KALYANAKARI WHOLESELLER PVT. LTD.,KOLKATA V. I.T.O., WARD-11(1), KOLKATA

ITA 2168/KOL/2024

AI Insights

The case involves Kalyanakari Wholeseller Pvt. Ltd., which appealed against the addition of ₹12,41,75,160 to its income, categorized as unexplained cash credit under section 68 of the Income Tax Act, due to share capital/share premium issued. Initially, the AO made this addition, which was partly reduced by the CIT(A) to ₹6,20,87,580 to end litigation. However, both the Tribunal and the assessee's counsel criticized the CIT(A)'s arbitrary reduction without substantial basis. The Tribunal noted that the assessee had provided comprehensive evidence, including PAN cards, audited financial statements, and bank statements of the subscribers, which were not adequately considered by the AO or CIT(A). The Tribunal set aside the CIT(A)'s order and directed the AO to delete the addition, thereby allowing the assessee's appeal and dismissing the Revenue's appeal against the partial deletion.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 473943 (ITAT-KOLKATA)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-02-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P.N. BARNWAL
• Assessee Lawyers: SUNIL SURANA
• Keywords: Set aside; Unexplained cash credit; Assessment record
• Section: 144; 143(3); 68; 133(6)

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, KOLKATA BEFORE SHRI RAJESH KUMAR, AM AND SHRI PRADIP KUMAR CHOUBEY, JM ITA No.2168/KOL/2024 (Assessment Year:2012-13) Kalyanakari Wholeseller Pvt. Ltd. Room No. 505, 5th Floor, 277, B.B. Ganguly Street, Kolkata-700012 West Bengal Vs. ITO, Wad-11(1) Aaykar Bhavan, P-7, Chowringhee Square, Kolkata, West Bengal (Appellant) (Respondent) PAN No. AAECK6914E ITA No.2296/KOL/2024 (Assessment Year:2012-13) ITO, Wad-11(1) Aaykar Bhavan, P-7, Chowringhee Square, Kolkata, West Bengal Vs. Kalyanakari Wholeseller Pvt. Ltd. Room No. 505, 5 th Floor, 277, B.B. Ganguly Street, Kolkata-700012 West Bengal (Appellant) (Respondent) Assessee by : Shri Sunil Surana, AR Revenue by : Shri P.N. Barnwal, CIT DR Date of hearing: 23.01.2025 Date of pronouncement : 24.02.2025 O R D E R Per Rajesh Kumar, AM: These are the Cross appeals preferred by the assessee and Revenue against the order of the National Faceless Appeal Centre, Delhi (hereinafter referred to as the “Ld. CIT(A)”] dated 03.10.2024 for the AY 2012-13. Page | 2 ITA Nos. 2168 & 2296/KOL/2024 Kalyanakari Wholeseller Pvt. Ltd; A.Y. 2012-13 02. The only issue raised in ground nos. 2 to 5,in ITA No. 2168/KOL/2024 in assessee’s appeal, is against the order of ld. CIT (A) confirming the part addition of ₹6,20,87,580/- by the ld. CIT (A) as against addition made by the ld. AO of ₹12,41,75,000/- on account of share capital / share premium. 03. The facts in brief are that the assessee filed the return of income on 28.08.2012, declaring total income at ₹ nil. The case of the assessee was selected for scrutiny and accordingly, statutory notices were duly issued and served upon the assessee. Accordingly, the assessment u/s 143(3) was framed vide order dated 25.03.2015, assessing the total income at ₹12,41,75,160/-, after making the addition on account of share capital / share premium issued during the instant financial year amounting to ₹12,41,75,160/- as unexplained cash credit u/s 68 of the Act. In the first round of litigation, the matter travelled upto the Tribunal and tribunal restored the matter to the file of the ld. AO for denovo adjudication after examining the facts ad evidences filed by the assessee and after affording a reasonable opportunity of hearing to the assessee. Pertinent to state that the Tribunal vide order dated 20.12.2020 in Para 4 observed that the books of accounts, bank statements, copy of returns were furnished by the assessee but not considered by the ld. AO during the assessment proceedings and therefore to meet the end of justice, the issue was remanded to the file of the ld. AO for fresh adjudication. In the set aside proceeding, the assessee filed copies of PAN Cards, the audited financial statements, bank statements of the subscribers and the ld. AO even noted that the subscribers have been assessed u/s 143(3) of the Act. Thereafter , ld. AO simply added the amount of share capital / share premium again on the ground that any prudent person would not invest in such company which has no significant assets or no track Page | 3 ITA Nos. 2168 & 2296/KOL/2024 Kalyanakari Wholeseller Pvt. Ltd; A.Y. 2012-13 record of business and finally framed the assessment u/s 143(3) read with section 144 of the Act dated 28.03.2022. 04. In the appellate proceedings, the ld. CIT (A) simply,, after taking into account the submission made by the assessee, observed in Para 4.1 that to end the process of litigation a fair view is taken and profit is taken at 50% of the total credits of ₹12,41,75,160/-, which comes to ₹6,20,87,520/- and thereby partly allowed the appeal by deleting the addition to the extent of 50%. 