AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2025 (9) TMI 1373
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....Section 143(2) of the Act was served upon the assessee. 3. During the previous year, the paid up capital of the appellant company was increased by Rs. 190 crores by issuance of 19 lakhs equity shares having face value of Rs. 10 each at a premium of Rs. 990/- per share. The said share capital was ploughed into investment of an identical amount of share capital of three other corporate bodies namely Blessings Commercial Private Limited, Stephens Financial Services Private Limited and Sayaji Financial Services Private Limited. In fact, during the year under consideration, the assessee company in his audited balance sheet has shown an increase of Rs. 1,90,00,000/- towards authorized share capital/issued subscribed and paid up capital and Rs. 188,10,00,000/- towards share premium account. The assessee on or about 05.06.2009 issued Cheque No.012842 drawn on Axis Bank. By way of issuing the said crossed cheque assessee transferred the funds of Rs. 65,00,00,000 crores to one M/s. Sayaji Financial Services Private Limited. 4. The said amount of Rs. 65,00,00,000 ultimately in turn was returned to the assessee company through other two companies namely M/s. Blessings Commercial Private ....
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....gs Commercial Pvt. Ltd. 650000000 650000000 Stephens Financial Ser. Pvt. Ltd. 650000000 650000000 Sayaji Marketing Pvt. Ltd. 600000000 600000000 7. The share applications from the above companies were invested in the following companies by the assessee company before us in the following manner: Name of the company No. of shares Amount invested Rs. Blessings Commercial Pvt. Ltd. 650000000 650000000 Stephens Financial Ser. Pvt. Ltd. 650000000 650000000 Sayaji Marketing Pvt. Ltd. 600000000 600000000 8. Ld. AO observed that the entire capital received by the appellant company during the year came from three companies i.e. M/s. Stephen Financial Services, M/s. Bleesings Commercial Ltd. and M/s. Sayaji Marketing (P) Ltd. In turn, the appellant company also made investments of similar amounts in the equity shares of the same three companies. It was the specific finding by the Ld. AO that these particular three cheques of Rs. 65,00,00,000 Rs. 60,00,00,000 and Rs. 65,00,00,000 respectively were involved in all the transactions and after their issue, the cheques were endorsed repeatedly by the recipients until each of them rea....
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....ch was later converted into share capital, was not received through any underlying flow of money as a banking transaction but through inter-company settlement of dues whereby cross-holdings were created. The direction for payment from one party to another resulted in a duty binding contract between the parties and in respect of such contractual obligations shares were allotted for consideration other than in cash. The cheques were not deposited in the Bank account and the Bank was not directed to make the payment. The various parties by means of directions and endorsement under the seal and signature completed the transactions with regard to allotment of shares as well as investment in shares. 12. We have perused the order passed by the La. CIT(A) who deleted the addition on merit. 13. However, at the time of hearing of the instant appeal, Ld. DR relied upon the order passed by the ITAT, Kolkata Bench in the case of ITO, Ward-5, Kolkata Vs. M/s. Blessing(P) Ltd. in ITA No.271/Kol/2014 and in the matter of ITO, Ward-5(2), Kolkata Vs. M/s. Sayaji Marketing (P) Ltd. in ITA No.282/Kol/2014. It is relevant to mention that the same alleged amount of Rs. 190,00,00,000 has also been ....
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.... this effect that tax cannot be levied twice on the same income. Once the disputed amount has been admittedly added in the hands of the three companies herein the same cannot be taxed in the hands of the assessee. We find the addition of same impugned amount has been made in the case of M/s. Blessings Commercial Private Limited fact of which is discussed at para 11 of the said order passed by the Coordinate Bench. Moreso, the same was recorded in the order passed by the Hon'ble Delhi Court while remitting the matter to the file before us. It is a trite law that when the company who had subscribed to the share of the assessee whose source being receipt of the share capital to other companies has already been held as bogus receipt, the same cannot be added in the hands of the assessee allotted such shares. 20. On this aspect we have considered the judgment passed by the High Court of Kolkata in PCIT vs Narsingh Ispat in ITAT/80/2024 dated 11.3.2024 as relied upon by the Ld.AR. While deciding with the issue the Hon'ble Court has been pleased to observe as follows:- "This appeal filed by the revenue under Section 260A of Income Tax Act, 1961 (the Act) is directed ag....
