The Kolkata Bench of Income Tax Appellate Tribunal ( ITAT ) upheld the Commissioner of Income Tax(Appeals)[CIT(A)] decision, confirming the genuineness of ₹2.06 crore share capital received, and deleted the addition under Section 68 of the Income Tax Act,1961.
The Revenue-appellant appealed against the order dated 20.05.2024 for the AY 2012-13 passed by the CIT(A).In this case Bhawani Alumina Products Pvt. Ltd,respondent-assessee engaged in manufacturing aluminum goods, had filed its return declaring an income of ₹54,22,660/-. The case was selected for scrutiny, and notices under sections 143(2) and 142(1) were issued. The Assessing Officer(AO) treated ₹2,06,50,000/- received as share capital as bogus and added it under section 68 of the Act, also initiating penalty proceedings.
The assessee appealed to the CIT(A) and requested a stay of demand from both the DCIT, and the CIT(A).On 08.02.2015, the respondent requested the Principal Commissioner of Income Tax(Pr. CIT), to transfer jurisdiction to Hazaribag, citing the relocation of business and records. Supporting documents were submitted, and jurisdiction was transferred to Hazaribag, on 31.03.2016.
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The assessee also filed a revision petition under section 264 with the Pr. CIT, Hazaribag. The Pr. CIT ordered a fresh assessment on 30.12.2016, directing the AO to focus only on unexamined issues and to review judicial precedents cited by the respondent.The AO reassessed the total income at ₹2,61,02,860/-. The respondent appealed this order, and the CIT(A) allowed the appeal, deleting the addition of ₹2,06,50,000/- made under section 68.
The revenue aggrieved by the order of CIT(A) preferred an appeal before the tribunal.
The revenue counsel argued that the CIT(A) was wrong to allow the respondent’s appeal. They claimed the assessee failed to prove the transaction was genuine or that the shareholders were credible. They also noted that the seller and purchaser of the shares had the same directors.
The assessee counsel argued that the CIT(A)’s order was correct, as it considered all facts and documents. The shares were issued at a premium in line with the Companies Act, 1956, and the returns were approved by the Registrar of Companies(ROC). The premium was not taxable and was used to reduce ROC fees.
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The counsel provided evidence of the share applicants’ identity, genuineness, and creditworthiness, with all transactions routed through proper banking channels. The share applicants’ returns for AY 2012-13 and AY 2009-10 were accepted, and the source of funds was explained.
The two member bench comprising Pradip Kumar Choubey(Judicial Member) and Rajesh Kumar(Accountant Member) after hearing both parties, reviewed the CIT(A)’s order and noted that the CIT(A)-Hazaribag had requested a remand report. During the remand proceedings, the assessee and three directors provided documents like Aadhar, PAN, balance sheets, and profit and loss accounts.It hghlighted that M/s Samsung Estate Pvt. Ltd., the share applicant, was incorporated in 1996 and obtained its NBFC status in 2001.
It was observed that the share capital raised by the assessee from M/s Samsung Estate Pvt. Ltd. in earlier years was accepted after proper verification. The CIT(A) had reviewed all aspects of the case, including the documents and the remand report, and found that the assessee had established the identity and creditworthiness of the share applicant company.
The tribunal found that the addition of Rs. 2,06,50,000/- under Section 68 of the Act was not justified. Based on the thorough review, it upheld the CIT(A)’s order, finding no errors or issues with it.
In short,the appeal filed by the revenue was dismissed.
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