Appellant: Intellectual Securities Pvt. Ltd., Corporate Office-505, Pragati Deep Building, District Centre, Laxmi Nagar, New Delhi-110092
Respondent: DCIT, Central Circle, Noida
PAN No. AABCI7610J
Assessee by: Sh. Rajiv Khandelwal, CA & Sh. Neelkanth Khandelwal, Adv.
Revenue by: Ms. Deepshikha Sharma, CIT DR
Date of Hearing: 11.11.2021
Date of Pronouncement: 12.01.2022
Per Dr. B. R. R. Kumar, Accountant Member:
The present appeal has been filed by the assessee against the order of the ld. CIT(A), Kanpur-4 dated 24.08.2021.
Intellectual Securities Pvt. Ltd. (the appellant) filed its return of income for the assessment year 2010-11 on 29.09.2010 declaring a total income of Rs.19,340/-. The return was processed u/s 143(1) on the returned income.
Subsequently, the appellant filed a letter stating that the company had received consultancy charges of Rs.37,500/- in cash during the financial year 2009-10 but had not accounted for this income. This led to the belief that income had escaped assessment, and a notice u/s 148 of the Income Tax Act, 1961 was issued. The appellant responded that the return filed on 29.09.2010 may be treated as the return in reply to the notice u/s 148.
Notices u/s 143(2) and 142(1) were issued and duly served on the appellant. During the financial year 2009-10, the appellant, a non-banking financial company (NBFC), raised share capital amounting to Rs.42.70 crore (including premium) by private placement, which was duly examined. The appellant received consultancy charges of Rs.37,500/- in cash, which was not incorporated into its total return of income by mistake, leading to an addition of Rs.37,500/- to the total income.
The appellant also claimed preliminary expenses write-off of Rs.41,300/-. Upon examination, it was found that the appellant had claimed an excess amount of Rs.25,500/-, which was part of capital expenditure. The appellant’s representative admitted the excess claim and offered no objection to the proposed disallowance, leading to an addition of Rs.25,500/- to the total income.
On 03.01.2012, the ITO, Ward-6(2), Kolkata, passed an order u/s 147/143(3) assessing the total income at Rs.82,340/-. The order was passed based on the belief that income chargeable to tax had escaped assessment.
However, the ld. CIT, Kolkata-2, Kolkata, held that the order of the Assessing Officer was erroneous and prejudicial to the interest of the revenue as the AO had not examined in detail the receipt of share capital. The ld. CIT directed the AO to examine the genuineness and source of share capital for each shareholder by conducting an independent inquiry. This led to the reassessment proceedings, and the AO passed an order u/s 143(3) r.w.s. 263 on 31.03.2015, making an addition of Rs.40.70 crore u/s 68 of the Income Tax Act, 1961.
The AO noted that the summons issued to the shareholders and directors returned unserved. The AO inferred that the subscribers to the share capital and premium must be dubious as they did not attend for deposition. The AO concluded that the credits from these entities were unexplained and treated the share capital and premium as unexplained cash credits u/s 68.
Aggrieved by the additions, the appellant filed an appeal before the ld. CIT(A), who confirmed the additions made by the AO. The appellant then filed an appeal with the Tribunal, which restored the issue to the file of CIT(A) for fresh adjudication.
The Tribunal noted that the appellant had provided detailed documentary evidence to support the identity, creditworthiness of the creditors, and genuineness of the transactions, including confirmations, share application forms, bank statements, and annual accounts of the share applicants. However, the AO and CIT(A) did not make any independent inquiries or field investigations to verify the claims.
The Tribunal highlighted that the initial burden of proof lies with the assessee to establish the identity, creditworthiness of the creditors, and genuineness of the transactions. Once the appellant provides prima facie evidence, it is for the revenue to conduct further investigations.
Based on the documentary evidence provided by the appellant and the lack of independent inquiries by the revenue authorities, the Tribunal held that the addition made by the AO u/s 68 was not justified. The Tribunal allowed the appeal of the assessee.
Order Pronounced in the Open Court on 12/01/2022.
SD/-
(Amit Shukla)
Judicial Member
SD/-
(Dr. B. R. R. Kumar)
Accountant Member
Dated: 12/01/2022
*Subodh Kumar, Sr. PS*
Copy forwarded to:
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