Unexplained Share Application Money- ITAT deletes addition as no sum of money/cash was involved

ITO Vs Shri Ganesh Cement Pvt. Ltd. (ITAT Kolkata)

In this case assessee company has shown receipt of fresh subscription to its share capital of Rs. 50.30 crores during the relevant assessment year (AY 2012-13). According to AO for the purpose of proper verification and examination into the existence, and creditworthiness of the share subscribers and genuineness of the share subscription transaction claimed by the assessee company, he issued summons u/s 131 of the Act (no dates given) to the Directors of the assessee company directing them to appear personally along with complete sets of books of account and all the relevant details / documents for the purpose of examination and verification. Thereafter the AO notes that he issued further summons to the Directors of the share subscribing companies from whom the assessee company had claimed to have received share subscription and they were also directed to appear personally along with complete sets of books of accounts and all the relevant details / documents to substantiate (i) their identity, (ii) creditworthiness and source of funds (iii) genuineness. According to AO further he sent the final reminder letter to the Principal Officer of the assessee company requesting him to appear before him [date not disclosed]. According to AO even though repeated summons, notices and final reminder letters were issued, neither the directors of the assessee company nor the directors of the share subscribing company appeared before him to substantiate their identity, creditworthiness and genuineness of the transaction. Therefore AO was of the opinion that the assessee failed to satisfy the identity, creditworthiness and source of funds of share subscriber company and also the genuineness of the share subscription of transaction, so he are made an addition of Rs. 50.30 crores.

Held by ITAT

We find that there was no sum of money/cash was involved in the transaction of allotment of shares to M/s SKJ Coke Industries Ltd. Therefore provisions of section 68 of the Act [un­explained cash credit] is not attracted as held by Hon’ble Madras High Court in M/s V R Global Energy Pvt. Ltd. vs. ITO (supra) and Hon’ble Calcutta High Court in M/s Jatia Investment Co vs. CIT (supra). So, looking from any angle as discussed supra, the addition u/s 68 of Rs. 50.30 crores was not factually or legally sustainable and so in the facts and circumstances as discussed above the addition was not warranted.

FULL TEXT OF THE ORDER OF ITAT KOLKATA

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