Calcutta High Court
Principal Commissioner Of Income Tax vs M/S. Femina Stock Management Company ... on 6 May, 2025
Author: T.S. Sivagnanam
Bench: T.S. Sivagnanam
OD-2
IN THE HIGH COURT AT CALCUTTA
SPECIAL JURISDICTION (INCOME TAX)
ORIGINAL SIDE
ITAT/237/2024
IA NO: GA/2/2024
PRINCIPAL COMMISSIONER OF INCOME TAX, CENTRAL-1, KOLKATA
VS.
M/S. FEMINA STOCK MANAGEMENT COMPANY LIMITED
BEFORE :
THE HON'BLE THE CHIEF JUSTICE T.S. SIVAGNANAM
AND
THE HON'BLE JUSTICE CHAITALI CHATTERJEE (DAS)
DATE: 6TH MAY, 2025
Appearance:
Mr. Soumen Bhattacharjee, Adv.
Mr. Ankan Das, Adv.
Ms. Shradhya Ghosh, Adv.
...for Appellant
Mr. Abhratosh Majumdar, Sr. Adv.
Mr. Kausheyo Roy, Adv.
...for Respondent
The Court : This appeal by the revenue filed under Section 260A of the
Income Tax Act, 1961 (the Act) is directed against the order dated 14.12.2023
passed by the Income Tax Appellate Tribunal "B" Bench, Kolkata, in ITA No.
850/Kol/2023, for the assessment year 2011-12.
The revenue has raised the following substantial questions of law for
consideration :
"A) Whether the Learned Tribunal has committed substantial error
in law by deleting the addition to the tune of Rs.33,51,33,000/- (i.e.
Rs.33,19,33,000/- + Rs.3,00,000 + Rs.29,00,000/-) made on account of
unexplained cash credit under section 68 of the Income Tax Act, 1961 and
addition on account of unexplained expenditure under section 69C of the
Income Tax Act, 1961, amounting to Rs.16,75,665/-?
B) Whether on the facts and in the circumstances of the case, the
Hon'ble Income Tax Appellate Tribunal was justified in law to delete the
addition u/s 68 of the Act holding that assessee had discharged its onus to
prove identity and creditworthiness of the share subscribers without
considering that Identity, creditworthiness or genuineness of the
transaction is not established by merely showing that the transaction was
through banking channels or by account payee instrument as held by the
Jurisdictional High Court in the case of M/s. BST Infratech Ltd. [161
taxmann.com 668]?
C) Whether on the facts and in the circumstances of the case, the
Hon'ble Income Tax Appellate Tribunal was justified in law to delete the
addition u/s 68 of the Act observing that the investing companies are body
corporate registered with the Registrar of Companies and individually
assessed to income tax ignoring that, this is not the litmus test to discharge
the burden on the assessee to establish creditworthiness of the investing
companies as well as the genuineness of the transaction as held by the
Jurisdictional High Court in the case of M/s BST Infratech Ltd. [161
taxmann.com 668]?
D) Whether on the facts and in the circumstances of the case, the
Hon'ble Income Tax Appellate Tribunal was justified in law in not
considering that in the case of closely held companies, there is additional
onus needs to prove the source of money in the hands of such shareholders
or person making payments towards issue of shares before such sum is
accepted as genuine credit, as held by the Jurisdictional High Court in the
case of M/s BST Infratech Ltd. [161 taxmann.com 668]?"
We have heard Mr. Soumen Bhattacharjee, learned standing counsel
appearing for the appellant/revenue and Mr. Abhratosh Majumdar, learned
senior counsel appearing for the respondent/assessee.
It is not disputed by the revenue that identical issue was considered by
this Court in the case of Principal Commissioner of Income Tax, Central-1,
Kolkata vs. Wise Investment Private Limited, in ITAT No. 238 of 2024. The
appeal filed by the revenue was dismissed by judgment dated May 6, 2025. The
operative portion of the judgment is as follows :-
"11. The short issue which falls for consideration in the instant
case is whether three factors which are required to be established by
the department at the first instance have been established namely
identity of the investors, their creditworthiness and the genuineness of
the transaction.
