Case Law Details
Virat Tradecom Pvt Ltd Vs ITO (ITAT Kolkata)
The ITAT Kolkata allowed the assessee’s appeal against the order of the Commissioner of Income Tax (Appeals) for Assessment Year 2012-13, which had confirmed an addition of ₹1,43,35,000 under Section 68 of the Income-tax Act on account of share capital and share premium received by the assessee.
The assessee had issued 14,335 equity shares of face value ₹10 each at a premium of ₹990 per share. During scrutiny assessment, the Assessing Officer issued summons under Section 131 to the directors of the shareholder companies to verify the investments. As none of the directors appeared, the Assessing Officer treated the share application money as unexplained cash credit under Section 68. The CIT(A) upheld the addition, observing that the summons remained uncomplied with, the subscribing companies had meagre income and limited business activities, and the high share premium lacked justification. The CIT(A) concluded that the assessee had failed to establish the creditworthiness of the subscribers and the genuineness of the transactions.
The Tribunal noted that the assessee had furnished extensive documentary evidence relating to all the share subscribers, including PAN, income tax returns, names and addresses, audited financial statements, bank statements, ROC records, and confirmations. It observed that the Assessing Officer had neither pointed out any defect in these documents nor conducted any further investigation. The addition was made solely on account of non-compliance with the summons issued under Section 131.
The Tribunal further found that three of the four subscribers had themselves been assessed under Section 143(3), and in those assessments, the amounts invested in the assessee company had already been added in the hands of the respective subscriber companies. In the case of the fourth subscriber, although an assessment under Section 143(3) had been completed, no addition had been made.
Relying on the decision of the jurisdictional Calcutta High Court, the Tribunal observed that where the identity, creditworthiness, and genuineness of the share applicants are established and the share application money has already been subjected to tax in the hands of the subscribers, taxing the same amount again in the hands of the recipient company would amount to double addition. The High Court had also recognised that scrutiny assessments of the share applicant companies had attained finality.
Applying the same principle to the present case, the Tribunal held that the addition under Section 68 could not be sustained. It set aside the order of the CIT(A), directed the Assessing Officer to delete the addition of ₹1,43,35,000, and allowed the assessee’s appeal.
FULL TEXT OF THE ORDER OF ITAT KOLKATA
This is the appeal preferred by the assessee against the order of the Ld. Commissioner of Income Tax (Appeals)-NFAC, Delhi (hereinafter referred to as the Ld. CIT(A)”] dated10.10.2025 for the AY 2012-13.
2. At the time of hearing the Ld. Counsel of the assessee pressed the ground nos. 2,3 and 4 challenging the order of Ld. CIT(A) confirming the addition of Rs. 1,43,35,000/-.
3. Facts in brief are that the assessee filed return of income on 30.11.2012 declaring total income of Rs. 95,350/- which was processed u/s 143(1) of the Act. The case of the assessee was selected for limited scrutiny under CASS and notices were issued u/s 143(2) and 142(1) along with questionnaire and duly served upon the assessee. The assessee was asked to furnish various the documents/details as called for by the AO which were furnished and test-checked by the AO and are available on record. The AO on perusal of the balance sheet of the assessee observed that the assessee has issued 14,335 equity shares at face value of Rs. 10/- each at premium of Rs. 990/- thereby receiving an amount of Rs. 1,43,35,000/-. In order to verify the transactions, the AO issued summons u/s 131 to the directors of the share holding companies asking to produce certain evidences, details in support of justification for investments in the assessee company. But none appeared. Thereafter, the AO issued show cause notice to the assessee for which, the assessee could not give any explanation. Finally the AO added the amount as unexplained cash credit to the income of the assessee u/s 68 of the Act.
3. The Ld. CIT(A) affirmed the order of AO by holding that the summons were not complied with by the assessee. The Ld. CIT(A) has also discussed the financials of the share subscribing companies and income derived by them and finally held that the assessee failed to discharge the onus to prove creditworthiness and genuineness of the transactions and therefore justified the addition. The Ld. CIT(A) noted that the subscribing companies have meager income and the share premium charged by the assessee was also unjustified.
