Case Law Details
Shaktigarh Textile and Industries Ltd. Vs DCIT (ITAT Kolkata)
Introduction: Shaktigarh Textile and Industries Ltd. found itself in a legal battle with the Deputy Commissioner of Income Tax (DCIT) in Kolkata, with a pivotal focus on Section 68 of the Income Tax Act. In this article, we delve into the case, the issues at hand, and the Tribunal’s decision.
Background: Shaktigarh Textile and Industries Ltd. contested an order from the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi, dated June 19, 2023, for the assessment year 2012-13. The company raised two grounds of appeal challenging the addition of Rs. 1,00,00,000, which they had received from M/s. Kasa Contrade Pvt. Limited, a Group Company.
The Cash Credit: The case originated from the assessee filing a ‘NIL’ return of income on September 21, 2012. Subsequently, the assessing officer issued a notice under section 143(2) to scrutinize the accounts. During the assessment, it was revealed that the sum of Rs. 1,00,00,000 had been credited to the assessee’s account on April 1, 2011, under the name of M/s. Kasa Contrade Pvt. Limited as share application money.
The Tax Authority’s Stand: The assessing officer deemed this cash credit as unexplained and made an addition to the assessee’s income. The appeal to the Commissioner of Income Tax (Appeals) did not provide any relief.
Assessee’s Defense: The assessee’s counsel argued that the cash credit should not be taxed in the assessment year 2012-13. They presented crucial evidence that M/s. Kasa Contrade Pvt. Limited had received the money in the financial year 2010-11, which was relevant to the assessment year 2011-12. As a result, it should not be taxable in 2012-13 when it was in the hands of the assessee.
Tribunal’s Decision: The tribunal examined the evidence and clarified that M/s. Kasa Contrade Limited had indeed received Rs. 1,00,00,000 via RTGS in the financial year 2010-11, relevant to the assessment year 2011-12. Since M/s. Kasa Contrade Pvt. Limited merged with the assessee company, this credit entry transferred to the assessee’s accounts. The tribunal agreed that the assessee was responsible for explaining the cash credit of its predecessor or amalgamated company in the assessment year 2011-12, not in 2012-13.
Section 68 Compliance: Section 68 of the Income Tax Act allows additions for cash credits received during the year relevant to a specific assessment year, in this case, 2012-13. As no amount was received by the erstwhile M/s. Kasa Contrade Pvt. Limited in that year, the tribunal concluded that the addition was not sustainable. Therefore, they allowed the appeal and deleted the addition.
Conclusion: The case of Shaktigarh Textile and Industries Ltd. vs. DCIT serves as a reminder that section 68 additions should be made in the assessment year of receipt. The tribunal’s decision in this case highlights the importance of meticulous record-keeping and demonstrates how understanding the timing of cash receipts can significantly impact tax liabilities.
FULL TEXT OF THE ORDER OF ITAT KOLKATA
The assessee is in appeal before the Tribunal against the order of ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi dated 19th June, 2023 passed for A.Y. 20 12-13.
2. The assessee has raised two grounds of appeal, whereby it has challenged confirmation of addition of Rs.1,00,00,000/-, which was received from a Group Company M/s. Kasa Contrade Pvt. Limited.
3. Brief facts of the case are that the assessee has filed its return of income at ‘NIL’ on 2 1.09.2012. The case of the assessee was selected for scrutiny assessment and a notice under section 143(2) was issued and served upon the assessee. On verification of the accounts, it revealed to the ld. Assessing Officer that a sum of 1,00,00,000/- has been credited in the accounts of the assessee on 01.04.2011 against the name of M/s. Kasa Contrade Pvt. Limited in the guise of share application money. The ld. Assessing Officer ultimately treated this cash credit as unexplained and made the addition. Appeal to the ld. CIT(Appeals) did not bring any relief to the asses see.
4. Before us, ld. Counsel for the assessee took us through page no. 6 of the assessment order and submitted that on the first part, the ld. Assessing Officer has reproduced the copy of the relevant loan ledger. This ledger would show that as on 1.4.2011 opening balance was Rs.5,74,05,326/-. M/s. Kasa Contrade Pvt. Limited has received the amount of Rs.1 crore through RTGS on 29.03.2011 from an account maintained with SBI, Commercial Branch, 24, Park Street, Kolkata. M/s. Kasa Contrade Pvt. Limited later on amalgamated with the assessee and this amount was credited in the accounts of the assessee. Ld. Counsel for the assssee took us through the accounts of M/s. Kasa Contrade Pvt. Limited in the books of the assessee-company for F.Y. 2010-11, copy of such account is placed on page no. 19. He took us through all Relevant documents and submitted that this sum of Rs.1,00,00,000/- came to the possession of M/s. Kasa Contrade Pvt. Limited in F.Y. 2010-11 relevant to A.Y. 2011-12, therefore, it is not taxable in A.Y. 2012-13 in the hands of the assessee.
5. On the other hand, ld. D.R. relied upon the assessment order, wherein ld. Assessing Officer has discussed the facts very elaborately.
6. We have duly considered the rival contentions. It emerges out from the record that M/s. Kasa Contrade Limited has received a sum of Rs.1,00,00,000/- through RTGS from Account No. 30430214498 maintained with SBI, Commercial Branch, 24, Park Street, Kolkata in the name of Shaktigarh Jutepark Infrastructures Limited. This amount was credited in the accounts of Group Company i.e. M/s. Kasa Contrade in F.Y. 2010-11 relevant to A.Y. 2011-12. Later on, M/s. Kasa Contrade Pvt. Limited merged with the assesseecompany and this credit entry came to the accounts of the assessee. It was demonstrated before us that the assessee is responsible for the assets and liability of its predecessor company or amalgamated company being a successor company of the erstwhile M/s. Kasa Contrade Pvt. Limited but its liability of a particular year could be examined in that very year. The erstwhile M/s. Kasa Contrade Pvt. Limited received the money in F.Y. 2010- 11, which could be assessed in A.Y. 2011-12. The assessee can be held responsible for explaining that cash credit of its predecessor or amalgamated company in A.Y. 2011-12 and in not 2012-13.
7. A perusal of section 68 would indicate that additions would be made for the cash credits received by an assessee in its accounts during the year relevant to A.Y. 2012-13. No amount was received by erstwhile M/s. Kasa Contrade Pvt. Limited and, therefore, being a successor company, it cannot be assessed in the hands of the assessee in A.Y. 2012-13. At the most, it could have been enquired in A.Y. 2011-12, but since no assessment was reopened in A.Y. 2011-12, therefore, addition is not sustainable. We allow the appeal of the assessee and delete the addition.
8. In the result, the appeal of the assessee is allowed.
Order pronounced in the open Court on October 10, 2023.
