RITUDHARA DISTRIBUTORS PVT. LTD.,KOLKATA V. I.T.O., WARD - 4(1), KOLKATA, KOLKATA

ITA 1103/KOL/2024

AI Insights

Ritudhara Distributors Pvt. Ltd. appealed against the order of the National Faceless Appeal Centre, which upheld the addition of \\u20b912,93,00,000/- to the assessee's income as unexplained money under the head share capital/share premium. The Assessing Officer had made this addition after the assessee failed to comply with summons under section 131 of the Income Tax Act, and the CIT(A) dismissed the appeal in limine. The Tribunal, however, found that the assessee had provided substantial evidence to substantiate the transactions, including details of the subscribers, their financial capabilities, and the compliance with procedural requirements for issuing shares at a premium. The Tribunal noted that the legal provisions applicable for the assessment year 2012-13 did not prohibit issuing shares at a high premium, and the amendments introduced by the Finance Act, 2012, were not retrospective.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 474015 (ITAT-KOLKATA)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-02-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Other Referred Cases: CIT Vs. Orissa Corporation Pvt. Ltd., CIT Vs. Orchid Industries Ltd., Crystal Networks Pvt. Ltd. Vs. CIT, ITO Vs. M/s. Cygnus Developers India Pvt. Ltd., Joy Consolidated Pvt. Ltd. Vs. ITO, CIT vs. Gangadeep Infrastructure Pvt. Ltd., CIT Vs Orchid Industries Ltd., CIT vs. Raj Kumar Agarwal, ITO vs. Devinder Singh Shant
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUBHENDU DATTA
• Assessee Lawyers: SOMITRA CHOUDHURY
• Keywords: Set aside; Retrospective amendment; Question of law
• Section: 143(3); 142(1); 143(2); 250; 56; 68; 131; 133(6); 6

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, KOLKATA BEFORE SHRI RAJESH KUMAR, AM AND SHRI PRADIP KUMAR CHOUBEY, JM ITA No.1103/KOL/2024 (Assessment Year:2012-13) Ritudhara Distributors Pvt. Ltd. 5/1, Clive Row, 4 th Floor, Kolkata-700001, West Bengal Vs. ITO, Ward-4(1), Kolkata Aaykar Bhavan, P-7, Chowringhee Square, Kolkata-700069, West Bengal (Appellant) (Respondent) PAN No. AAFCR7607A Assessee by : Shri Somitra Choudhury, AR Revenue by : Shri Subhendu Datta, DR Date of hearing: 10.02.2025 Date of pronouncement : 24.02.2025 O R D E R Per Rajesh Kumar, AM: This is an appeal preferred by the assessee against the order of the National Faceless Appeal Centre, Delhi (hereinafter referred to as the “Ld. CIT(A)”] dated 03.10.2023 for the AY 2012-13. 02. At the outset, we observe that there is a delay of 164 days in filing the appeal by the assessee. The ld. Counsel for the assessee stated that Shri R Agarwal was looking after the taxation matter of the assessee, who also appeared before the first appellate authority. The ld. AR further stated that the said Counsel was not familiar with the procedure of the Tribunal and advised the assessee not to file any appeal before the Tribunal. Thereafter, the assessee approached the present counsel in 3rd week of April, 2024, to seek consultation on Page | 2 ITA No.1103/KOL/2024 Ritudhara Distributors Pvt. Ltd.; A.Y. 2012-13 some taxation matter, who advised the assessee to file the appeal along with condonation application. The ld. Counsel for the assessee stated that the assessee has not delayed the appeal intentionally or benefited from any manner from the delayed filing of the appeal. Therefore, in the interest of justice and fair play the delay may be condoned and appeal may be admitted for adjudication. 03. The ld. DR on the other hand stated that the reason stated by the Counsel of the assessee are not cogent and convincing and therefore, the appeal of the assessee should not be admitted by not condoning the delay. 04. After perusing the contents of the condonation application, we find that the delay is for bonafide and genuine reasons and hence, the the delay is condoned and appeal is admitted for adjudication, 05. The only issue raised in the various grounds of appeal is against the confirmation of ₹12,93,00,000/- by the ld. CIT (A) in an ex-parte order as made by the ld. AO on account of share capital/ share premium despite the assessee filing all the relevant documents/ submissions before the ld. CIT (A) thereby upholding the order of the ld. Assessing Officer. 