×Latest Case Laws on Income Tax by various Income Tax Appellate Tribunals in India
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This appeal by the revenue and cross-objection by the assessee are directed against the order of the Learned Commissioner of Income Tax (Appeals) - 5, Kolkata, (hereinafter the “ld.CIT(A)”), passed u/s. 250 of the Income Tax Act, 1961 (the ‘Act’), dt. 24/03/2017, for the Assessment Year 2013-14.
2. The assessee is a company and is in the business of real estate i.e., land development. During the year, it filed its return of income on 30/09/2013, declaring total income of Rs.10,08,920/-. The Assessing Officer completed the assessment u/s 143(3) of the Act, determining the total income of the assessee at Rs.2,25,45,046/- interalia making addition of share capital u/s 68 of the Act of Rs.50,00,000/- and unexplained deposits of Rs.2,10,36,126/-. Aggrieved, the assessee carried the matter in appeal.
The ld. First Appellate Authority deleted the addition towards unexplained deposits for the detailed reasons given in his order from para 2.3. onwards (pages 8 to 10). As regards the addition on account of share capital u/s 68 of the Act, the ld. CIT(A) confirmed the addition.
3. Aggrieved, both the assessee as well as the revenue are in appeal before us.
4. The ld. Counsel for the assessee filed a paper book running into 134 pages. He submitted that the addition sustained by the ld. CIT(A) on account of share capital is bad in law for the reason that the assessee had proved the identity and creditworthiness of the share applicants which were only two companies i.e., M/s. Ekdant Tie Up Pvt. Ltd. & M/s. Good Value Vinimay Pvt. Ltd. He argued that the share applications were made by way of account payee cheques and that the identities of the companies were not in doubt and that the company M/s. Ekdant Tie Up Pvt. Ltd., was having paid up capital with free reserves and surplus of Rs.21,59,97,329/- as on 31.03.2011 and that th share capital and reserves was Rs 26,31,22,160/- in the case of M/s. Good Value Vinimay Pvt. Ltd. He vehemently contended that there is no allegation by the Assessing Officer that these share applicant companies had deposited cash in their bank account, prior to making payment through banking channels for subscription of shares in the assessee company. He submitted that the source of source was explained. He relied on a number of case-law in support of his contentions that no addition can be made u/s 68 of the Act, under these circumstances. We would be discussing these case-law as and when necessary.
5. The ld. D/R, on the other hand, submitted that the Assessing Officer had relied on the report of the investigation wing. He submitted that Shri Bhagaban Das Agarwal, in astatement had confirmed that the two allottee companies were being run by his front men, one being the Director of the said allottee company named Shri Santanu Bose. While pointing out that Shri Santanu Bose has retracted from his statement, he submitted that these are front paper companies of Shri Bhagaban Das Agarwal. He relied on the assessment order and the evidence gathered therein in support of the ld. CIT(A).
5.1. On the revenue’s appeal, the ld. D/R submitted that the ld. CIT(A) was wrong ingranting relief to the assessee. He submitted that an amount of Rs.1,75,969.40/- and Rs.2,06,84,187.20/- were found to have been deposited in the bank account of the assessee company on 24/08.2012 and 05/10/2012 respectively and when the assessee was asked to explain the said deposits, he was not able to explain the same properly. He also pointed out that the DIT (Inv.), Kolkata had vide letter dt. 04/12/2015, had provided information that Shri Bhagaban Das Agarwal, director of M/s. Sincere Commodities and Derivatives Pvt. Ltd., was a know entry operator of Kolkata who had accepted on oath the fact of providing bogus entries to different companies. He relied on para 13 of the assessment order. He argued that the ld. CIT(A) was wrong in considering both the money given and money received back and thereafter giving relief to the assessee.
6. The ld. Counsel for the assessee, on the other hand, submitted that the ld. CIT(A) has examined the facts and come to a conclusion that the assessee had given money to this company M/s. Sincere Commodities and Derivatives Pvt. Ltd. and also received back money and the amount of Rs.2,22,60,386/- was an aggregate progressive receipt and Rs.2,07,74,271/-, was an aggregate of the progressive payments. He relied on the findings of the ld. CIT(A) from page 8 to 10 of his order and submits that the same be upheld.
7. We have heard rival contentions. On careful consideration of the facts and circumstances of the case, perusal of the papers on record, orders of the authorities below as well as case law cited, we hold as follows:-
8. We first take up the assessee’s appeal in I.T.A. No. 1198/Kol/2017 Assessment Year: 2013-14.
9. The share application in question in this case was received from two entities M/s. Ekdant Tie Up Pvt. Ltd. & M/s. Good Value Vinimay Pvt. Ltd.. One Shri Bhagaban Das Agarwal had stated before the investigation wing officers that these companies were run by his front man Shri Santanu Bose. This statement was retracted before the Assessing Officer. When Shri Santanu Bose was questioned, he declined to depose on oath. The copies of statement recorded were not furnished to the assessee and the assessee was not given an opportunity to cross-examining the persons whose statements were used against the assessee for the purpose of the addition. The assessee in this case has furnished confirmations, identity of the companies, the mode of payment, the source of source of funds etc. The ld. Assessing Officer has only relied upon the report of the investigation wing and the copies of the retracted statements for making this addition. The copy of the statements relied upon, are not placed on record.
9.1. In our view this addition cannot be sustained under these circumstances. We are of the view that the issue has to be set aside to the Assessing Officer with a direction to follow the principles of natural justice and confront the assessee with all the material and statements relied upon by him for making the addition. This Bench of the Tribunal in the case of Sriram Tie Up Pvt. Ltd. vs ITO in I.T.A. No. 1104/Kol/2016, Assessment Year: 2009-10 order dt. March 21, 2018 at para 6 and 7 held as follows:
“6. In the case of M/s. Sukanya Merchandise Pvt. Ltd. vs ITO (ITA 291/Kol/2016 dated 15.12.2017) cited by the learned counsel for the assessee, a similar view has been taken by the Co-ordinate Bench of this Tribunal and the similar issue relating to the addition made unde se tion 68 on account of share capital contribution by treating the same as unexplained cash credits is restored back by the Tribunal to the file of the A.O. in almost similar situation after recording its observations / findings as under:
We note that the AO pursuant to the order of Ld. CIT had taken note of the directions of the Ld. CIT and issued notice u/s. 142(1) dated 16.08.2013 and has acknowledged that the assessee had furnished the copy of final account, I. T. Acknowledgement, bank statement for the relevant period evidencing the receipt of share application money from the share applicants. Thereafter, the AO makes certain inferences based on the list of shareholders and taking note of the bank statement furnished by the assessee. We note that after the initial notice dated 16.08.2013, thereafter the AO had issued the notice on 26.02.2014 which has been reproduced at page 3 of the reassessment order, wherein AO required the directors of the assessee company to be present before him on 06.03.2014. However, according to the Ld. AR, the assessee received the notice only on 07.03.2014 and thereafter, the assessee requested the AO to provide another opportunity of hearing vide its letter dated 20.03.2014. Thereafter, the AO fixed the date of hearing on 12.03.2014 vide notice dated 10.03.2014. So, according to the assessee company since the directors were not in station till 23.03.2014, the Ld. AR had requested for adjournment till that time. Though the AO has stated that he has issued summons on 24.03.2014 to the assesseecompany to produce the directors of the company before him on 26.03.2014, the assessee company contended that it has not received the said summon and, therefore, could not make the personal appearance. The AO has drawn adverse conclusion