Income Tax Appellate Tribunal - Delhi
Acit, New Delhi vs M/S. Adamine Construction Pvt. Ltd., ... on 18 August, 2017
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I.T. Appeal No. 6178/Del/2013
C. O. No. 262/Del/2015
Assessment Year : 2009-10.
IN THE INCOME TAX APPELLATE TRIBUNAL
[ DELHI BENCHES: "A" NEW DELHI ]
BEFORE SHRI I. C. SUDHIR, JUDICIAL MEMBER
AND SHRI L. P. SAHU, ACCOUNTANT MEMBER
I.T. Appeal No. 6178/Del/2013
Assessment Year : 2009-10.
Asstt. Commissioner M/s.Adamine Construction Pvt.Ltd.,
of Income Tax, Vs. 315, 3rd Floor, E - Block,
Central Circle : 13, International Trade Tower,
New Delhi. Nehru Place, New Delhi.
PAN : AAGCA 4039 G
A N D
C. O. No. 262/Del/2015.
[ in I.T. Appeal No. 6178/Del/2013 ]
Assessment Year : 2009-10.
M/s. Adamine Construction Pvt. Ltd., Asstt. Commissioner
211, Somdutt Chamber-II, Vs. of Income Tax,
Bhikaji Cama Place, Central Circle : 13,
N e w D e l h I - 110 066. New Delhi.
PAN : AAGCA 4039 G
(Appellants) (Respondents)
Assessee by : Shri Ashwani Kumar, C. A.;
Department by : Shri S. K. Jain, Sr. D. R.;
Date of Hearing : 24.05.2017
Date of Pronouncement : 18.08.2017
O R D E R.
PER I. C. SUDHIR, J. M. :
This appeal and the cross objection against the first appellate
order for the assessment year 2009-10 were heard together and are
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C. O. No. 262/Del/2015
Assessment Year : 2009-10.
being disposed off, for the sake of convenience, by this common
order. Since in the cross objection the issue raised is legal in nature
going to the root of the matter, hence parties were directed to advance
their respective arguments on the issue raised in the cross objection.
C. O. No. 262/Del/2015 :
2. The assessee has taken the following ground of appeal in its
cross objection :-
" That the order dated 16.09.2013 passed under section 250
of the Income Tax Act, 1961 by the ld. Commissioner of Income Tax
(Appeals)-I, New Delhi, is against law and facts on the file and bad
in law in as much as he was not justified to uphold the action of
the ld. Assessing Officer in resorting to the provisions of Section
148 of the Income Tax Act, 1961. "
3. Validity of initiation of reopening of assessment proceedings
under section 147 / 148 as well as validity of assessment framed
in furtherance thereto upheld by the ld. CIT (Appeals) has been
objected by the assessee.
4. In support of the above objection, the ld. AR has basically
reiterated submissions made in this regard before the ld. CIT (A). The
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C. O. No. 262/Del/2015
Assessment Year : 2009-10.
main thrust of his argument is that initiation of reopening proceedings
by the Assessing Officer was based on report filed by the Investigation
Wing of the Department, which was never confronted to the assessee
and there was no application of independent mind of the Assessing
Officer for forming his reasons to believe for initiation of reopening
proceedings.
5. The ld. AR submitted that a perusal of the assessment order and
history of the assessment proceedings would show that various
references have been made to the findings of various wings of the
Investigation Unit, a copy of which has not been provided to the
Appellant Company at any stage of the assessment proceedings even
after written requests. Consequentially, the basic principles of natural
justice which involve reasonable application of prescribed procedures
with a view to promote natural justice and prevent its miscarriage have
been derailed and sabotaged. As such a conclusion having a deep impact
on the Appellant and conflicting with his consistent stand has been
drawn without giving him at least a reasonable opportunity to examine
the said evidences and to cross examine the underlying witnesses and is
accordingly in violation of the principles of natural justice. As such the
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C. O. No. 262/Del/2015
Assessment Year : 2009-10.
entire exercise made in gross violation of the principles of natural justice
is void ab-initio and the corresponding conclusions drawn need to be
negated to prevent further miscarriage of justice. The North Wales Police
v. Evans [(1982) 1 WLR 1155] judicial review is concerned not with the
decision, but with the decision-making process. The assessment
proceeding is a part of judicial process. When a statutory process is
exercised by the assessing authority in exercise of its judicial functions
which is detrimental to the appellant, it is not and cannot be
administrative in nature. Principles of natural justice are based on two
principles: (i) nobody shall be condemned unheard (audi alteram
partem); (ii) nobody shall be judge of his own cause (nemo debet
esse judex in propria sua causa). Duty to assign reasons is, however,
judge-made law. The action of the Learned Assessing Officer in
resorting to provisions of section 148 which is also being challenged
in this appeal is bad in law as would be apparent from the submission
made hereinafter.
