9911796707
TMI Blog2025 (1) TMI 171X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee has received huge share capital/ share premium during the year of Rs. 3,54,76,000/- vis a vis the net profit of the company being very meagre to the tune of Rs. 1,20,461/- in F.Y. 2010-11 and Rs. 1,01,321/- for F.Y. 2011-12. The assessee also furnished the details of allottees, their IT returns, etc. and informed the ld. AO that shares were issued at a premium of Rs. 490/- with face value of Rs. 10 each. The ld. AO also issued summons u/s 131 of the Act to the shareholders for independent verification of the transactions of share subscription, however, nobody turned up and finally, the amount of capital share/ share premium was treated as bogus and unexplained and added to the income of the assessee in the assessment framed vide order dated 17.03.2015 passed u/s 144 of the Act. 04. The assessee preferred the appeal before the ld. CIT (A), who allowed the appeal of the assessee. The ld. CIT (A) after taking into consideration the contentions/ submissions of the assessee deleted the addition by observing and holding as under:- "5. Decision: The appellant in its ground of appeal has assailed the AO in making the assessment under section 144 without allowing the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct r.w CPC, 1908 the transaction cannot be treated to be genuine. 5.3 The submission, the assessment order is perused. The AO has stated that there was submission by the appellant, which establishes that there was compliance and that it was not a case of non-compliance as stated out by the AO in framing the order u/s 144 of the Act. Further the AO issued summons u/s 131(1) of the Act for personal attendance which was not adhered to by the shareholders. It was also stated by the AO that some replies were received in section. The AO is not specific which compliance and by which shareholder was made, however the AO proceeded to add the share premium u/s 68 in the order framed u/s 144 of the Act. The appellant in its detailed submission filed the copies of the ROI, copy of confirmations, forms of application for equity shares etc., their balance sheet etc. The appellant further relied on a number of judicial decisions to support its grounds of appeal. The issue of disallowance by the AO on non-compliance of notice u/s 131(1) of the Act has been considered by the ITAT-Delhi in United Foods (P.) Ltd. v. ACIT in ITA /9681/2019.Therelevant part of the order is reproduced below: "8. We ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... record. The Assessee also contends that the authority issuing summons should judge the relevancy of documents or books of accounts before issuing summons for production of documents. There is no averment in this regard in the orders of the lower authorities on such co-relation and application of mind 8.2 It is further case of the assessee that the summons issued to the parties situated in Gujarat for personal attendance in Delhi is an obvious case of overreaching the exercise of power vested under section 131 of the Act read with provisions of CPC. In the instant case, where the contractors are situated at a remote area situated in excess of distance of 500 kms, witnesses could not be ordered to attend in person before the Assessing Officer having regard to the order XVI Rule 19 of Civil Procedure Code 1908. The assessee contends that the Assessing Officer has the same powers as are vested in a Court in Civil Procedure Code 1908 while trying a suit, for exercise of power vested under section 131(1) of the Act. This being so, the right course of action available to the Assessing Officer was to issue 'commission' under S. 131(1)(d) of the Act at the nearest place of the sit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the service providers. TDS has been deducted on such expenses and reflected in the return of income of the contractors. The increase in turnover, addition of new line of business, i.e., processing of rice and substantial increase in the fixed asset are vital indicators of plausibility of the explanation offered by the assessee in this regard. In this factual matrix, in the absence of any culpable evidence in possession of revenue, the job work expenses deserve to allowed, on a standalone basis, as incurred in the ordinary course of business. 8.5 Now we turn to address the grievance of revenue on non-compliance of summons. Admittedly, the summons under section 131 were duly served on the contractors but had remained un-responded. In this backdrop, the observations of Hon'ble Madras High Court in S. Hastimal v. CIT [1963] 49 ITR 273 are worth noting wherein an impetus was given on the difficulty on the part of any assessee to explain a transaction after a decade. Similar view has been recently expressed by the Hon'ble Supreme Court in CITI Bank case (supra). 