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....of the balance-sheet of the said company, the CIT (A) found that the major chunk of share capital received in the assessment year 2009-10 has been invested in the shares of the assessee company and has been out of the share capital raised in the assessment year 2009-10 and in the very same assessment year the entire share capital raised by M/s. Honesty Dealers Private Limited has been added back in the hands of the party. Furthermore, on examining the facts the CIT (A) found that the creditworthiness of M/s. Honesty Dealers Private Limited vis-a-vis the investment in the shares of the assessee company has been established. There is also a finding that there is a clear link between the raising of the share capital and in the assessment year 2009- 10 by M/s. Honesty Dealers Private Limited and investing the major share capital into the shares of the assessee company for the assessment year 2012-13. The CIT(A) has also done a similar exercise in M/s. Seaview Agencies Private Limited. It noted that in the assessment year 2011-12 information received from the investigation wing of the was department regarding unaccounted income received by M/s. Seaview Agencies Private....
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....y recording a factual finding that the three necessary ingredients, namely, identity creditworthiness of the share applicants and genuineness of the transaction as provided under Section 68 of the Act have been established and there was no ground to interfere with the order passed by the CIT(A) dated 25.1.2023. Thus, we find no question of law much less substantial question of law is arising for consideration in this appeal. Hence, the appeal fails and is dismissed. The stay application GA/2/2024 also stands dismissed." 21. The judgment passed by the High Court at Kolkata in the case of PCIT vs. M/s. Lal Baba Seamless Tubes Private Limited as relied upon by the Ld. AR has been considered by us. The relevant observation on the aspect of double taxation is as follows:- "We find the Learned Tribunal has done an elaborate exercise to examine the factual position as well as the documents which were filed by the assessee in the form of a paper book. Learned Tribunal records the finding of fact that the assessee has established source of source, even though it was not required for the assessment year under consideration. The documents which were call....
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....the HUF would be contrary to the provisions of the Act, particularly s. 14(1) of the Act. We, therefore, hold that if the assessment proceedings initiated under s. 34 of the Act culminated in the assessment of the HUF, appropriate adjustments have to be made by the ITO in respect of the tax realized by the Revenue in respect of that part of the income of the family assessed on the individuals of the said family. To do so is not to re-open the final orders of assessment, but in reality to arrive at the correct figure of tax payable by the HUF". 24. In this case it has been held that once the addition is made in the hands of individual, the ITO will not be permitted to assess the HUF for the same Assessment Year otherwise, tax would be imposed on the same income twice over. 25. In the case in hand before us, it is an undisputed fact that 3 cheques were issued amounting to Rs. 190 crores circulated amongst the 4 companies. The Hon'ble Tribunal in the case of ITO vs Blessing Commercials Pvt Ltd in ITA No. 271/Kol/2014 vide order dated 28.06.2017 has confirmed the addition made by the Assessing Officer of Rs. 190 crores and similarly in the case of ITO vs Sayaji Marketing Pvt.....
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....0,000/- added by the Assessing Officer under Section 68 of the Act in the assessment order in the case of our assessee is on account of an amount of Rs. 1,90,00,000/- being share capital received and Rs. 188,10,00,000/- being share premium @ Rs. 990/- per share received by the assessee company during financial year 2009-10 relevant to Assessment Year 2010-11, the details of which are as under: S. No. Name of the share applicant companies Towards shares Towards premium Total Shares allotted. 1. Sayaji Marketing Pvt.Ltd. Rs.6000000 Rs.594000000 Rs.600000000 600000 2. Blessings Commercial Pvt. Ltd. Rs.6500000 Rs.643500000 Rs.650000000 650000 3. Stephens Financials Services Pvt. Rs.6500000 Rs.643500000 Rs.650000000 650000 2.1 The facts of the case are not repeated for the sake of brevity and there is no dispute with respect to the facts of the case as stated by my Ld. Sister. However, my findings differ from my Ld. Sister in view of the facts as discussed hereinafter. 2.2 My Ld. Sister has considered the above amount of Rs. 190 crores as a case of same income being taxed twice in the case of the assessee on t....