5.1 The above provisions make it clear that an Assessing Officer
if he has "reason to believe" that any income chargeable to tax has
escaped assessment for any assessment year, may, subject to the
provisions of sections 148 to 153, -
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C. O. No. 262/Del/2015
Assessment Year : 2009-10.
assess or reassess
such income; and
also any other income chargeable to tax
which has escaped assessment; and
which comes to his notice subsequently in the course of the
proceedings under section 147, or
re-compute
the loss
the depreciation allowance or
any other allowance, as the case may be
for the relevant assessment year.
(iii) Further the Explanation 2 to section 147(not reproduced
supra) clarifies that, for the purposes of section 147, the following
are also to be deemed to be cases where income chargeable to tax
has escaped assessment:-
where no return of income has been furnished by the
assessee although
his total income or
the total income of any other person in respect of which
he is assessable under this Act.
during the previous year exceeded the maximum
amount which is not chargeable to income-tax.
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Assessment Year : 2009-10.
where a return of income has been furnished by the assessee
but no assessment has been done and it is noticed by the
Assessing Officer that the assessee -
has understand the income, or
has claimed excessive loss, deduction, allowance or
relief in the return;
where an assessment has been made, but
income chargeable to tax has been under assessed; or
income chargeable to tax has been assessed at too low
a rate; or
income chargeable to tax has been made the subject of
excessive relief under the 1961 Act; or
excessive loss or depreciation allowance or any other
allowance under the 1961 Act has been computed.
5.2 Thus Section 147 of the Income-tax Act, 1961 authorises and
permits an Assessing Officer to assess or reassess income chargeable to
tax if he has reason to believe that the said income for any assessment
year has escaped assessment. The expression 'escaped assessment'
clearly connotes a very basic postulate that the income for a particular
assessment year went unnoticed by the Assessing Officer and because of
it not being noticed by him for any reason, it escaped assessment.
Accordingly there should be a complete and direct conclusion as to
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C. O. No. 262/Del/2015
Assessment Year : 2009-10.
income escaping assessment so as to resort to the re-assessment
provisions.
5.3 Section 148 to 151 set out the frame work, procedure and
the conditions governing the reassessment provisions incorporated a
section 147. The said sections successively deal with :-
(a) Form of notice and recording of reasons for issue (S. 148);
(b) Time limit for issue (S. 149);
(c) Enlargement of time limit in certain cases and restriction
thereon(Section 150);
(d) Sanction to be obtained for issue of notice (S. 151);
5.4 For resorting to reassessment the most noted requirement is
that the Assessing Officer should have reason to believe that income
chargeable for the relevant assessment year has escaped assessment.
The language of the section makes it clear that although the powers of an
Assessing Officer in initiating re-assessment proceedings are very wide at
the same time they are not plenary in nature. These powers are vitally
controlled by the words 'reason to believe' employed by the section. The
reasons for formation of belief for reopening an assessment must have a
rational connection or relevant bearing on the formation of the belief.
The existence or otherwise of such a belief, on the part of the Assessing
Officer, is not a mere question of limitation but the very foundation of his
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C. O. No. 262/Del/2015
Assessment Year : 2009-10.
jurisdiction. These words import the presence of the following four
essential ingredients.
(i) some material or materials and not mere fancy, imagination,
speculation, suspicion;
(ii) a nexus between such material and the belief of escapement
of income from assessment;
(iii) an application of mind by the Assessing Officer to such
material; and
(iv) an inference based on reason drawn tentatively by the officer
that income has escaped assessment.
5.5 A review of the reasons recorded for resorting to reassessment
proceedings and consequent issue of notice u/s 148 would make it
clear that basis for the formation of an opinion is a statement recorded,
of an employee of Bhushan Steels Ltd., during the course of survey
u/s 133A at the Registered Office of the Company from which it was
sought to be concluded that the Assessee Company belonged to the
Bhushan Group of Companies and was allegedly a "Paper Company"
established for introducing money from unexplained sources. The fact
remains that the existence of the Company incorporated as a separate
legal entity following the rigorous and due process of law laid down in
the Companies Act, 1956 has not been denied. In fact, such a negation
of its corporate existence is neither suggestible nor inferable either
from the said statement or from the Office of the Registrar of Companies,
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C. O. No. 262/Del/2015
Assessment Year : 2009-10.
the statutory regulatory body, in this regard. The conclusion has
sought to be drawn on the basis of a statement of a person who had
no locus standi in the Assessee Company, and accordingly was not
authorized on its behalf. While again emphasizing the separate legal
existence of the Assessee Company, it needs also to be understood
that there is nothing in law to prohibit several companies having their
Registered Offices at the same address or for companies to share
common infrastructure and facilities so as to economize the costs.
