PCIT Vs Bright Commodeal Private Limited (Calcutta High Court)
Summary: The Calcutta High Court, in Principal Commissioner of Income Tax-2, Kolkata Vs M/s. Bright Commodeal Private Limited, dismissed the Revenue’s appeal under Section 260A of the Income-tax Act, 1961, challenging the Income Tax Appellate Tribunal’s order dated 24 June 2024 for Assessment Year 2012-13. The principal controversy concerned the deletion of an addition under Section 68 relating to share capital and share premium, particularly whether the assessee had established the identity and creditworthiness of the investors and the genuineness of the transactions. The Revenue also questioned the Tribunal’s treatment of the source-of-source issue and referred to CBDT Circular No. 5 of 2024 in its proposed substantial questions of law.
The High Court examined the Tribunal’s findings and observed that the Assessing Officer had issued notices under Section 133(6) to the investing companies, which were duly complied with and the required details furnished. Summons were also issued under Section 131 directing the assessee company’s director to appear and produce the directors of the investing companies for examination. The Tribunal had specifically found that the directors appeared pursuant to the summons, whereas the Assessing Officer incorrectly recorded that the directors of the assessee company had failed to appear. The Tribunal further found that the assessee had submitted the documentary evidence called for during assessment proceedings.
The supporting documents included income-tax returns, audited balance sheets, profit and loss accounts, audit reports, bank statements and master data relating to the share subscribers. Despite the availability of these records and the responses submitted to notices under Section 133(6), neither the Assessing Officer nor CIT(A) carried out verification or conducted an effective enquiry into the evidence. Instead, the addition was sustained by relying upon an allegation of non-compliance with Section 131 summons, which the Tribunal found factually incorrect. The High Court considered these factual findings significant in determining whether the Tribunal’s decision involved any substantial question of law.
The Tribunal had relied upon the Supreme Court’s ruling in CIT Vs Orissa Corporation Ltd. (1986) 159 ITR 78 (SC), the Calcutta High Court’s decision in Crystal Networks Pvt. Ltd. Vs CIT (2013) 353 ITR 171 (Cal), and the Kolkata Tribunal’s decision in ITO Vs M/s. Cygnus Developers India Pvt. Ltd., ITA/282/Kol/2012, involving similar factual circumstances. The High Court held that the Tribunal had examined the relevant facts and reached its conclusion on the evidence available. Consequently, no question of law, much less a substantial question of law, arose for consideration under Section 260A. The Revenue’s appeal was dismissed, and the accompanying stay application was also dismissed. The Court separately condoned the delay of 232 days in filing the appeal.
Cases Discussed:
1. CIT Vs Orissa Corporation Ltd., (1986) 159 ITR 78 (SC), Supreme Court: Relied upon by the Tribunal in examining whether the assessee had discharged its evidentiary burden under Section 68 and the significance of the Revenue’s failure to pursue enquiries into documents and particulars furnished by the assessee.
2. Crystal Networks Pvt. Ltd. Vs CIT, (2013) 353 ITR 171 (Cal), Calcutta High Court: Relied upon in relation to the evidentiary value of documentary records and the insufficiency of alleged non-appearance before the Assessing Officer as an independent ground for sustaining an addition where relevant material has been furnished.
3. ITO Vs M/s. Cygnus Developers India Pvt. Ltd., ITA/282/Kol/2012, ITAT Kolkata: Referred to by the Tribunal as a decision involving similar factual circumstances concerning the assessment of transactions under Section 68. The uploaded judgment does not specify the date of this decision.
FULL TEXT OF THE JUDGMENT/ORDER OF CALCUTTA HIGH COURT
Leave granted to the learned advocate for the respondent/assessee to file Vakalatanama in the department.
There is a delay of 232 days in filing the appeal. As the explanation offered is found to be satisfactory, the delay in filing the appeal is condoned. The application for condonation of delay being IA No: GA/1/2025 is allowed.
This appeal has been filed by the revenue under Section 260A of the Income Tax Act, 1961 (the Act) challenging the order passed by the Learned Income Tax Appellate Tribunal, “A” – Bench, Kolkata (the Tribunal) in ITA No.96/Kol/2024 dated 24.06.2024 for the assessment year 2012-13.
The revenue has raised the following substantial questions of law for consideration :
“1. Whether the Learned Income Tax Appellate Tribunal has committed substantial error in law in deleting the addition made by the Assessing Officer under section 68 of the Income Tax Act, 1961 in respect of share capital and share premium?
2. Whether the Learned Income Tax Appellate Tribunal has committed substantial error in law in allowing the appeal of the assessee ignoring the basic issue which entails share capital treating the addition as unexplained cash credit in terms of identity, creditworthiness and genuineness?
3. Whether the share capital raised by the assessee company is nothing but the involvement of organized tax evasion and falls under exceptional clause 3.1h of the CBDT Circular No. 5 of 2024?
4. Whether the Learned Income Tax Appellate Tribunal has committed substantial error in law by not considering the principles laid down in the Doctrine of “source of source” and Doctrine of “origin of origin” while passing the impugned order?
We have heard the learned counsel for the parties.
The short issue which falls for consideration is whether the Learned Tribunal was justified in setting aside the order passed by the Commissioner of Income Tax (Appeal) (CIT[A]) and deleting the addition made under Section 68 of the Act.
We have perused the reasons assigned by the learned Tribunal for allowing the assessee’s appeal. It is seen that the assessing officer issued notice under Section 133 (6) of the Act to the investing companies and both the parties have complied with the said notice and furnished the requisite details.
Summons under Section 131 of the Act was issued to the Director of the assessee company to be personally present and also to produce the Directors of the investing company for examination of genuineness of the transaction, identity and creditworthiness of the lenders. The Tribunal noted that the Directors appeared pursuant to the summons but the assessing officer wrongly recorded that the Directors of the assessee company failed to appear in response to the summons issued under 131 of the Act. Furthermore, the Tribunal examined the factual position and noted that the assessee has filed evidences as called for by the assessing officer in respect of the assessee as well as the investing companies. The evidences filed comprised of income tax returns, audited balance sheet, profit and loss account, audited report, bank statement and master data in respect of each of the subscribers. Furthermore, both the parties have submitted their reply pursuant to the notice issued under Section 133(6) of the Act. After noting these facts, the Learned Tribunal held that the assessing officer as well as the CIT(A) did not cause any verification or conduct any enquiry into the evidences which were filed by the assessee and merely harped on non-compliance of the summons issued under Section 131 of the Act, which is factually incorrect.
Learned Tribunal placed reliance on the decision of the Hon’ble Supreme Court in CIT -Vs- Orissa Corporation Ltd. (1986) 159 ITR 78 (SC) as well as the decision of this Court in Crystal Networks Pvt. Ltd. -Vs- CIT, (353) ITR 171 (Cal). The Tribunal also noted the decision of the Co-ordinate Bench in the case of ITO -Vs- M/S Cygnus Developers India Pvt. Ltd. (ITA/282/Kol/2012) wherein the factual position was also similar to that of the case of the assessee.
Thus, we find that the facts have been examined by the Tribunal and the conclusion has been arrived at and therefore, no question of law, much less substantial questions of law, arises for consideration in this appeal.
Accordingly, the appeal is dismissed.
Accordingly, the stay application (GA/2/2025) also stands dismissed.