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....vis-à-vis the investments in the shares of M/s. Narsingh Ispat Ltd. has been established. The Hon'ble Court also took note of the fact that the revenue challenged this order before the Tribunal which once again re-appreciated the factual position and more importantly found that the share application money received by the assessee from M/s. Honesty Dealers Private Limited has already been added back in the hands of the share applicant and as the source has already been added, it upheld the action of the CIT(A). However, while finally affirming the order of the Tribunal, the Hon'ble Court took note of the fact that the tribunal affirmed the order passed by the CIT(A) by recording a factual finding that the three necessary ingredients, namely, identity, creditworthiness of the share applicants and genuineness of the transaction as provided under Section 68 of the Act have been established and there was no ground to interfere with the order passed by the CIT(A) dated 25.1.2023. In view of the above factual position, the Hon'ble Court held that no question of law much less substantial question of law arises for consideration in this appeal and dismissed the appeal of the Revenue.....
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....wn resources. Thus, we find no questions of law, much less substantial questions of law, arising for consideration in this appeal. The appeal is dismissed." 2.7 In the above case also, the Hon'ble Court took note of the finding of the fact by the Tribunal that the assessee had established source of source and submitted the documents which were called by the AO and the director of the share applicant company appeared in person. The Hon'ble Court also took note of the fact that the Tribunal had noted that the addition of the share capital added in the hands of the assessee company had already been made in the hands of the subscribing company and, therefore, no further addition was required to be made in the hands of the assessee company. Further, the Hon'ble Court also took note of the fact regarding the finding of the Tribunal that all the companies (share applicant companies) are active and have invested money from their own resources. 2.8 Thus, it is seen that the Hon'ble Calcutta High Court considered the above finding of the Tribunal that the source of source i.e. the creditworthiness of the share applicant was established and the genuineness of the transaction wa....
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....ed the merits of the matter and the Tribunal will, thus, be free to arrive at its own conclusion while deciding the matter on merits. In the case of M/s. Blessings Commercial Pvt. Ltd.(supra), the Kolkata Bench of Tribunal in para no. 15 held that the assessee (M/s. Blessings Commercial Pvt. Ltd.), could not prove the genuineness of the above credits of Rs. 190,00,00,000/- as well as the creditworthiness of the creditor and held that the addition was rightly made by the AO. Similarly, relying upon the order of Kolkata Bench of Tribunal in the case of M/s. Blessings Commercial Pvt. Ltd. (supra), the Kolkata Bench of Tribunal vide its order dated 05.09.2018 in the case of M/s. Sayaji Marketing Pvt. Ltd. in ITA No.282/Kol/2014 (wherein identical amount of Rs. 190,00,00,000/- was added under Section 68 of the Act) confirmed the addition of Rs. 190,00,00,000/- made by the Assessing Officer. 2.11 Against the above two orders of the Kolkata Tribunal, the respective assessee's have filed appeals before the Hon'ble Calcutta High Court which are pending as on date. Therefore, the facts in the case of our assessee is distinguishable as the Co-ordinate Bench vide its earlier order dated 18.....
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....imitation period or for any valid reason, the issue of 'substantive addition' and 'protective basis' cannot be finalized by the respective AOs during the limitation period of passing of the respective assessment orders. On perusal of the records available before us, it is seen that the addition of Rs. 190,00,00,000/- was made in the case of our assessee vide order under Section 143(3) dated 25.03.2013 and the same addition was made in the case of M/s. Sayaji Marketing Pvt. Ltd. vide order under Section 143(3) dated 28.03.2013. The information about the date of the passing of the assessment order in respect of M/s. Blessings Commercial Pvt. Ltd. is not available before us. Further, the said addition was made in all the three cases for Assessment Year 2010-11. On perusal of these facts, it is seen that there was a constraint of time as the limitation period was running parallelly/simultaneously in all the three cases and, therefore, the same being a constraint for not deciding the addition on 'substantive/protective basis' in the respective cases cannot be ruled out. In such a situation, the Tribunal under Section 254(1) of the Act is within its power to set aside the assessment befo....
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....of its income. Nonetheless, if, under some mistake, such income was assessed to tax in the hands of the individual members, which should not have been done, when a proper assessment made on the HUF in respect of total income, the Revenue had to make appropriate adjustments, otherwise, the assessment made in respect of that income on the HUF would be contrary to the provisions of the Act, particularly s.14(1) of the Act. We, therefore, hold that if the assessment proceedings initiated under s. 34 of the Act culminated in the assessment of the HUF, appropriate adjustments have to be made by the ITO in respect of the tax realized by the Revenue in respect of that part of the income of the family assessed on the individuals of the s aid family. To do so is not to reopen the final orders of assessment, but in reality, to arrive at the correct figure of tax payable by the HUF." 2.15 Therefore, the Hon'ble Apex Court instead of quashing the proceedings initiated by the Assessing Officer under Section 34 on account of possible same income being taxed twice directed the Assessing Officer to make appropriate adjustments to avoid the same and the same can also be done in the case of our as....