In addition, the fact that the Directors of the Company being employees
of Bhushan Ltd, should also not lead to any adverse inference in as
much as such an arrangement is again a matter of administrative
and logistical convenience to ease operational matters. Such facts do
not merely themselves lead to any evidence or suggestion, what to talk
of conclusion, as to the Company being just a 'paper company'
established for introducing money from unexplained sources.
5.6 The above facts make it clear that the basis for formation of
the belief and recording of the reasons to escapement of income so as
to resort to reassessment proceedings is based on mere suspicion and
conjectural inferences not backed by any tangible evidence. The basis
for the issue of notice is an alleged statement of Shri B.S Bisht,
Assistant Secretarial Officer of M/s Bhushan Steel Ltd. While on a
deeper analysis the contents of the said statement by itself do not lead
to any damaging / adverse inference. Even otherwise, as discussed
supra, there is no tangible evidence of escapement of income to warrant
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C. O. No. 262/Del/2015
Assessment Year : 2009-10.
a revisit of the assessment and resorting to reassessment proceedings
and accordingly the basis of recording of "reason to believe" as to
escapement of income does not exist in the instant case.
6. The ld. AR contended that the reasons to believe recorded in the
present case are only suspicion and not belief. There is no tangible
material to substantiate the belief.
7. In support he placed reliance on the following
decisions :-
(i) M/s. Parashuram Pottery Works Co. Ltd. Vs. ITO (1977)
106 ITR 1 (SC);
(ii) Ganga Prasad Maheshwari & Others Vs. CIT (1983)
139 ITR 1043 (All.);
(iii) Sheo Nath Singh Vs. ACIT Central, Calcutta (1971)
82 ITR 147 (SC);
(iv) Ajit Jain Vs. Union of India & Others (2000)
242 ITR 302 (Del.);
(v) VXL India Vs. ACIT (1995)
215 ITR 295 (Guj.);
(vi) Surat City Gymkhana Vs. ACIT
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C. O. No. 262/Del/2015
Assessment Year : 2009-10.
76 ITD 327 (Ahd.);
(vii) Ram Bai Vs. CIT (1999)
236 ITR 696 (SC);
(viii) Bagsu Devi Bafna Vs. CIT (1966)
62 ITR 506 - 512 (Cal.);
(ix) Kishanchand Chellaram Vs. CIT, Bombay City-II (1980)
125 ITR 713 (SC);
(x) R.B. Shreeram Durga Prasad and Fatechand Nursing Das Vs.
Settlement Commission (IT and WT) and another (1989)
176 R 169 (SC);
(xi) Rajesh Kumar & Others Vs. DCIT & Others (2006)
287 R 91 (SC);
(xii) C. B. Gautam Vs. Union of India (1993)
199 R 530 (SC); & 1 SSC 78;
(xiii) Prakash Chand Nahta Vs. CIT (2008)
301 ITR 134 (MP).
8. The ld. Sr. DR, on the other hand, opposed the cross objection
with this submission that the assessee was given opportunity to raise
objection before the Assessing Officer against the initiation of reopening
proceedings. The assessee filed its objections and it was duly disposed
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C. O. No. 262/Del/2015
Assessment Year : 2009-10.
off by the Assessing Officer, hence there is no substance in the
contention of the ld. AR that assessee was not given opportunity to
cross examine on the basis of whose submissions reported by the
Investigation Wing of the Department reopening proceedings were
initiated.
9. Having gone through the orders of the authorities below in
view of the above submissions, we find that assessee was supplied
with the reasons recorded and opportunity to raise objections thereto
was given to him. It was availed as the assessee raised the objections
against the validity of initiation of reopening proceedings and the
Assessing Officer duly disposed off the said objections. The reason to
believe was based on search operation in Bhushan Steel Group and
survey at the assessee. We thus do not find substance in the contention
of the ld. AR that initiation of reopening proceedings against the
assessee was not valid. It is well established position of law that
for initiation of reopening proceedings formation of reasons to belief is
required to be based upon a prima facie view that taxable income has
escaped assessment. Sufficiency of such belief cannot be questioned
before the court of law. We thus do not find reason to interfere with
the first appellate order in this regard, as in our view, the ld. CIT
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C. O. No. 262/Del/2015
Assessment Year : 2009-10.
(Appeals) under the facts and circumstances of the case as discussed
above has rightly upheld the validity of initiation of reopening
proceedings and the assessment framed in furtherance thereto. The
first appellate order in this regard is thus upheld. The cross objection
is accordingly rejected.
