s 133(6) of the Act were issued by the AO which were duly complied with by the shareholders and requisite documents were furnished evidencing their identity, and creditworthiness and that even source of investment was also provided. The Ld. Counsel for the assessee has submitted that the assessee, otherwise, had provided all the details to the assessing officer to prove the identity and creditworthiness of the subscribers and genuineness of the transaction, as noted above. He has further submitted that the subscribing companies were having adequate reserves and surpluses to invest in the assessee company. Further, that all these subscribers were income tax assessees and further that all the investor companies were duly incorporated with the Registrar of Companies. That there were no paper companies involved in the transactions. The Ld. Counsel has further contended that the AO, however, instead of examining the relevant documents, insisted for the personal presence of I.T.A No.35/Kol/2020 Assessment year: 2008-09 M/s Mahalakshmi Vinimay (P) Ltd 4 the directors of the subscribers which was not in the hands of the assessee. He therefore, has submitted that the identity and creditworthiness of these companies was duly established. He has further submitted that the AO could not point out any defect or discrepancy in the evidences/documents submitted by the assessee to prove the identity and creditworthiness of the subscribers and genuineness of the transaction. He has further submitted that instead of pointing out any defect or discrepancy in the evidences and the details furnished by the assessee, the AO proceeded to take adverse inference only on the ground that the directors of the subscriber companies did not appear personally before the AO. The ld. Counsel for the assessee in this respect has relied upon the decision of the Jurisdictional Calcutta High Court in the case of Crystal networks (P) Ltd. vs CIT (supra). The ld. Counsel has also relied upon the decision of the Co-ordinate Kolkata Bench of the tribunal in the case of ‘M/s Satyam Smertexpvt. ltd. vs. DCIT’, ITA No.2445/kol/2019 vide order dated 29.05.2020, wherein, the coordinate bench of the tribunal, while further relying upon the decision of the Hon’ble Allahabad High Court in the case of CIT vs Raj Kumar Agarwal vide ITA No.179/2008 dated 17.11.2009 has held that non production of the director of the company, which is regularly assessed to income Tax having PAN, on ground that the identity of the subscriber is not proved, cannot be sustained. 6. The ld. D/R on the other hand, has relied upon the observations made by the AO. He has further relied upon the impugned order of the ld. CIT(A). 7. We have considered the rival submissions of the ld. representatives of the parties and also gone through the record. In this case a perusal of I.T.A No.35/Kol/2020 Assessment year: 2008-09 M/s Mahalakshmi Vinimay (P) Ltd 5 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 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 AO. The Ld. Counsel for the assessee has rightly placed reliance upon the decision of the Hon’ble Bombay High I.T.A No.35/Kol/2020 Assessment year: 2008-09 M/s Mahalakshmi Vinimay (P) Ltd 6 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.” 8. It has to be further noted that though powers of the ld. CIT(A) are co-terminus with the AO and the ld. CIT(A) had all the plenary powers as that of the AO. The Hon’ble Delhi High Court in the case of Commissioner of Income-tax vs. Manish Build Well (P.) Ltd. reported in [2011] 16 taxmann.com 27 (Delhi) has held that the CIT(A) is statutory first appellate authority and has independent power of calling for information and examination of evidences and possesses co-terminus power of assessment apart from appellate powers. However, a perusal of the impugned order of the ld. CIT(A) shows that the ld. CIT(A) has not discussed anything about the material facts of the case. He has not pointed out any defect and discrepancy in the evidences and details I.T.A No.35/Kol/2020 Assessment year: 2008-09 M/s Mahalakshmi Vinimay (P) Ltd 7 furnished by the assessee but simply upheld the order of the Assessing Officer in mechanical manner. The order of the ld. CIT(A) is a non- speaking order. The same is not sustainable as per law. 9. In view of the above discussion we do not find justification on the part of the lower authorities in making the impugned additions and the same are accordingly ordered to be deleted. 10. In the result, the appeal of the assessee stands allowed. Kolkata, the 18 th May, 2023. Sd/- Sd/- [डॉÈटर मनीष बोरड /Dr. Manish Borad] [संजय गग[ /Sanjay Garg] लेखा सदèय /Accountant Member ÛयाǓयक सदèय /Judicial Member Dated:18.05.2023. RS Copy of the order forwarded to: 1. M/s Mahalakshmi Vinimay (P) Ltd 2. ITO, Ward-4(2), Kolkata 3. CIT(A)- 4. CIT- , 5. CIT(DR), //True copy// By order Assistant Registrar, Kolkata Benches