ITAT Upholds Addition for Failure to Explain Large Share Premium

Court Name : ITAT Kolkata

Parties : Timely Commercial P. Ltd. Vs ITO

Decision Date : 23 June 2023

Judgement ref : ITA No. 688/Kol/2019

Imagine you're a company that's received a significant share premium. You're asked to explain this premium, but you fail to do so. What happens next?

This was the situation faced by Timely Commercial Pvt. Ltd. The company received a share premium amounting to Rs. 18,98,07,000. However, they failed to provide a satisfactory explanation for this premium to the Income Tax Officer (ITO).

The case was brought before the Income Tax Appellate Tribunal (ITAT), Kolkata. The ITAT noted that the company had been absent in several hearings, leading to an ex parte judgement based on the available material.

The company's failure to comply with the ITO's request for details and explanation regarding the share capital raised, as well as its casual conduct during the appeal process, resulted in the decision going against them.

The case took an interesting turn due to a delay of 565 days in filing the appeal, a fact not explained by the assessee. The noticeable gap between the date of the order by CIT(A) and its

O R D E R

PER GIRISH AGRAWAL, ACCOUNTANT MEMBER:

This appeal filed by the assessee is against the order of Ld.

CIT(A)-2, Kolkata vide Appeal No. 655/CIT(A)-2/15-16 dated

19.07.2017 passed against the assessment order by ITO, Ward-4(1),

Kolkata u/s.144 of the Income-tax Act, 1961 (hereinafter referred to as

the “Act”), dated 12.03.2015 for AY 2012-13.

2. There is a delay of 565 days in filing the present appeal. The

impugned order by Ld. CIT(A) is dated 19.07.2017 which is claimed to

have been received on 05.02.2019 as mentioned in Form 36. There is

no petition for condonation of delay furnished by the assessee to

explain the delay of 565 days in filing the present appeal as well as to

explain the lapse of time in respect of passing of order by the Ld.

CIT(A) and receipt thereof. Assessee has filed Form 36 before the

Tribunal on 05.04.2019. Also, before us none represented the

assessee. In the past, this matter has been listed on several occasions

and on certain occasions it was attended by either Advocate Shri

Somnath Ghosh or his office staff, seeking adjournments. On one of

the occasions, adjournment was sought to file paper book but no such

paper book has been filed till the last hearing. It is also noted that in

the last hearing fixed on 27.03.2023, none appeared to represent the

assessee. On that date, the matter was adjourned to 20.06.2023 on

which also none appeared to represent the assessee. Notices have not

been returned unserved. We also noted that the appeal is of the year

2019. Considering the overall factual matrix, we find it proper to take

it up for adjudication ex parte qua the assessee with the assistance of

Ld. CIT, DR, based on material available on record.

3. The impugned assessment order is dated 12.03.2015, passed

u/s. 144 of the Act. From the said order, we note that assessee filed

its return of income on 29.09.2012, reporting total income of

Rs.14,020/-. Case was selected for scrutiny assessment for the

reason “large share premium received”. Ld. AO noted that assessee

has raised share capital including share premium of

Rs.18,98,07,000/- and called for details and explanation. Ld. AO also

issued notice u/s. 131 on the assessee for personal attendance of the

Principal Officer/Director of the assessee as well as the investors to

establish the identity and creditworthiness of the investors and

genuineness of the transactions, undertaken by them. Since

compliance was not made to the satisfaction of Ld. AO, addition was

made in this respect and assessment was completed u/s. 144 of the

Act. Aggrieved, assessee went in appeal before the Ld. CIT(A).

3.1. During the first appellate proceeding, e-notices were issued for

hearing the matter, the details of hearings fixed by the Ld. CIT(A)

along with remarks is tabulated as under:

4. Since nothing additional was submitted nor anything was

represented before the Ld. CIT(A), appeal was dismissed. Aggrieved,

assessee is in appeal before the Tribunal.

5. Before us also, as already noted above, we find that conduct of

the assessee is evidently casual as there is a delay of 565 days in filing

the present appeal which is not backed up by any petition for

condonation of delay. Also, there is a huge gap between the date of

order of Ld. CIT(A) and its receipt by the assessee as noted above. At

all the stages, right from Ld. AO to Ld. CIT(A) and now before us, there

has not been any representation by the assessee or its authorised

representative. It is important to note that the assessee is a legal

entity which must be having all the para-pharnelia to meet the

regulatory and statutory compliance requirement, more so, when

assessee itself is pursuing the litigation before various authorities. In

the present case before us, conduct of the assessee as observed above

persuades us to uphold the addition made by the Ld. AO.

Accordingly, grounds taken by the assessee challenging the addition of

Rs.18,98,01,000/- on account of share application money along with

premium are dismissed.

6. In the result, appeal of the assessee is dismissed.

Order pronounced in the open court on 23rd June, 2023.

Sd/- Sd/-

(Sanjay Garg) (Girish Agrawal)

Judicial Member Accountant Member

Dated: 23rd June, 2023

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IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH KOLKATA

BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER

AND SHRI GIRISH AGRAWAL, ACCOUNTANT MEMBER

ITA No.688/Kol/2019

Assessment Year: 2012-13

Timely Commercial P. Ltd.

C/o S. N. Ghosh &

Associates, Advocates, 2,

Garstin Place, 2nd Floor, Suite

No. 203, Off Hare Street,

Kolkata-700 001.

(PAN: AADCT 7219 E)

Vs.

Income-tax Officer, Ward4(1), Kolkata.

(Appellant) (Respondent)

Present for:

Appellant by : N o n e

Respondent by : Shri Abhijit Kundu, CIT, DR

Date of Hearing : 20.06.2023

Date of Pronouncement : 23.06.2023