I.T. Appeal No. 6178/Del/2013 :
10. The Revenue has questioned first appellate order on the
following grounds :-
" 1. The order of Ld. CIT (Appeals) is not correct in law and facts;
2. On the facts and circumstances of the case the ld. CIT
(Appeals) has erred in deleting the addition of Rs.9,30,00,000/-
being unexplained share capital including share premium
made by Assessing Officer without appreciating the fact that
the identity and the creditworthiness of the investors were
not established as all the investors were showing a nominal
income. "
11. Ground No. 2 is relating to deletion of addition of
Rs.9,30,00,000/- on account of unexplained share capital and share
premium received by the appellant company from various companies
made by the Assessing Officer on the ground that :-
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C. O. No. 262/Del/2015
Assessment Year : 2009-10.
(i) the creditworthiness of the investor companies was not
established as all the investors were showing a nominal income;
(ii) neither the investors companies nor the appellant company
had produced any proof to substantiate the creditworthiness of the
investors; &
(iii) the genuineness of the transactions was also in doubt.
12. The Appellant Company had filed its original return of
income declaring a total income of Rs.546/- on 29.09.2009 vide e-filing
Acknowledgement No. 95415871290909. The return was processed
under section 143(1) of the Income-tax act, 1961 at the returned income.
Subsequently, a search, seizure and survey operation u/s 132 and
133A respectively of the Income-tax Act, 1961 was carried out in the
Bhushan Group of cases on 03-03-2010. The Appellant Company was
also covered in the said survey operation and its jurisdiction was
subsequently transferred to the Office of the ACIT, Central
Circle-13, New Delhi.
13. The case of the Appellant Company for the assessment year
2009-10 was reopened u/s 147 of the Income -Tax Act, 1961 and
notice u/s 148 was issued on 19.09.2011. In response to the said
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Assessment Year : 2009-10.
notice the Appellant Company filed a reply dated 26-09-2011 stating
that original return of income filed earlier by it on 29.09.2009
vide receipt No. 95415871290909 may be treated as return filed
in response thereto.
14. The assessment was completed vide order dated 28-03-2013
at an income of Rs.9,30,00,546/- wherein the Ld. Assessing Officer
has proceeded to unjustifiably add back a sum of Rs. 9,30,00,000/-
on account of alleged unexplained share capital received by the
Appellant Company from various companies situated at Mumbai
and Kolkata. The ld. CIT (Appeals) has deleted this addition, which has
been questioned in the present appeal by the Revenue.
15. In support of the ground, the ld. Sr. DR has basically placed
reliance on the assessment order with this contention that assessee has
thoroughly failed to establish creditworthiness of the investor companies
as well as genuineness of the transaction. Some of the parties were not
found on the given address and some of them did not respond to the
notices issued by the Assessing Officer to them nor the assessee has
been able to produce them for verification before the Assessing Officer.
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Assessment Year : 2009-10.
In absence of compliance of these requirements the Assessing Officer
was very much justified in making the addition of Rs.9,30,00,000/-
under section 68 of the Act on account of unexplained share capital
and share premium received by the assessee company from various
companies. Ignoring these material aspects the ld. CIT (Appeals) has
erred in deleting the addition.
16. The ld. AR, on the other hand, tried to justify the first appellate
order on the issue with following submissions :-
" (1) By way of a brief introduction, it is submitted that the
Appellant Company had raised money amounting to Rs.9,30,00,000/-
through share capital during the financial year 2008-09 from various
parties situated at Mumbai and Kolkata. The details of the parties
from whom Share Capital and Share Premium had been received
are as under :-
S.No Name of Investor Address of the investor Amount
Company Company
1 Gromore Fund 48A/1, New Alipore Road, 90,00,000/-
Management Co. Ltd Kolkata-700053
2 Super Finance Ltd 102, Stephen House, 4 B.B.D. 95,00,000/-
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Assessment Year : 2009-10.
Bag(E), Kolkata-700001
3 Delton Exim Pvt Ltd 3, Alipore Road, Kolkata- 95,00,000/-
700027
4 Tridev Multitrade Pvt Ltd 14, Popatwadi 1st Floor, 95,00,000/-
Kalbadevi, Mumbai-400002
5 Eternity Multitrade Pvt B-G12, Cabin Road, Bhayander 95,00,000/-
Ltd (E) Thane-401105
6 Ganga Builders Ltd Stephen House, room No.102, 95,00,000/-
6th Floor, 4BBD Bagh (East),
Kolkata-700001
7 Bayanwala Brothers Pvt 9, Old China Bazar Street, 5th 90,00,000/-
Ltd Floor, R/No. 84, Kolkata-
700001
8 Shivlaxmi Exports Ltd 102, Stephen House, 4 BBD 90,00,000/-
BAG(E), Kolkata-700001
9 Sital Mercantile & Credit 32/C/1, MLB Road, Gound 95,00,000/-
Pvt Ltd Floor, Bally, Howrah-711201
10 Pentium Tech Pvt Ltd 32/34, Bombay, chamber, 5th 40,00,000/-
Floor, Anandilal Paodar Marg,
Dhobi Tolao, Mumbai-400002
11 Realgold Trading BIG TREE BLDG., Chamber 50,00,000/-
company Pvt Ltd No. 6, 1st Floor, Marine Street,
Mumbai-400002
Total 9,30,00,000/-
(2) The Assessing Officer in the course of assessment proceedings
had desired the Appellant Company to furnish the details of the
amount received and evidence in support of identity and
creditworthiness of the parties and also the genuineness of the
transaction of all the parties from whom the share capital and share
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Assessment Year : 2009-10.