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....on as required in terms of Section 68 of the Act, therefore, the case may be refixed for fresh hearing on merits by giving notice to both the parties. PER MAHAVIR SINGH, VICE PRESIDENT (AS THIRD MEMBER): By the order of President, ITAT vide U.O. No.F.28- Cent.Jd(AT)/2025 dated 4th March, 2025, the undersigned has been nominated to adjudicate the difference of opinion between the learned Judicial Member and learned Accountant Member on the following question:- "1. As to whether under the present facts and circumstances of the matter, the addition made in the hands of the assessee before us on the same amount of income which has already been added by the Revenue on two other companies namely M/s Blessing Commercials Pvt.Ltd. and Sayaji Marketing Pvt.Ltd. which was further affirmed by the ITAT, is a case of double taxation and sustainable in the eyes of law or not. 2. As to whether if there is any disagreement on the point of maintainability on the addition on the preliminary ground then without deciding the same by a Third Member the appeal can at all be proceeded with to decide the matter on merit." 2. At the outset, it is observed that vide letter dated 3....
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.... other companies was finally endorsed to the issuer company whereby the issuer company while making a payment to the endorsee company treated the money as share application paid and when finally the cheque was received, it was treated as share application money received. In view of the endorsement by different companies, the entries do not appear in the bank statement. The transactions were carried out in a manner the "& Co" crossed cheque was endorsed from one party to another resulting in share capital as well as investment based on such endorsement of the cheque. 4. The details of a share application money received on shares allotted to the applicants is tabulated hereunder:- Name of the applicant Address PAN details Date of application Amount received Rs. Blessings Commercial Pvt. Ltd., Landmark, 5^th Floor, 228A, A.J.C. Boss Road, Kolkata-700020 AACCB1349N 05.06.2009 650000000 Stephens Financial Ser. Pvt. Ltd. Landmark, 5^th Floor 228A, A.J.C. Boss Road, Kolkata-700020 AACGS2740G 05.06.2009 650000000 Sayaji Marketing Pvt. Ltd. 5, Russell Street Ist Floor, Kolkatta-700071 AAGCS0147M 05.05.2009 600000000 5. The sh....
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....cheques were issued amounting to Rs. 190 crores circulated amongst the four companies. The Tribunal in the case of ITO Vs. Blessing Commercials Pvt. Ltd. in ITA No.271/Kol/2014 vide Order dated 28th June, 2017 has confirmed the addition made by the AO of Rs. 190 crores and similarly, in the case of ITO Vs.Sayaji Marketing Pvt. Ltd. in ITA No.282/Kol/2014 vide order dated 5th September, 2018, the same has been confirmed by ITAT. The same amount again has been added in the hands of the assessee which is not permissible since tax cannot be levied twice, and addition in dispute is not sustainable in the eyes of law and deserves to be deleted. Thus, learned Judicial Member, by respectfully following the aforesaid precedent, confirmed the order of the learned CIT(A) by dismissing the appeal of the Revenue. 9. The learned Accountant Member has noted the fact that the learned Judicial Member has considered the issue that once the same amount has again been added in the hands of the assessee which is not permissible since tax cannot be levied twice on the same income. The learned AM distinguished the decision of Hon'ble Calcutta High Court in the case of NarsinghIspat Ltd. in ITAT/80/202....
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....essing Commercial Pvt.Ltd, Kolkata and Sayaji Marketing Pvt.Ltd. In turn, the assessee also made investments of similar amounts in the equity shares of same three companies. In fact, it was found by the Assessing Officer that three cheques of Rs. 65 crores Rs. 60 crores and Rs. 65 crores respectively were involved in all the transactions and after their issue the cheques were endorsed repeatedly by the recipients until each of them reached back to the Issuing Company. Based on these observations, the Assessing Officer concluded that the entire claim of transactions was sham. Therefore, according to him the capital introduction of Rs. 190 crores in the assessee Company was unexplained. 11 As already discussed above, the amount of share capital and share premium received were invested in the three companies. The manner in which the flow of transactions took place is as follows:- (a) On 05.06.2009 the assessee issued cheque No.012842 draw on Axis Bank. The cheque being a "& Co" crossed cheque went through a series of endorsements as follows:- (i) On 05.06.2009 the assessee transferred the fund by issuing "& Co" crossed cheque bearing No.012842 in favour of Sayaji ....
