Calcutta HC Rejects S.68 Appeal as Tax Effect Falls Below ₹2 Crore Limit Under Circular No. 9/2024 [Read Order]

The appeal was filed by the Principal Commissioner of Income Tax-2, Kolkata, against M/s. Navnita Dealcom Private Limited, a company registered as a Non-Banking Financial Company (NBFC). The case arose from an assessment in which the Assessing Officer (AO) made an addition of ₹1,21,50,000 on account of alleged unexplained cash credit in respect of share capital and share premium under Section 68 of the Income Tax Act, 1961.

The AO had noted that the assessee received share application money by issuing 6,075 equity shares of face value ₹10 each at a premium of ₹1,990 per share to Zeus Vinimay Pvt. Ltd. The assessee furnished statutory documents including its NBFC registration certificate, Form 2 filed with the Registrar of Companies, details of subscribers, and particulars of the Managing Director of the subscribing company. However, the Managing Director did not appear when summoned under Section 131.

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The Commissioner of Income Tax (Appeals) upheld the addition, but the Income Tax Appellate Tribunal later deleted it. The revenue challenged this deletion before the High Court.

Represented by Soumen Bhattacharjee, Ankan Das and Shradhya Ghosh, the appellant-revenue contended that the Tribunal erred in deleting the addition under Section 68 of the Income Tax Act, 1961. as the assessee failed to discharge its onus to prove the identity, creditworthiness, and genuineness of the share applicant, primarily because the Managing Director of the investing company did not appear before the AO under Section 131.

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The respondent-assessee, represented by Avra Mazumder, Alisha Das and Maitreyee Naskar, argued that all documentary evidences have been furnished before the AO, merely because the Managing Director of the subscribing entity did not appear, the AO cannot not disregard them. They pointed out that the tax effect involved in the appeal was below ₹2 crore, making the appeal non-maintainable in view of Circular No. 9/2024.

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The Bench comprising Justice Rajarshi Bharadwaj and Justice Uday Kumar held that the appeal was not maintainable as the tax effect involved was well below the monetary threshold of ₹2 crore prescribed in Circular No. 9/2024 dated 17.09.2024 for filing appeals before the High Court. The Court noted that the assessee had provided sufficient documents during assessment as well as before the Tribunal, and given that the appeal fell squarely within the limitations imposed by the circular.

Therefore, it could not be entertained. Consequently, the appeal and the connected interlocutory application were dismissed with no order as to costs.

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