premium had been received. In response, the Appellant Company
vide letter dated 13.08.2012 filed with the Assessing Officer copies
of bank accounts, confirmation and Income Tax Return
acknowledgements from all the parties to establish the identity,
genuineness and sources of transaction regarding share capital and
share premium. The entire amount had been received by the Appellant
Company through normal banking channels by account payee
cheques/demand drafts. Furthermore, the said confirmations also
clearly reveal the source of funds, particulars of the bank account
through which payment has been received and the Income-Tax
particulars which go on to establish the identity and creditworthiness
of the respective share applicants authoritatively and
conclusively.
(3) On the basis of the documents/details submitted, the Learned
Assessing Officer, has summarized as follows :-
S.No. Name of the Share Holder Returned Income Assessment
Year
1 Gromore Fund Management Co. Rs 14,130/- 2009-10
Ltd
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Assessment Year : 2009-10.
2 Super Finance Ltd Rs 10,730/- 2009-10
3 Delton Exim Pvt Ltd Rs 11,210/- 2009-10
4 Tridev Multitrade Pvt Ltd Rs 8,520/- 2009-10
5 Eternity Multitrade Pvt Ltd Rs 8,620/- 2009-10
6 Ganga Builders Ltd Rs 5,850/- 2009-10
7 Bayanwala Brothers Pvt Ltd Rs 10,630/- 2009-10
8 Shivlaxmi Exports Ltd Rs 10,480/- 2009-10
9 Sital Merchantile & Credit Pvt Ltd Rs 12,020/- 2009-10
10 Pentium Tech Pvt Ltd Rs 17,037/- 2009-10
11 Real gold Trading company Pvt No ITR Submitted 2009-10
Ltd
(4) In order to further verify the genuineness of all the parties
commissions u/s 131 were sent by the Learned Assessing Officer to the
respective Investigation agencies in Mumbai and Kolkata. In response to
which reports were received from the office of Addl. CIT, Range-10(2),
Mumbai and Assistant Director of Income Tax (Inv) Unit-III(3), Kolkata.
The Addl. Commissioner of Income Tax, Range 10(2), Mumbai and
Assistant Director of Income Tax (Inv), Unit-III(3), Kolkata also deputed
Inspectors of Income Tax to serve the summons and conduct field
enquiries. The results of the said enquiries are as follows :-
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Assessment Year : 2009-10.
Report from Mumbai
S No. Name of the Shareholder Report as received in response to
commission from Mumbai
1 Tridev Multitrade Pvt Ltd The address is of B L Agarwal and
office of Amit Textiles. As per report of
inspector dated 30.11.2011, no such
person has ever resided in such
premises- Report of Shri Ajay Kumar
Inspector is enclosed as annexure
(Annexure-20)
2 Eternity Multitrade Pvt Ltd The address was not found. Report of
Shri Ajay Kumar Inspector is enclosed
as annexure (Annexure-21)
3 Pentium Tech Pvt Ltd Party has responded to the summons
and the details are annexed. Details
annexed as Exhibit-E
4 Real gold Trading Company The address is office address of N
Pvt Ltd Chandulal & Co., CA. As per report of
Inspector dated 30.11.2011, no such
person has ever resided in such
premises. Report of Shri Ajay Kumar
Inspector is enclosed as annexure
(Annexure-20)
Report from Kolkata
S No. Name of the Shareholder Report as received in response to
commission from Kolkata
1 Gromore Fund Assessee made a submission through
Management Co. Ltd dak and submitted that the company
has applied for 90,000 equity shares of
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Assessment Year : 2009-10.
Rs 10/- of M/S Adamine Construction
Pvt Ltd in FY 2008-09 each at a
premium of Rs 90/- The assessee has
not given the reason for paying such a
high premium. The assessee has
enclosed bank statement showing
payment was made by cheque no
844721 dated 11.04.2008 for Rs
50,00,000/-, and cheque no 844721
dated 11.04.2008 for Rs 40,00,000/-
drawn on Deutsche Bank. The
assessee has not enclosed the bank
statement showing the source of fund
for share application money. The
company has shown income of Rs
14,130/- for A.Y. 2009-10.