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....Marketing Pvt.Ltd. transferred the fund by endorsing "& Co" crossed cheque bearing No.000059 in favour of Stephens Financial Services Pvt.Ltd. (d) On or about 05.06.2009 Blessing Commercial Pvt.Ltd. issued a "& Co" crossed cheque bearing No.012902 on Axis Bank and the flow of the funds was as under. The cheque being a "& Co" crossed cheque went through a series of endorsements as follows:- (i) On 05.06.2009 Blessings Commercial Pvt.Ltd. transferred the fund by issuing "& Co" crossed cheque bearing No.012902 in favour of Sayaji Marketing Pvt.Ltd. (ii) On 06.06.2009 Sayaji Marketing Pvt.Ltd. transferred the fund by endorsing "& Co" crossed cheque bearing No.012902 in favour of the assessee. (iii) On 06.06.2009 the assessee transferred the fund by endorsing "& Co" crossed cheque bearing No.012902 in favour of Blessing Commercial Pvt.Ltd. The nature of transactions took place in a manner that the "& Co" crossed cheque issued by one company after a series of endorsements to other companies was finally endorsed to the issuer company whereby the issuer company while making a payment to the endorsee company treated the money as share application paid ....
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....otal value : @1,000/-) 1 Double Plus Software Pvt.Ltd. 650000 65,00,000 64,35,00,000 65,00,00,000 2 Sayaji Marketing Pvt.Ltd. 650000 65,00,000 64,35,00,000 65,00,00,000 3 Stephens Financial Services Pvt.Ltd. 600000 60,00,000 59,40,00,000 60,00,00,000 19000000 19,00,00,000 188,10,00,000 190,00,00,000 14. Similarly, the Kolkata Tribunal in the case of Sayaji Marketing Pvt.Ltd. in ITA No.282/Kol/2014 for the relevant assessment year 2010- 11 vide Order dated 5th September, 2018 has confirmed the additions. In both the cases, the Revenue's appeals were allowed by the Tribunal. As regards the Stephens Financial Services Pvt.Ltd. (as pointed out by the learned Accountant Member that the income tax details are not available for the relevant assessment year before the Bench), even now, no income tax details or pendency of litigation for the relevant assessment year 2010-11 was filed by the assessee and even not available on records. 15. Now, the question arises whether the same income can be taxed doubly. This concept was explained by the Hon'ble Supreme Court in the case of Bachu Lal Kapoor (su....
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....Shekhar Aggarwal to the effect that the undisclosed income of Priya Gold Group of Companies was routed in the form of share capital of the respondents/assessee companies by way of accommodation entries from Kolkata based entry provider companies and such share capital is liable to be taxed as income in the hands of the respondents/assessee companies. At the same time, it is also not in dispute that Surya Food & Agro Limited, the flagship company of the group has already offered the said undisclosed income to the tune of Rs. 49,12,00,000/- to tax before the Settlement Commission, which income was enhanced by the Commission to Rs. 55,77,00,000/- and the final order of the Settlement Commission having not been challenged by either side has attained finality. It is also not in dispute that before the Settlement Commission the flagship company specifically declared that the undisclosed income which was offered before the Settlement Commission had been applied by way of share capital to the group entities, namely the present respondents/assessee's. Further, before the Settlement Commission, the flagship company also explicitly stated that there is no other undisclosed asset found or appl....
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....nd discussion carried above, I am of the view that this will tantamount to double addition and hence, answered in the affirmative, in favour of the assessee and against the Revenue. 2. As to whether if there is any disagreement on the point of maintainability on the addition on the preliminary ground then without deciding the same by a Third Member the appeal can at all be proceeded with to decide the matter on merit. As the above question is answered in favour of the assessee, this question has become academic and needs no answer. The matter shall now be placed before the regular Bench for passing appropriate order in accordance with the majority opinion. PER BENCH: There was difference of opinion between the Members of the Bench who originally heard the instant Revenue's appeal on the issue of addition in the hands of the assessee as unexplained cash credits u/s 68 of the Act. The Ld. Judicial Member dismissed the Revenue's appeal by affirming the deletion of the impugned addition. The Ld. Accountant Member held otherwise and wrote a separate order. Therefore, a reference was made to the Hon'ble President, ITAT, under Section 255(4) of the Act. The Hon'ble Presiden....