PCIT Vs Hirak Vyapaar Pvt. Ltd. (Calcutta High Court)
Calcutta High Court has dismissed an appeal filed by the revenue challenging an order from the Income Tax Appellate Tribunal (ITAT) which deleted an addition of Rs. 10,60,50,000/- made under Section 68 of the Income Tax Act, 1961, for the assessment year 2008-09. The case, PCIT Vs Hirak Vyapaar Pvt. Ltd., revolved around the treatment of share capital and share premium received by the assessee company.
The revenue had put forth three substantial questions of law for the court’s consideration. These questions essentially argued that the ITAT erred by:
- Deleting the addition of share capital and premium without adequately examining the facts and materials of the case.
- Ignoring the fact that the assessee did not appear or pursue its appeal before the Commissioner of Income Tax (Appeals) [CIT(A)], implying a lack of explanation for the share capital.
- Disregarding the assessee’s alleged failure to discharge its onus of proving the identity, genuineness, and creditworthiness of the subscribing companies, as well as the genuineness of the share transactions.
Mr. Om Narayan Rai, learned standing counsel, appeared for the appellant/revenue, while Mr. Abhratosh Majumder, learned senior advocate, represented the respondent/assessee.
Background of the Case:
The assessment for the relevant year was initially completed by the Assessing Officer (AO) under Section 143(3) of the Income Tax Act. Subsequently, the Commissioner of Income Tax (CIT) exercised revisional powers under Section 263 of the Act. On March 30, 2013, the CIT passed an order setting aside the original assessment and directed the AO to conduct further inquiries into the genuineness of the transactions, including the examination of company directors and other related matters concerning the share capital raised.
Following these directions, the AO re-examined the issue and, by an order dated March 31, 2014, disallowed the share application money received by the assessee during the year. This amount was added back to the assessee’s total income as unaccounted cash credit under the provisions of Section 68 of the Act.
Aggrieved by the AO’s order, the assessee filed an appeal before the Commissioner of Income Tax (Appeals)-17, [CIT(A)]. However, the assessee did not appear during the appeal proceedings before the CIT(A), leading to the dismissal of the appeal by an order dated March 20, 2017.
The assessee then appealed to the Income Tax Appellate Tribunal (ITAT). The High Court noted that the Tribunal, in its impugned order, had undertaken a “thorough and elaborate examination of the facts.” It also took note of the response filed to the notices issued under Section 133(6) of the Act. Furthermore, the Tribunal delved into the resources and surplus of the companies which had subscribed to the assessee’s shares.
ITAT’s Factual Findings:
