Case Law Details
Principal Commissioner Of Income Tax Vs Snowwhite Infrastructure Pvt. Ltd. (Calcutta High Court)
The Calcutta High Court dismissed an appeal filed by the Principal Commissioner of Income Tax against Snowwhite Infrastructure Pvt. Ltd. regarding the assessment year 2012-13. The appeal challenged the Income Tax Appellate Tribunal’s (ITAT) order, which upheld the decision of the Commissioner of Income Tax (Appeals) [CIT(A)] to delete an addition of ₹17.61 crore under Section 68 of the Income Tax Act. The addition was initially made by the Assessing Officer (AO) on the grounds that Snowwhite Infrastructure failed to prove the identity, creditworthiness, and genuineness of its share subscribers. The AO noted that none of the company’s directors appeared in response to notices for verification. However, the CIT(A), after an elaborate fact-finding process and considering judicial precedents, concluded that the funds were received from the company’s holding company, Infinity BNKE Infocity Pvt. Ltd., which was a financially sound entity interested in Snowwhite’s real estate projects. The ITAT reviewed these findings, noting that the holding company was part of the same business group and had invested funds for a large development project in Uttar Pradesh. Additionally, the CIT(A) had obtained a remand report from the AO and evaluated the evidence provided. The High Court, citing the absence of any substantial question of law, upheld the ITAT’s decision and dismissed the revenue’s appeal. The case underscores the importance of thoroughly substantiating claims when challenging the identity, creditworthiness, and genuineness of financial transactions under Section 68.
FULL TEXT OF THE JUDGMENT/ORDER OF CALCUTTA HIGH COURT
The Court :- This appeal is directed against the order dated 19.4.2023 passed by the Income Tax Appellate Tribunal “C” Bench, Kolkata in ITA no.565/Kol/2020 for the assessment year 20 12-13.
The Revenue has raised the following substantial questions of law for consideration :-
i. Whether on the facts and in the circumstances of the case, the Learned Income Tax Appellate Tribunal was justified to grant relief to the respondent assessee and upholding the order of the Commissioner of Income Tax [Appeals] with respect to addition of Rs. 17,61,40,800/- under section 68 of the Income Tax Act, 1961 on account of share capital/premium as unexplained cash credit where the respondent assessee has failed to prove the identity, creditworthiness of the subscribers and genuineness of the transaction
ii. Whether on the facts and in the circumstances of the case, the Learned Income Tax Appellate Tribunal was justified to grant relief to the respondent assessee by upholding the order of the Commissioner of Income Tax [Appeals] despite the fact that none of the directors of the respondent assessee responded and appeared in response to notice issued under section 131 of the Income Tax Act, 1961 before the Assessing Officer for verification, examination of genuineness of transitions, as well as the identity, creditworthiness of the share applicants ?
Heard learned advocates on either side.
The revenue on appeal challenging the correctness of the order passed by the tribunal by which the appeal filed by the tribunal challenging the order passed by the Commissioner of Income Tax [Appeals] -17, Kolkata [CIT(A)] dated 22.7.2020 was dismissed. The CIT[A] deleted the addition made by the Assessing Officer in respect of the certain sum of receipt which was treated by the Assessing Officer as unexplained income of the assessee under section 68 of the Act on the ground that the assessee had failed to establish the identity, genuineness and creditworthiness of the share subscribers. We find that the CIT[A] while allowing the assessee’s appeal has done an elaborate fact finding exercise and also taken note of the various decisions of the Courts. The tribunal on its part also examined the facts and pointed out that the assessee had treated the relevant financial year raised a share capital from one company namely, M/s. Infinity BNKE Infocity [P] Ltd., which is the holding company and the assessee is part of the real estate group of companies.
The share subscriber company was a holding company of the assessee company and both the companies were having common directors and that the share subscribing/holding company was interested in the business of the assessee. The nature of business activity was examined by the tribunal and noted that the assessee company had completed multiple pieces of land in the State of UP for developing a project in phases. The estimated cost of the project at the relevant point of time was Rs.300 crores. The assessee company had registered its project before the Real Estate Development Authority, U.P. The tribunal noted that the funds of the investing company and its creditworthiness has been duly considered and discussed by the CIT[A] in its order dated 22.7.2020. The entire share subscription amount was received by the tribunal from its holding company, i.e., IBIPL which in turn is promoted by Infinity Infotech Parks Limited and provided funds for execution of the project either by own or through subsidiaries.
After discussing the other relevant facts, the Tribunal also took note that the CIT[A] called for a remand report from assessing officer in respect of various details and evidence was submitted by the assessee and thereafter after considering the remand report the CIT[A] passed the order. The Tribunal also took note of the decisions of this Court in the case of Principal Commissioner of Income Tax Vs. Anmol Stainless (P) Ltd. [2022] 138 taxmann .com 535 (Calcutta) and ultimately dismissed the appeal.
Thus, we find that there is no question of law, much less substantial question of law arising for consideration in this appeal and the same is dismissed.
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