06. The facts in brief are that the assessee filed the return of income on 11.02.2013, showing the total income at ₹ nil. The case of the assessee was selected for scrutiny under Computer Assisted Scrutiny Selection (CASS) for examination of large share premium received and accordingly, notice u/s 143(2) of the Act was issued and served upon the assessee along with notice u/s 142(1) of the Act and questionnaire. During the assessment proceedings, Shri Pravin Kumar appeared before the AO and furnished the details as called for from Page | 3 ITA No.1103/KOL/2024 Ritudhara Distributors Pvt. Ltd.; A.Y. 2012-13 time to time. The ld. AO on the basis of said information/ details, observed that the assessee was incorporated on 0903.2012 and during instant financial year 2011-12, it had received share application from different entities. The assessee filed before the ld. AO its board resolution for issue of shares, bank statements and assessment framed u/s 143(3) dated 12.03.2015 in assessee’s own case and also filed the evidences / details of the subscribers which are available in the paper book from page no.60 to 857. The ld. AO also issued summons u/s 131 of the Act but the said summons were not complied with. It was also noted by the ld. AO that directors of some subscriber companies appeared but the details required u/s 131 of the Act were not furnished. Finally, the ld. AO treated the share capital/ share premium of ₹12,93,00,000/- as unexplained money and added the same to the income of the assessee in the assessment framed u/s 143(3) of the Act dated 12.03.2015. 07. In the appellate proceedings, the ld. CIT (A) dismissed the appeal in limine by noting that the assessee has not replied on the various opportunities allowed to the assessee that too in violation of provisions of Section 250 sub section 6 as the merits of the case were not discussed and decided, whereas, on the other hand the assessee had filed return submissions before the ld. CIT (A) along with details and evidences submitting the details in respect of share subscribers which are available at page no.858 to 873. 08. The ld. AR vehemently submitted before us that both the authorities below have failed to conduct an enquiry into evidences filed by the assessee qua the share subscribers as well as its own. The ld. Counsel for the assessee submitted that during the relevant financial year, the assessee has issued equity shares to 15 subscribers at a face value of Page | 4 ITA No.1103/KOL/2024 Ritudhara Distributors Pvt. Ltd.; A.Y. 2012-13 Rs. 10 each at a premium of Rs.990/-. The ld. AR stated that the ld. AO simply added amount of share capital/ share premium of ₹12,93,00,000/- to the income of the assessee on the ground that there was no compliance to the summons u/s 131 of the Act by the directors of the subscriber companies as well as by the directors of the assessee company. The ld AR argued that though the directors of the assesse4e company did not appear before the AO but furnished all the evidences as called for by the AO. The ld. Counsel for the assessee submitted that in the appellate proceedings, all the evidences/details qua share capital/share premium were furnished along with written submission. The ld. Counsel for the assessee submitted that assessee filed the share application forms along with allotment letters, the proof of ITRs of the subscribers, payment of share application through cheques, bank accounts ,also proof of share subscribers having substantial net worth and assessment orders u/s 143(3)/143(1) of the Act in the case of subscribers. The ld. AR submitted that it is not the case of the ld. AO that cash was deposited in the banks of the subscribers before the making investments in the assessee company. The ld. AR further submitted that the addition cannot be made on the ground that there was no compliance to the summons issued u/s 131 of the Act and in defense he is relied on the following decisions: (i) CIT Vs. Orissa Corporation Pvt. Ltd. (1986) 159 ITR 78 (SC); (ii) CIT Vs. Orchid Industries Ltd. 397 ITR 136 (Bom); (iii) Crystal Networks Pvt. Ltd. Vs. CIT 353 ITR 171 (Kol); (iv) ITO Vs. M/s. Cygnus Developers India Pvt. Ltd.(ITA No. 282/Kol/2012) and (v) Joy Consolidated Pvt. Ltd. Vs. ITO (ITA No. 547/Kol/2020. Page | 5 ITA No.1103/KOL/2024 Ritudhara Distributors Pvt. Ltd.; A.Y. 2012-13 09. Further, the ld. AR submitted that there was no bar in issuing equity shares at a high premium during the instant assessment year and the proviso to Section 68 of the Act has been introduced by Finance Act, 2012, with effect from 01.04.2013, and was accordingly, applicable from A.Y. 20131-4 onwards. Therefore, the observation of the AO that the equity shares were issued at a very high premium is devoid of any merits. The ld. Counsel for the assessee stated that the proviso to Section 68 of the Act has not been inserted with retrospective effect nor it is the proviso so introduced that it is for the removable of doubts or it is directory. The ld. Counsel for the assessee in defense of his argument relied on the CIT Vs. Gagandeep Infrastructure Private Limited (80 taxmann.com 272 (Bom). 010. The ld. DR on the other hands strongly opposed the arguments presented by the ld. AR by submitting that the ld. AO could not verify the transactions and the credentials of the investors when there was no compliance to the summons u/s 131 of the Act by the subscribers as well as by the directors of the assessee company and therefore, no deposition could be recorded. 