8.6 This apart, we are alive to the concern of the assessee that owing to closure of business and in the absence of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ld. D.R submitted that replying to the notices u/s 131 of the Act did not mean that the ingredients as envisaged in section 68 of the Act were duly satisfied. Besides the ld DR stated that the enquiries and investigation could not be carried out by the AO when the subscribers did not appear personally in compliance to summons issued u/s 131 of the Act. Therefore the Ld. D.R, therefore, submitted that the addition was rightly made by the AO. The DR argued that the Ld. CIT(A) has just deleted the addition on the ground that the assessee furnished all the evidences and AO failed to carry out further enquiry based on these evidences while the important aspect of non compliance to summons to the summons issued u/s 131 of the Act. The ld DR therefore prayed that the order of ld CIT(A) may be reversed and that of AO be restored. 06. Ld. Counsel for the assessee vehemently submitted before the bench that the order passed by the Ld. CIT(A) is cogent, reasoned and passed after taking into account the facts record and various decisions given by different judicial forum. The Ld. AR, while referring to the evidences filed by the assessee as well as by the subscribers, submitted that the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whatsoever. We note that the AO has only harped on the fact that the directors did not turn up on the date and time giving for personal deposition. Besides the AO has harped on the fact that these shares were allotted at very high premium by ignoring the facts that there was no bar on issue of shares of high premium in the AY 2012- 13 and the same was applicable from AY 2013-14 because Clause (viib) to Clause 2 section 56 inserted by Finance Act, 2012 w.e.f 01.04.2013. Similarly the provisions in Finance Act, 2012 that the assessee company issuing share premium have to prove source of source has been inserted with effect from 1.4.2013 and is not applicable in the case of assessee for AY 2013-14 onwards. The case of the assessee finds support from the decision of the Hon'ble Bombay High Court in the case of CIT vs. Gangadeep Infrastructure Pvt. Ltd. in 80 taxmann.com 272 (Bom). Therefore, the appellate order passed by the Ld. CIT(A) directing the AO to delete the addition is based on the correct appreciation of facts on record and the ratio laid by the Hon'ble Courts in the various decisions as discussed hereinbelow. In our opinion, the addition cannot be made merely on the ground t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refore it shall be assumed that the assessee failed to prove the existence of the creditors or for that matter creditworthiness. As rightly pointed out by the learned counsel that the Ld. CIT(A) has taken the trouble of examining of all other materials and documents viz., confirmatory statements, invoices, challans and vouchers showing supply of bidi as against the advance. Therefore, the attendance of the witnesses pursuant to the summons issued in our view is not important. The important is to prove as to whether the said cash credit was received as against the future sale of the product of the assessee or note. When it was found by the Ld. CIT(A) on fact having examined the documents that the advance given by the creditors have been established the Tribunal should not have ignored this fact findings. Indeed the Tribunal did not really touch the aforesaid fact finding of the Ld. CIT(A) as rightly pointed out by the learned counsel. The Supreme Court has already stated as to what should be the duty of the learned Tribunal to decide in this situation. In the said judgment noted by us at page 463, the Supreme Court has observed as follows: "The Income-Tax Appellate Tribunals perfo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that order of Ld. CIT(A) does not call for any interference. It may be seen from the grounds of appeal raised by the revenue that the revenue disputed only the proof of identity of share holder. In this regard it is seen that for AY 2004-05 Shree Shyam Trexim Pvt. Ltd. was assessed by ITO, Ward-9(4), Kolkata and the order of assessment u/s 143(3) dated 25.01.2006 is placed in the paper book. Similarly Navalco Commodities Pvt. Ltd. was assessed to tax u/s 143(3) for AY 2005-06 by ITO, Ward-9(4), Kolkata by order dated 20.03.2007. Similarly Jewellock Trexim Pvt. Ltd. was assessed to tax for AY 2005-06 by the very same ITO, Ward-9(3), Kolkata assessing the assessee. In the light of the above factual position which is not disputed by the revenue, it cannot be said that the identity of the share applicants remained not proved by the assessee. The decision of the Hon'ble Allahabad High Court as well as ITAT, Kolkata Bench on which reliance was placed by the learned counsel for the assessee also supports the view that for non-production of directors of the investor company for examination by the AO it cannot be held that the identity of a limited company has not been established. For the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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