2 Super Finance Ltd Assessee made a submission through
dak and submitted that the company
has applied for share of M/s Adamine
Construction Pvt Ltd in FY 2008-09.
The assessee has not specified for
how many shares and at what
premium. The assessee has enclosed
bank statement showing payment was
made by cheque no 069223 dt
17.04.2008 for Rs.50,00,000/- and
cheque no 069224 dt 17.04.2008 for
Rs 45,00,000/- drawn on Deutsche
Bank. The assessee has not enclosed
the bank statement showing the source
of fund for share application money.
The company has shown total income
of Rs 10,730/- for A.Y 2009-10.
3 Delton Exim Pvt Ltd Assessee made a submission through
dak and submitted that the company
has applied for 95,000 equity shares of
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Assessment Year : 2009-10.
Rs 10/- of M/s Adamine Construction
Pvt Ltd in FY 2008-09 each at a
premium of Rs 90/-. The assessee has
not given reason for paying such high
premium. The assessee has enclosed
bank statement showing payment was
made by cheque no 611611 dt
17.04.2008 for Rs 50,00,000/- and
cheque no 611612 dt 17.04.2008 for
Rs 45,00,000/- drawn on Deutsche
Bank. The assessee has not enclosed
the bank statement showing the source
of fund for share application money.
The company has shown income of
Rs 11,210 for A.Y 2009-10.
4 Ganga Builders Ltd Assessee made a submission through
dak and submitted that the company
has applied for shares of M/s Adamine
Construction Pvt Ltd in FY 2008-09.
The assessee has not specified for
how many shares and at what
premium. The assesssee has enclosed
bank statement showing payment was
made by cheque no 875658 dt
30.04.2008 for Rs 45,00,000/- and
cheque no 875659 dt 30.04.2008 for
Rs 50,00,000/- drawn on Deutsche
Bank. The assessee has not enclosed
the bank statement showing the source
of fund for share application money.
The company has shown total income
of Rs 5,850/- for A.Y 2009-10.
5 Bayanwala Brothers Pvt Ltd Assessee made a submission on
15.12.2011 through dak and submitted
that the company has applied for
90,000 equity share of M/s Adamine
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Construction Pvt Ltd. each at a
premium of Rs.90/- each and allotted
the same. The assessee has not given
reason for paying such high premium.
The assessee has enclosed bank
statement showing payment was made
by cheque no 675388 dt 02.05.2008 for
Rs 50,00,000/- and cheque no 675289
dt 02.05.2008 for Rs 40,00,000/- drawn
on Centurion Bank of Punjab, India
Exchange Place. The assessee has
not enclosed the bank statement
showing the source of fund for share
application money. The company has
shown total income of Rs 10,626/- for
A.Y 2009-10.
6 Shivlaxmi Exports Ltd Assessee made a submission through
dak and submitted that the company
has applied for shares of M/s Adamine
Construction Pvt Ltd in FY 2008-09.
The assessee has applied for 90,000
equity share of Rs 10/- of Adamine
Construction Pvt Ltd each at premium
of Rs.90/- and allotted the same. The
assessee has enclosed bank statement
showing payment was made by cheque
no 861812 dt 02.05.2008 for Rs
30,00,000/- and cheque no 861811 dt
02.05.2008 for Rs 60,00,000/- drawn
on Deutsche Bank. The assessee has
not enclosed the bank statement
showing the source of funds for share
application money. The company has
shown total income of Rs 10,480/- for
A.Y 2009-10.
7 Sital Merchantile & Credit Assessee made a submission on
24
I.T. Appeal No. 6178/Del/2013
C. O. No. 262/Del/2015
Assessment Year : 2009-10.
Pvt Ltd 15.12.2011 through dak and submitted
that the company has applied for
95000 equity share of Rs 10/- of
Adamine Construction Pvt Ltd at a
premium of Rs 90/- and allotted the
same. The assessee has not given
reason for paying such high premium.
The assesssee has not submitted the
proper bank statement showing the
payment. The assessee has not
enclosed the bank statement showing
the source of fund for share application
money. The company has shown total
income of Rs.12,023/- for A.Y 2009-10.
(5) On the basis of the said exercise, the Learned Assessing Officer has
observed and concluded as follows:-
The identity and the creditworthiness of the investors are not
established as all the investors are showing a nominal income.
Neither the investor company and nor the assessee company has
produced any proof to substantiate the credit worthiness of the
investors (for example balance sheet of the investor company)
The genuineness of the transactions is also in doubt as the
investors have not enclosed the bank statement showing the
source of fund for share application money.