011. After hearing the rival contentions and perusing the material on record, we find that the assessee has furnished before the AO as well as the Ld. CIT(A) all the evidences qua the share capital/ share premium raised during the instant financial year comprising the names , addresses ,proofs of voter IDs, Driving licenses, PAN cards, list of directors with share holders with DIN, copies of ITRs, copies of bank statements and assessment orders u/s 143(3)/143(1) of the Act etc in case of share subscribers. We find that though the directors of the assessee company and also the subscribers companies did not comply Page | 6 ITA No.1103/KOL/2024 Ritudhara Distributors Pvt. Ltd.; A.Y. 2012-13 with summons u/s 131 of the Act. We even note that the AO has not issued notices u/s 133(6) of the Act to the share subscribers despite the assessee furnishing all the details/evidences as called by the AO. We note that the AO has not done any verification on the evidences furnished by the assessee and has not pointed any defect of any kind whatsoever in the documents furnished before the AO. We note that the AO has only harped on the fact that the directors of the appellant as well as share subscribers did not turn up on the date and time given for personal deposition. Besides the AO has harped on the fact that these shares were allotted at very high premium by ignoring the facts that there was no bar on issue of shares of high premium in the AY 2012-13 because Clause (viib) to Clause 2 section 56 inserted by Finance Act, 2012 w.e.f 01.04.2013 and was was applicable and effective from AY 2013-14. Similarly, the provisions in Finance Act, 2012 that the assessee company issuing share premium have to prove source of source has been inserted w.e.f 1.4.2013 is also not applicable in the case of assessee as the same is applicable from AY 2013-14 onwards. The case of the assessee finds support from the decision of the Hon’ble Bombay High Court in the case of CIT vs. Gangadeep Infrastructure Pvt. Ltd. in 80 taxmann.com 272 (Bom). Therefore, the appellate order passed by the Ld. CIT(A) upholding the assessment order which lacked any enquiry on the evidences filed by the assessee and also failure on the part of the AO to bring any substantive evidences on record to the conrary, we are unable to sustain the appellate order. In our opinion, the addition cannot be made merely on the ground that the summon issued u/s 131 to the directors of the assessee company and also to the subscriber companies were not complied with whereas on the other hand the assessee has filed all the evidences called for by the AO qua the Page | 7 ITA No.1103/KOL/2024 Ritudhara Distributors Pvt. Ltd.; A.Y. 2012-13 subscribers. Under the circumstances, we are not in a position to sustain the order of Ld. CIT(A). We find support from the decision of Hon’ble Supreme Court in the case of Orissa Corporation Ltd. (supra) while coming to the above conclusion. The operative part is extracted below: “That in this case the respondent had given the names and addresses of the alleged creditors. It was in the knowledge of the Revenue that the said creditors were income-tax assessees. Their index numbers were in the file of the Revenue. The Revenue, apart from issuing notices under Section 131 at the instance of the respondent, did not pursue the matter further. The Revenue did not examine the source of income of the said alleged creditors to find out whether they were creditworthy. There was no effort made to pursue the so-called alleged creditors. In those circumstances, the respondent could not do anything further. In the premises, if the Tribunal came to the conclusion that the respondent had discharged the burden that lay on it, then it could not be said that such a conclusion was unreasonable or perverse or based on no evidence. I f the conclusion was based on some evidence on which a conclusion could be arrived at, no question of law as such arose. The High Court was right in refusing to state a case.” 012. The case of the assessee is also squarely covered by the decisions of Hon’ble Calcutta High Court in the case of Crystal Networks Pvt. Ltd. vs. CIT (supra ) wherein it has held that where all the evidences were filed by the assessee proving the identity and creditworthiness of the loan transactions , the fact that summon issued were returned un- served or no body complied with them is of little significance to prove the genuineness of the transactions and identity and creditworthiness of the creditors. The relevant portion of the decision is extracted below: “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 Ld. CIT(A) 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 product of the assessee or note. When it was found by the Ld. CIT(A) on fact having examined the documents that the advance given by the creditors have been established the Tribunal should not have ignored this fact findings. Indeed the Tribunal did not really touch the aforesaid fact finding of the Ld. CIT(A) as rightly pointed out by the learned counsel. The Supreme Court has already stated as to what should be the duty Page | 8 ITA No.1103/KOL/2024 Ritudhara Distributors Pvt. Ltd.; A.Y. 2012-13 of the learned Tribunal to decide in this situation. In the said judgment noted by us at page 463, the Supreme Court has observed as follows: “The Income-Tax Appellate Tribunals performs a judicial function under the