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Case Law Details

Case Name : Invorex Trading Pvt. Ltd. Vs ITO (ITAT Kolkata)
Appeal Number : I.T.A. No. 601/Kol/2023
Date of Judgement/Order : 23/01/2024
Related Assessment Year : 2012-13

Invorex Trading Pvt. Ltd. Vs ITO (ITAT Kolkata)

he ITAT Kolkata recently ruled on the dispute between Invorex Trading Pvt. Ltd. and the Income Tax Officer (ITO) concerning the addition of share capital and premium under Section 68 of the Income Tax Act, 1961. Despite numerous hearing dates, the appellant failed to attend, complicating the case further.

The tribunal, after reviewing the arguments presented by the respondent, affirmed the addition of share capital and premium. Central to their decision was the appellant’s non-appearance and their inability to establish key requirements outlined in Section 68, including the identity and creditworthiness of the share subscribers, and the genuineness of the transactions. This absence of substantiation raised doubts regarding the legitimacy of the funds, compounded by suspicious financial activities noted by the tribunal.

Given the appellant’s non-attendance and failure to fulfill statutory obligations, the ITAT’s dismissal of the appeal was unsurprising. This ruling underscores the significance of compliance and transparency in financial dealings. The case serves as a stark reminder of the consequences of inadequate documentation and the importance of adhering to legal requirements, especially in matters concerning share capital and premium. Invorex Trading Pvt. Ltd. vs ITO sets a precedent, emphasizing the authorities’ vigilance in combating potential tax evasion and irregular financial practices.

FULL TEXT OF THE ORDER OF ITAT KOLKATA

The present appeal is directed at the instance of the assessee against the order of the National Faceless Appeal Centre, Delhi, [hereinafter the “ld. CIT(A)”] dt. 10/10/2022, passed u/s 250 of the Income Tax Act, 1961 (“the Act”) for the Assessment Year 2012-13.

2. This appeal was fixed for hearing on various dates but adjournments were sought for by the ld. A/R on three occasions i.e., on 28/12/2022, 30/01/2023 and 20/03/2023, deposing that he had no instructions from the assessee in respect of pursuing the appeal before the Hon’ble ITAT and withdrew himself from the appeal vide a letter dt. 06/06/2023. Thereafter, fresh notices were issued to the assessee, but there was no compliance to the said notices.

3. Under these circumstances, we proceed to adjudicate the appeal on merits, ex-parte qua the assessee on merits, after hearing the ld. D/R.

4. The ld. D/R submitted that the ld. Assessing Officer as well as the ld. CIT(A) has examined the facts of the case extensively and financial statements of the share applicants were also scrutinised and came to a plausible conclusion. He vehemently argued supporting the order of the ld. Assessing Officer and stated that merely filing paper documents cannot be treated as a compliance to explain the nature and source of the alleged sum. Surrounding circumstances which includes the meagre income offered by the share subscribers, no regular business activity carried out by the assessee company as well as by the share subscribers and the typical nature of flow of funds in the bank statement indicates that share subscribing companies are engaged in rotation of funds for providing accommodation entries and they are jamakharchi or shell/paper companies and, therefore, the ld. Assessing Officer has rightly added the sum in the hands of the assessee. He prayed that the order of the ld. CIT(A) be upheld.

5. Heard the ld. D/R. The sole issue involved in this appeal is the addition of share capital including share premium amounting to Rs.2,05,00,000/- raised during the year from five share subscriber companies as unexplained cash credit u/s 68 of the Act, by the AO as confirmed by the ld. CIT(A). We find that the assessee has firstly failed to appear in-person before the ld. CIT(A) as well as before us. Secondly, the assessee has miserably failed to establish the three ingredients as prescribed u/s 68 of the Act i.e., identity, creditworthiness of the share subscribers and genuineness of the transactions. Under these given facts and circumstances, we do not find any reason to interfere with the findings of the ld. CIT(A) in confirming the addition u/s 68 of the Act.

6. In the result, appeal of the assessee is dismissed.

Order pronounced in the Court on 23rd January, 2024 at Kolkata

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