(6) The Learned Assessing Officer has accordingly held that the
creditworthiness of the investors and the genuineness of the transactions
is in doubt and has accordingly treated share capital and share premium
25
I.T. Appeal No. 6178/Del/2013
C. O. No. 262/Del/2015
Assessment Year : 2009-10.
amounting to Rs. 9,30,00,000/- as unexplained and added this same to
the taxable income of the Appellant Company u/s 68 of the Income -tax
Act, 1961.
(7) The Assessing Officer in the course of assessment proceedings had
desired the Appellant Company to furnish the details of the amount
received and evidence in support of identity and creditworthiness of the
applicants and also the genuineness of the transaction of all the parties
situated at Mumbai and Kolkata from whom the share capital and share
premium had been received. In response, the Appellant Company filed
copies of confirmations, Income Tax Return acknowledgements and bank
accounts from all the parties establishing the identity, genuineness and
sources of transaction regarding share capital and share premium with
the Assessing Officer. The entire share application money had been
received by the Appellant Company through normal banking channels by
account payee cheques/demand drafts. Furthermore, the said
confirmations also clearly reveal the source of funds, particulars of the
bank account through which payment has been received and the
Income-Tax particulars which go on to establish the identity and
creditworthiness of the various parties authoritatively and conclusively.
(8) As a result of the above documents being filed before the Learned
Assessing Officer in respect of all the parties in respect of which no cause
exists as to recourse to the provisions of Section 68 of the Income-tax
Act, 1961 in as much as the onus cast on the Appellant Company vis-à-
26
I.T. Appeal No. 6178/Del/2013
C. O. No. 262/Del/2015
Assessment Year : 2009-10.
vis the genuineness of the transaction and credit worthiness of the
parties has been effectively and completely discharged. The action of the
Learned Assessing Officer is not only against the spirit but also letter of
the provisions relating to establishing the identity of cash creditors as
embodied in the Income -tax Act, 1961. Independent investigations from
parties over which an Appellant Company does not have any control
cannot be used to form any conclusion, adverse of otherwise in respect of
the Appellant Company. As such the said addition is neither warranted
nor justified or sustainable on the facts of the case.
(9) The above factual statements and arguments can be further
buttressed and reinforced by an analysis of the relevant legal provisions
and legal pronouncements on the issue. Before proceeding further with
the matter it would be worthwhile to reproduce the provisions of S.68 of
the Income tax Act, 1961 which reads as follows:-
S 68. Where any sum is found credited in the books of an assessee
maintained for any previous year, and the assessee offers no
explanation about the nature and source thereof or the explanation
offered by him is not, in the opinion of the officer, satisfactory, the
sum so credited may be charged to income-tax as the income of the
assessee of that previous year.
27
I.T. Appeal No. 6178/Del/2013
C. O. No. 262/Del/2015
Assessment Year : 2009-10.
(10) The above Section enjoins upon an Appellant Company, the duty to
adequately, satisfactorily and substantively explain the source of any
cash credit in his books of accounts and no further. To put it differently
an Appellant Company's burden of proof would stand discharged if he is
able to prove the nature and source of the cash credit received and thus
his onus of proof cannot extend to failure to prove the source of the
proof with a view to arrive at the ultimate source of funds. As long as
the nature, source and identity of the investor is established, no further
onus of proof can be enjoined on it. In the instant case no case can be
made out to doubt the genuineness, existence or identity of the investors
and as such no cause exists for the invocation of S. 68.
(11) An analysis of the provisions of Section 68 of the Income-tax Act,
1961 would make it clear that in order to discharge the onus, the
Assessee must prove the following:-
(i) identity of the creditor;
(ii) capacity of the creditor to advance money; and
(iii) genuineness of the transaction.
(12) The question of the manner in which the onus u/s 68 has to be
discharged is to be looked at with different perspectives and varying
parameters in each different circumstance and no standards/guidelines
can be lead out in this regard.
28
I.T. Appeal No. 6178/Del/2013
C. O. No. 262/Del/2015
Assessment Year : 2009-10.
(13) In the instant case there is no material on record to prove or even
remotely suggest that the share application money received actually
emanated for the Appellant Company. In fact it may be reiterated that
the share application money was received from independent legally
incorporated companies through normal and regular banking channels
which fact stands duly corroborated and confirmed by the confirmations
bank statements and Income Tax Returns of the share applicants duly
placed on record. In fact, no evidence, direct or indirect, conclusive, or
even circumstantial, exists to doubt in any manner the identity and
credit worthiness of the parties and genuineness of the transactions
entered into.