Indian Income-tax Act. It is invested with authority to determine finally all questions of fact. The Tribunal must, in deciding an appeal, consider with due care all the material facts and records its findings on all the contentions raised by the assessee and the Commissioner, in the light of the evidence and the relevant law.” The Tribunal must, in deciding an appeal, consider with due care all the material facts and record its findings on all contentions raised by the assessee and the Commissioner, in the light of the evidence and the relevant law. It is also ruled in the said judgment at page 465 that if the Tribunal does not discharge the duty in the manner as above then it shall be assumed the judgment of the Tribunal suffers from manifest infirmity. Taking inspiration from the Supreme Court observation we are constrained to hold in this matter that the Tribunal has not adjudicated upon the case of the assessee in the light of the evidence as found by the Ld. CIT(A). We also found no single word has been spared to up set the fact finding of the Ld. CIT(A) that there are materials to show the cash credit was received from various persons and supply as against cash credit also made. Hence, the judgment and order of the Tribunal is not sustainable. Accordingly, the same is set aside. We restore the judgment and order of the Ld. CIT(A). The appeal is allowed.” 013. The case of is also covered by the decision of the coordinate bench by ITO Vs M/s Cygnus Developers India Pvt. Ltd. (supra) the operative part whereof is extracted below: “8. We have heard the submissions of the learned D.R, who relied on the order of AO. The learned counsel for the assessee relied on the order of Ld. CIT(A) and further drew our attention to the decision of Hon’ble Allahabad High Court in the case of CIT vs. Raj Kumar Agarwal vide ITA No. 179/2008 dated 17.11.2009 wherein the Hon’ble Allahabad High Court took a view that non-production of the director of a Public Limited Company which is regularly assessed to Income tax having PAN, on the ground that the identity of the investor is not proved cannot be sustained. Attention was also to the similar ruling of the ITAT Kolkata bench in the case of ITO vs. Devinder Singh Shant in ITA No. 208/Kol/2009 vide order dated 17.04.2009. 9. We have considered the rival submissions. We are of the view that order of Ld. CIT(A) does not call for any interference. It may be seen from the grounds of appeal raised by the revenue that the revenue disputed only the proof of identity of share holder. In this regard it is seen that for AY 2004-05 Shree Shyam Trexim Pvt. Ltd. was assessed by ITO, Ward-9(4), Kolkata and the order of assessment u/s 143(3) dated 25.01.2006 is placed in the paper book. Similarly Navalco Commodities Pvt. Ltd. was assessed to tax u/s 143(3) for AY 2005-06 by ITO, Ward-9(4), Kolkata by order dated 20.03.2007. Similarly Jewellock Trexim Pvt. Ltd. was assessed to tax for AY 2005-06 by the very same ITO, Ward-9(3), Kolkata assessing the assessee. In the light of the above factual position which is not disputed by the revenue, it cannot be said that the identity of the share applicants remained not proved by the assessee. The decision of the Hon’ble Allahabad High Court as well as ITAT, Kolkata Bench on which reliance was placed by the learned counsel for the assessee also supports the view that for non- production of directors of the investor company for examination by the AO it cannot be held that the identity of a limited company has not been established. For the reasons given above we uphold the order of Ld. CIT(A) and dismiss the appeal of the revenue.” Page | 9 ITA No.1103/KOL/2024 Ritudhara Distributors Pvt. Ltd.; A.Y. 2012-13 014. Similar ratio has been laid down by the Hon’ble Mumbai High Court in the case of CIT Vs Orchid Industries (P) Ltd CIT Vs. Orchid Industries Ltd. 397 ITR 136 (Bom) by holding that provisions of section 68 of the Act can not be invoked for the reasons that the person has not appeared before the AO where the assessee had produced on records documents to establish genuineness of the party such as PAN ,financial and bank statements showing share application money . 015. In the instant case before us also, the assessee has furnished all the evidences proving identity and creditworthiness of the investors and genuineness of the transactions but AO has not commented on these evidences filed by the assessee. Besides the investors have also furnished complete details/evidences before the AO which proved the identity , creditworthiness of investors and genuineness of the transactions. Under these facts and circumstances and considering underlying facts in the light of ratio laid down in the decisions as discussed above , we are inclined to set aside the order of Ld. CIT(A) by directing the AO to delete the addition. 016. In the result, the appeal of the assessee is allowed. 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 Page | 10 ITA No.1103/KOL/2024 Ritudhara Distributors Pvt. Ltd.; A.Y. 2012-13 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 "