05. The ld. Authorized Representative vehemently submitted before us that the assessee has filed all the evidences before the ld. AO such as names, addresses, PANs, audited financial statements, bank statements, etc. evidencing that the shareholders have invested money in the assessee company and all the money has been received through banking channels. The ld. Authorized Representative further submitted that the ld. AO, in order to independently verify the transactions, issued notices u/s 133(6) of the Act to the subscribers of shares and all the subscribers duly furnished their replies along with the evidences as were called for by the ld. AO. The ld counsel for the assessee submitted that ld. AO has not disputed or drawn any adverse inference against the shareholders. Pertinent to state that these enquiry letters were issued in the course of first assessment proceedings. The ld. Authorized Representative stated that the assessee had issued shares to six share subscribers. The assessments were framed u/s 143(3) of the Act in the case of 5 subscribers out of total 6 subscribers. The ld. Authorized Representative further referring to the paper book submitted that all the evidences qua the subscribers were filed before the authorities below and also before this tribunal which is available very page nos. 15 to 261 of the paper books. Page | 4 ITA Nos. 2168 & 2296/KOL/2024 Kalyanakari Wholeseller Pvt. Ltd; A.Y. 2012-13 However, any of authorities below did not find any defect or deficiency in the said evidences filed by the assessee as well as by the subscribers. Therefore, the ld. Counsel for the assessee submitted that the finding of ld. CIT (A) estimating the profit at 50% of the total share capital/ share premium is perverse finding and may kindly be set aside by allowing the appeal of the assessee. 06. The ld. DR on the other hand fairly agreed when a query was put as to how the appellate authority estimated the profit at 50% of the share capital/ share premium amount that this was a wrong conclusion drawn by the ld. CIT (A) however , relied stongly on the order of the ld. AO wherein the addition was made of total amount of share capital/share premium.The ld DR submitted that the order of ld CIT(A) may be reversed and that of AO may be restored fully by dismissing the appeal of the assessee and by allowing the appeal of the revenue. 07. After hearing the rival contentions and perusing the materials available on record, we find that this is second round of litigation before the Tribunal and in the first round vide order dated 20.11.2020, passed in ITA No. 448/Kol/2020 A.Y. 2012-13, in para 4 the coordinate bench observed that though the documents filed by the assessee comprising cash book ledger, bank statements, audited accounts of the subscribers were submitted before the ld. AO which were not examined by the AO and consequently restored the matter back to the file of the AO for fresh adjudication after examining all these evidences and after affording reasonable opportunity of hearing to the assessee. We note that in the set aside assessment proceedings, the assessee furnished all the details before the ld. AO qua the share subscribers comprising names, addresses, PANs, audited bank statements, assessment orders u/s 143(3) etc. Page | 5 ITA Nos. 2168 & 2296/KOL/2024 Kalyanakari Wholeseller Pvt. Ltd; A.Y. 2012-13 However, the ld. AO has not done any enquiry on the same. Pertinent to state that in the first round of assessment, the notices u/s 133(6) of the Act were issued to all the investors and they have furnished their reply along with the details/ evidences as required by the ld. AO. We note that out of six subscribers, as many as five subscribers were subjected to scrutiny u/s 143(3) of the Act and assessment orders were available in the paper book. 08. In the appellate proceedings, the ld. CIT (A) simply in order to put litigation to end estimated the profit on share capital/ share premium at 50% thereby partly allowing the appeal by directing the deletion of the addition to the extent of ₹6,20,87,580/- and sustaining the addition by a similar amount. In our opinion, the conclusion drawn by the ld. CIT (A) is completely flawed and wrong and cannot be sustained. The ld. CIT (A) instead of commenting on the evidences filed by the assessee as well as the replies of the subscribers available in the assessment records chose a very cryptic and wrong manner while disposing off the appeal. In our opinion, the assessee has filed all the evidences before the ld. AO as well as before the ld. CIT (A) and both the authorities below have failed to carry out any meaningful and purposeful enquiry and draw any legal conclusion based on the said enquiry. For the aforesaid reasons , we are not in a position to sustain the order of the ld. CIT (A). Having examined and considered all the facts on records and in the paper book , we are of the considered view that the assessee has discharged its burden by furnishing all the evidences and both the authorities below have failed to conduct any enquiry intio the same despite the tribunal specific direction. Accordingly, we set aside the order of ld. CIT (A) on this issue and direct the ld. AO to delete the addition.The appeal of the assessee is allowed. Page | 6 ITA Nos. 2168 & 2296/KOL/2024 Kalyanakari Wholeseller Pvt. Ltd; A.Y. 2012-13 09. The issue raised by the Revenue in ITA No. 2296/KOL/2024 for A.Y. 2012-13 is against the part deletion of addition to the extent of 6,20,87,580/- being 50% of the aggregate share capital/ share premium of ₹12,41,75,160/- which has been adjudicated by us in the assessee appeal (supra), wherein we set aside the order of CIT (A) and direct the ld. AO to delete the addition. Consequently, the appeal of the Revenue is dismissed. 010. In the result, the appeal of the assessee is allowed and the appeal of the Revenue is dismissed. Order pronounced in the open court on 24.02.2025. Sd/- Sd/- (PRADIP KUMAR CHOUBEY) (RAJESH KUMAR) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Kolkata, Dated: 24.02.2025 Sudip Sarkar, Sr.PS Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. CIT 4. DR, ITAT, 5. Guard file. BY ORDER, True Copy// Sr. Private Secretary/ Asst. Registrar Income Tax Appellate Tribunal, Kolkata "