4. After hearing the rival contentions and perusing the material on record, we find that the assessee during the year issued shares to four subscribers, three of which were private limited entities and the fourth no was HUF. Undisputedly, the assessee filed before the AO qua share subscribing persons besides PANs, ITRs, names and addresses, audited balance sheets, bank statements, ROC data and confirmations etc. and the AO has not carried out any investigation ror pointed out any defect in the evidences by the assessee. The only reason for making addition was that as there was no compliance to the summon u/s 131, the verification could not be done. The Ld. CIT(A) though discussed the financials of the share subscribers to uphold the finding of the AO on the ground that subscribing companies having meager income and no substantial activities and therefore there is no justification to issue shares at high premium. We note that the assessment has been framed in the case of three entities namely Amtek Financial Consultants Pvt. Ltd., Jagmangal Vanijya Pvt. Ltd. and Zircon Infracon Pvt. Ltd. u/s 143(3) of the Act and copies of the orders are available at page no. 35,55 and 82. We note that the money invested in the assessee company by way of share subscribers was already added in their respective assessment order. In the case of fourth investors i.e. S. K. Enterprises, we note that assessment has been framed u/s 143(3) of the Act but no addition was made. Copy of order is available at page 102 of PB. Therefore, in our opinion, the addition made by the AO and confirmed by the Ld. CIT(A) is wrong and cannot be sustained. The case of the assessee is squarely covered by the decision of Hon’ble Calcutta High Court in the case of PCIT vs. One point Commercial Pvt. Ltd. in [2025] 176 taxmann.com 136 (Cal) wherein the Hon’ble Calcutta High Court has held as under:
“5. After noting the principles which was laid down by the Hon’ble Supreme Court in the aforementioned two decisions, the learned Tribunal examined the facts and the details which were furnished by the assessee in respect of the each of the five share applicants companies. The details and documents which were furnished have been noted in paragraph 11 of the impugned order. After considering the documents and details the learned Tribunal has recorded a factual finding that the identity of the share applicant companies cannot be disputed. The next aspect which was examined was the creditworthiness of the share applicant companies for which the learned Tribunal perused the financial statement of all the five companies and found that all the five companies had sufficient funds and the amount which was invested in the purchase of shares was negligible compared to their creditworthiness. Therefore, the Tribunal was satisfied about creditworthiness of all the share applicant companies. While doing so, the Tribunal also found that the identity of the share applicant companies and the genuineness of the transaction also cannot be disputed. Furthermore, in respect of the assessment made on the five share applicant companies were of scrutiny assessment under section 143(3) of the Act and those remained intact. Furthermore, source of share application money which has been received by the assessee has already been taxed in the hands of the share applicants and, therefore, it was held taxing the same amount in the hands of the assessee would tantamount to double addition. In this regard reference was made to the decision of the Hon’ble Supreme Court in Mahaveer Kumar Jain v. CIT [2018] 92 taxmann.com 340/255 Taxman 161/404 ITR 738 (SC)/AIR OnLine 2018 SC 1461. That apart, the learned Tribunal also took note of the decision of this court in the case of Pr. CIT v. Sreeleathers [2022] 143 taxmann.com 435/448 ITR 332 (Calcutta).
6. Thus, we find upon thorough examination of the factual position, the appeal filed by the assessee was rightly allowed by the learned Tribunal. We find no question of law much less substantial question of law arises for consideration involved in this appeal. For the above reason, the appeal fails and the same is dismissed. Consequently, the application, GA/1/2025 stands dismissed.”
6. Therefore, considering the facts of the assessee’s case in the light of the decision of the jurisdictional High Court, we are inclined to set aside the appellate order and direct the AO to deplete the addition. Consequently, the ground no. 2, 3 and 4 are allowed.
7. In the result, the appeal of the assessee is allowed.
Order is pronounced in the open court on 29th June, 2026
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