2025 (2) TMI 1075 - AT - Income Tax

Unexplained cash credit u/s 68 - Bogus share capital / share premium - HELD THAT - CIT (A) instead of commenting on the evidences filed by the assessee as well as the replies of the subscribers available in the assessment records chose a very cryptic and wrong manner while disposing off the appeal. In our opinion the assessee has filed all the evidences before the AO as well as before the ld. CIT (A) and both the authorities below have failed to carry out any meaningful and purposeful enquiry and draw any legal conclusion based on the said enquiry. For the aforesaid reasons we are not in a position to sustain the order of the ld. CIT (A). Assessee has discharged its burden by furnishing all the evidences and both the authorities below have failed to conduct any enquiry intio the same despite the tribunal specific direction. Accordingly we set aside the order of ld. CIT (A) on this issue and direct the ld. AO to delete the addition. The appeal of the assessee is allowed.

Summary

The judgment by the Appellate Tribunal ITAT Kolkata involved cross-appeals by the assessee and the Revenue against the order of the National Faceless Appeal Centre for the assessment year 2012-13. The main issue in the appeals was the addition made on account of share capital/share premium. The assessee had declared a total income of nil in the return filed, but the assessment by the Assessing Officer resulted in an addition of 12,41,75,160 as unexplained cash credit under section 68 of the Income Tax Act. The matter had previously been remanded by the Tribunal to the Assessing Officer for fresh adjudication due to the failure to consider evidence provided by the assessee.In the subsequent assessment, the Assessing Officer again added the amount of share capital/share premium, stating that a prudent person would not invest in a company without significant assets or a business track record. The Commissioner of Income Tax (Appeals) (CIT(A)) partly allowed the appeal by estimating the profit at 50% of the total credits and deleting the addition to that extent.The assessee contended that all necessary evidence had been provided to the Assessing Officer, including details of shareholders, audited financial statements, and bank statements, all showing that the money had been received through banking channels. The Assessing Officer had issued notices to the subscribers of shares under section 133(6) of the Act, and their replies confirmed the investments. However, the CIT(A)'s estimation of profit at 50% was deemed flawed by the Tribunal, which found that both the Assessing Officer and the CIT(A) had failed to conduct a meaningful enquiry into the evidence provided. Consequently, the Tribunal set aside the CIT(A)'s order and directed the Assessing Officer to delete the addition.The Revenue's appeal against the part deletion of the addition was dismissed by the Tribunal, as the Tribunal had already directed the deletion of the addition in the assessee's appeal.In conclusion, the Tribunal allowed the assessee's appeal and dismissed the Revenue's appeal, directing the deletion of the addition made by the Assessing Officer. The judgment was pronounced in open court on 24.02.2025.