95% of Appeals in relation to Share Application and Share Premium are filed by Shell Companies: ITAT Kolkata [Read Order]

Appeals- Share Application - Share Premium- Shell Companies - ITAT Kolkata - taxscan

The Kolkata Bench of the Income Tax Appellate Tribunal (ITAT) has recently observed that the appeals filed in relation to share application and share premium are done by Shell Companies, devoid of any business.

A shell company or corporation exists only on paper and has no office and no employees, but may have a bank account or may hold passive investments or be the registered owner of assets, such as intellectual property, or ships.

The assessee, in the present appeal to the Tribunal argued that the Commissioner of Income Tax (Appeals) [CIT(A)] has erred in confirming the addition of Rs. 9.67 Crores which was added by the Assessing Officer under Section 68 of the Income Tax Act, 1961 on account of bogus share capital including share premium raised by the assessee.

Since the matter before the Kolkata Bench of ITAT was a case of share application and share premium, the court refused to give more time, on the request of S K Thakur & Associates, who, as the court observed, did neither have the power of attorney issued by the assessee placed on record nor the letter requesting the letter of adjournment did bear the signature of the director of the company, M/s. Arham Packaging Goods Pvt. Ltd.

The tribunal also observed that some unknown person had put the signature for the director.

At this instance, the Kolkata Tribunal bench of Vice President Rajpal Yadav and Accountant Member Girish Agrawal made the observation that, “There are large number of appeals pending on this issue before the Tribunal and out of them, 95% are not being prosecuted or are not being filed by any genuine business concern. Basically, those appeals are filed by the shell companies and here and there, requests are being made to delay disposal of these appeals.”

The bench, thus declined the adjournment application of the assessee and proceeded to dispose of the appeal ex-parte.

Further observing that, “the assessee company evidently does not have any specific business. It

has filed a loss return of Rs.9,171/-” and being convinced that it is a paper company devoid of any business, the tribunal bench upheld the orders of the CIT(A) and AO, as no errors were to be found in the same.

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