12. After we have elaborately heard the senior standing
counsel for the appellant revenue, we find that the CIT(A) while
considering the appeal had called for two remand reports, we need not
discuss the findings of the assessing officer in both the reports but
suffice to observe that the identity and the creditworthiness of the
share applicant companies stands established. Therefore, the third
factor is with regard to the genuineness of the transaction. The learned
senior standing counsel would vehemently contend that the aspect
regarding abnormally high share premium was never considered by
the CIT(A) and has been brushed set aside. To consider the correctness
of this submission, we have carefully perused the order passed by the
CIT(A) and we find that this aspect was dealt with by the CIT(A), in our
view in an elaborate fashion. At this juncture, it will be beneficial to
extract a portion of the finding recorded by the CIT(A) on this aspect
namely with regard to the alleged high share premium:-
It has been explained that this premium was paid on
account of the anticipated future prospects of the
appellant company and the fact that it was felt by the
investing companies' Boards that it would be prudent to
invest in the appellant company. It has been explained
that the appellant company was incorporated on
02.06.1992 with a paid up capital of Rs. 1,13,000/-. This
amount was subscribed by the directors of the company
as promoters. In the impugned AY, the appellant was
engaged in the business of Investment and Finance. The
appellant Company was dealing in Equity shares. During
this period the appellant was dealing in quoted equity
shares and had a turnover of over 12.46 crores. The
growth of the appellant company was apparent from the
fact that in the immediately preceding AY, the turnover
had been Rs. 8.99 crore. This was a phenomenal reported
growth of almost 39%. It transpires that the appellant
company was also carrying impressive inventories of
quoted equity shares for a company in such nascent
stages of its operations. It had inventories respectively of
Rs. 8.38 crore and Rs. 9.36 crore as on 31.03.2011 and
31.03.2012. The Audited results of the appellant show
that its profits had grown by over 3 times between AY
2011-2012 and AY 2012-2013. In the same period the
EPS (Earning Per Share) for the appellant company had
grown by two and half times to 16% per share of Rs. 10/-.
The appellant company was obvious showing good
returns and was showing good prospects for its investors.
It was also a fact growing company.
13. After noting the above factual position, the CIT(A) has
observed that the assessing officer himself has stated that the investment
take place on personal one to one contact and persuasion but did not
analyze the meaning and implication of the observation by applying them
to the fact and circumstances of the case. Thus, after considering the
facts the CIT(A) has come to the conclusion that the assessing officer has
not doubted the identity and creditworthiness of the share subscribers
but has doubted the payment of high share premium. On this aspect the
CIT(A) has noted the growth of the assessee company which was
reported to be at 39% and the assessee was also carrying impressive
inventories of quoted equity shares for company in such stages of its
operation. The assessee had inventories of Rs. 8.38 crores as on
31.03.2011 and 9.36 crores as on 31.03.2012. The audited result of the
assessee has shown its profits grown by over three times between
assessment years 2011-2012 and the assessment year 2012- 2013.
Further during the same period, the earning per share of the assessee
company had grown from two and half times to 16% per share of Rs. 10
and therefore the CIT(A) on facts held that the assessee company was
showing good returns and were showing good profits for its investors and
it is a growing company. Therefore, the submission of the revenue that
the allegation that unduly high premium was charged was not examined
by the CIT(A) is incorrect. In fact, this aspect was also examined by the
assessing officer to certain extent as pointed out by the CIT(A). When the
matter travelled on appeal to the learned tribunal at the instance of the
revenue, the factual aspects were re-examined. The tribunal notes that
the paper book containing 1029 pages were filed and all documents were
placed before the learned tribunal and after noting the facts the learned
tribunal came to the conclusion that the CIT(A) was well justified in
deleting the addition made under Section 68 of the Act.
14. The decision in the case of NR Portfolio Private Limited
and Navodaya Castles Private Limited have to be applied considering
the facts and circumstances the case on hand it is not mere production of
incorporating details, PAN numbers etc. in the case on hand the CIT(A)
had made an elaborate exercise to examine the facts, called for two
remand reports after which finding has been recorded in favour of the
assessee. Therefore, the above decisions cannot be applied to the facts
and circumstances of the case on hand.
15. Thus, for the above reasons we find that there is no question of
law much less substantial question of law arising for consideration in this
appeal. Accordingly, the appeal fails and is dismissed."
The present appeal is indirectly connected with the appeal in the case of
Wise Investment Private Limited since the assesee in the present appeal is an
investor in Wise Investment Private Limited, the respondent/assessee in ITAT
238 of 2024.
Following the above decision, this appeal stands dismissed on the ground
that no substantial questions of law arises for consideration in this appeal.
The stay application, IA No: GA/2/2024, also stands dismissed.
(T.S. SIVAGNANAM, CJ.)
(CHAITALI CHATTERJEE (DAS), J.)
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