TaxTMI 
TaxTMI 
2026 (9) TMI 1792
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....s called for by the ld. Assessing Officer qua the subscribers alongwith all the evidences. The ld. AO observed from the documents furnished by the assessee that during the year the assessee has raised substantial capital by issuing 40,310 equity shares of face value of Rs.10 each at a premium of Rs.990/- per share to 26 share applicants. The assessee furnished the names, addresses, PANs, audited accounts, bank statements, confirmations, etc. qua the share subscribers. The AO also issued enquiry letters u/s 133(6) of the Act to all the subscribers, which were duly replied by all the share subscribers along with evidences as required by the AO. Summons u/s 131 of the Act were issued for physical appearance, which were complied with by furnishing all the details and evidences, however, there was no personal appearance by the directors of the subscriber companies. Thereafter, the ld. AO treated the amount of share capital or share premium of Rs.4,03,10,000/- as unexplained cash credit on the ground that there was no compliance to the summons issued u/s 131 of the Act to the directors of the assessee company and therefore, the transactions remained unverified. Finally, the ld. AO added ....
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....31 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 retums, 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 asses....
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....earance of directors could not invalidate documented transactions, especially when the AO had powers under Section 131 to enforce attendance. Distinguishing NRA Iron & Steel, the Court observed that the said judgment applies to phantom or non-existent entities, whereas the present investors were identifiable taxpayers who confirmed the transactions. Emphasizing that suspicion cannot replace evidence, the Court upheld the Tribunal's findings and dismissed the Revenue's appeal, holding that no substantial question of law arose. The Hon'ble'ble Court held as under: 3. The factual matrix, as can be gleaned from the records, reveals that the respondent-assessee is a Non-Banking Financial Company (NBFC) duly registered with the Reserve Bank of India. For the relevant Assessment Year, its retum was selected for scrutiny specifically to examine the receipt of a large share premium. During the assessment proceedings, the Assessing Officer (AO) noted that the assessee had raised share capital and premium from fifteen corporate entities. 4. It is seen from the record that the assessee had placed before the AO a voluminous "Paper Book" containing all requisite doc....
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....ntial net worth, which was far in excess of the amounts invested. 10. Furthermore, we find that the AO's reliance on the non-appearance of the directors is misplaced and is not supported by the statutory scheme where robust documentary evidence is available. As held by this Court in PCIT vs. Sreeleathers [2022] 448 ITR 332 (Cal), the AO is vested with co-terminus powers under Section 131 of the Act to compel attendance. If the AO fails to exercise these powers, he cannot subsequently visit the consequences of such failure upon the assessee. Personal appearance of a director is not a statutory substitute for documented traceability in a corporate assessment, especially when the entities are active taxpayers. 11. Insofar as the reliance on NRA Iron & Steel is concerned, we find the facts of that case to be clearly distinguishable. In that case, the investors were found to be non-existent or "phantom" entities upon field inquiry. In the case before us, the investors are identifiable taxpayers who directly responded to notices u/s 133(6) and confirmed the transactions through banking channels. Equating "traceable investors" with "phantom entities" is a leap in log....