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03-06-2019, Chemgems (India), Section 68, 69, 131, Tribunal Kolkata

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3 months 2 weeks ago #9649 by amit
Section - 68, 69, 131, 106
Order Date - 03-06-2019
Favouring - Assessee
Court - Tribunal Kolkata
Appellant - DCIT
Respondent - Chemgems (India) Pvt. Ltd.
Justice - A. T. Varkey, JM & Dr. A. L. Saini, AM
Citation - 619Taxpundit65
Appeal No. - I.T.A. No. 625/Kol/2017
Asstt. Year - 2012-13


PER : A.T.Varkey, JM

This is an appeal preferred by the Revenue against the order of the CIT(A) – 4, Kolkata dated 16.01.2017 for Assessment Year 2012-13.

2. The main grievance of the Revenue is against the action of the Ld. CIT(A) in deleting the disallowance of Rs. 1,00,00,000/- u/s 68 of the Act.

3 The brief facts of the case is that during the course of assessment proceedings, the AO noted that the assessee has returned total income of Rs. 34,46,930/-. Later the case was selected for scrutiny and the AO noted that the assessee has raised share capital of Rs. 6,00,000/- during the year ended on 31.03.2012 in respect of total 20,000 number of shares. Those share were issued at Face Value of Rs. 10/- for Rs. 2,00,000/- and Share premium of Rs. 4,00,000/- and details of which are as follows:

4. The AO noted that pursuant to the notices issued and served upon u/s 131 of the Act to both the shareholders, none of the directors of the company cared to appear before him during the assessment proceedings and therefore, he issued show cause notice to the assessee to explain as to why this amount should not be added u/s 68 of the Act. According to the AO, the assessee pursuant to the said show cause notice has furnished copy of audited balance sheet and application for share subscription to the assessee. According to the AO, the replies of the share-holders which was accompanied with the copy of Bank Statement through posts without caring to appear physically before him is not acceptable. The AO took note of the fact that since cash were deposited before the cheques were issued by them to assessee he was of the opinion that assessee has infused own money which has been rotated through share subscribing shell companies and therefore he added the amount of Rs. 1 crore u/s 68 of the Act. On appeal, the Ld. CIT(A) has deleted the addition. Aggrieved the Revenue is before us.

5. We have heard both the parties and perused the records. At the outset self, the learned AR drew our attention to the fact that the assessee company is not a fly by night company and is the business of manufacture of chemicals for leather industry and in the assessment year under consideration, the assessee had a turnover of Rs. 22.85 crores and had disclosed income of Rs. 34.46 lacs as income and drew our attention to the chart given below which shows the turnover of subsequent years and that the assessee has turnover of Rs. 41.70 crores in A.Y. 2018-19 and had returned net profit of Rs. 84.28 lacs, the chart is given below:

6. From the perusal of the aforesaid chart, we note that the assessee company is not a jama kharcha company or a Fly by Night Company and is in the business of manufacture of chemicals for leather industry. We note that the assessee company has reflected increasing net profit and its turnover and has also grown by leaps and bounds which facts are evident from the perusal of the chart. We note that in the assessment year under consideration, the appellant has raised share capital including share premium of Rs. 1 crore as tabulated as under:

7. We note that the assessee had filed confirmation letters from both the share subscribers, the share application form for applying for shares, source of funds, bank statement, board resolution, PAN cards, Income Tax acknowledgements, Certificate of registrations, audited balance sheet of both share-holder companies which documents are placed from page no. 35 to 76 of the Paper Book. We also note an important fact that both the share applicants are a registered NBFC company. We note that the AO had issued notices u/s 133(6) to both the share applicants which we note have been duly served on them. We note that pursuant to the said notice u/s 133(6) both the share applicants have confirmed of having contributed to the equity share capital of the assessee company. Both the share applicants having filed their respective bank statement, acknowledgement of filing of the income-tax return, balance sheet and explained the source of investments in the shares of the assessee. From a perusal of the aforesaid documents and the reply made by these share applicants directly to AO, the identity of the share-holders cannot be doubted. Since the transaction has happened through the banking channel, the genuineness cannot be questioned unless there is any adverse material against the assessee which is not there in this case. The Ld. CIT(A) has made a finding in the impugned order that the AO has not adversely commented upon the source of the capital contributed by both the share subscribers which finding of fact has not been assailed before us as a specific ground. Thus the creditworthiness of the share subscribers cannot be questioned since the finding of fact as aforesaid has crystallized. We note that the AO has d awn an adverse inference against the share subscribers only on the ground that the assessee has not produced the directors of the share subscribing companies when the fact was that all the relevant documents to prove the identity, creditworthiness and genuineness of the transactions were furnished before the AO as aforesaid.

8. We note that the both shareholders had submitted the following relevant details as called for and had confirmed the transaction with the assessee company. The evidence which were filed before the AO included the following details.

(a) Income Tax Return of the share holders
(b) Audited Accounts of the share holders
(c) Share Application Forms
(d) Share Allotment Letters
(e) Copy of the bank account of the share holders
(f) Transaction with the appellant was duly highlighted in the bank statement
(g) Evidences of source of source of the share holders

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