(14) The Appellant Company has discharged its onus by satisfactorily
dealing with all the issues in respect of which onus has been cast on it
u/s 68 of the Income-tax Act, 1961 as would be clear from the following
discussion:-
(i) With respect to the identity of the creditors the names,
addresses and PANs of the Assessee has been duly furnished and
provided to the Ld Assessing Officer during the course of the
assessment proceedings and no error or short coming has either
been determined or pointed out therein since all the share
applicants are duly identified with duly allotted PANs which are
29
I.T. Appeal No. 6178/Del/2013
C. O. No. 262/Del/2015
Assessment Year : 2009-10.
subsisting in the record of the Income Tax Department. Moreover
all the share applicants are companies duly incorporated after
following the procedure laid out in the Companies Act, 1956.
Thus, no doubt exists or even arises with respect to the identity of
the creditors.
(ii) With respect to the capacity/credit worthiness of the share
applicants to advance money and the genuineness of the
transactions it needs to be understood, reiterated and re-
emphasized that the entire transaction was consummated through
account payee cheques through regular banking channels which
fact has not been disputed or denied in any manner. As such
given the entire factual situation of the case no doubt arises and
remains as to the capacity and credit worthiness of the parties and
genuineness of the transactions.
(15) Moreover, without prejudice to the submissions made above, it is
submitted that a sum of Rs. 50 lac was received from M/s Real Gold
Trading Private Limited during the previous year relevant to Assessment
Year 2008-09 in which year it was reflected as Share Application Money
in the accounts and corresponding addition was made by the Ld
Assessing Officer during that year. Subsequently, during the assessment
year under appeal it was converted to Share Capital Money and a further
addition of Rs. 50 lacs was also made which has resulted in double
addition of the same amount over two assessment years.
30
I.T. Appeal No. 6178/Del/2013
C. O. No. 262/Del/2015
Assessment Year : 2009-10.
(16) In this connection Your Honour's attention is also invited to the
decision of the Hon'ble Delhi High Court in the case of Commissioner of
Income-Tax vs. Steller Investments Limited [(1991) 192 ITR 287 (Delhi)]
wherein it has been clearly held that any increased capital is not
assessable in the hands of the company. The relevant observations of
the Learned Judges are as follows:-
"It is evident that even if it be assumed that the subscribers to the
increased share capital were not genuine, nevertheless, under no
circumstances, can the amount of share capital be regarded as
undisclosed income of the assessee. It may be that there are some
bogus shareholders in whose names shares had been issued and
the money may have been provided by some other persons. If the
assessment of the persons who are alleged to have really advanced
the money is sought to be reopened, that would have made some
sense but we fail to understand as to how this amount of increased
share capital can be assessed in the hands of the company itself."
(17) Subsequent to the above an appeal filed by the Department against
the judgement/observations of the Supreme Court was also dismissed
and the Hon'ble Supreme Court did not find any reason to interfere with
the order of the High Court in the case of CIT vs Steller Investment Ltd
[(2001) 251 ITR 263 (SC)]. As such the observations of the Hon'ble Delhi
High Court have obtained the approval of their Lordship of the Supreme
Court and accordingly attained judicial finality and stamp of approval.
31
I.T. Appeal No. 6178/Del/2013
C. O. No. 262/Del/2015
Assessment Year : 2009-10.
(18) In addition, Your Honor's kind attention is also invited to the
following judgement of the Delhi High Court in the case of Commissioner
of Income Tax v Lovely Exports Pvt Ltd [(2008) 299 ITR 268 (Delhi)] has
held as follows:-
"In the case of a company the following are the propositions of law
under section 68. The assessee has to prima facie prove (1) the
identity of the creditor/ subscriber; (2) the genuineness of the
transaction, namely, whether it has been transmitted through
banking or other indisputable channels; (3) the creditworthiness or
financial strength of the creditor / subscriber; (4) if relevant details
of the address or PAN identity of the creditor / subscriber are
furnished to the Department alongwith copies of the shareholders'
register, share application forms, share transfer register, etc, it
would constitute acceptable proof or acceptable explanation by the
assessee; (5) the Department would not be justified in drawing an
adverse inference only because the creditor/ subscriber fails or
neglects to respond to its notices; (6) the onus would not stand
discharged if the creditor / subscriber denies or repudiates the
transaction set up by the assessee nor should the Assessing Officer
take such repudiation at face value and construe it, without more,
against the assessee; and (7) the Assessing Officer is duty bound to
investigate the creditworthiness of the creditor/ subscriber the
genuineness of the transaction and the veracity of the repudiation.
In the case of a public issue, the company concerned cannot be
expected to know every detail pertaining to the identity as well as
32
I.T. Appeal No. 6178/Del/2013
C. O. No. 262/Del/2015
Assessment Year : 2009-10.
financial worth of each of its subscribes. The company must,
however, maintain and make available to the Assessing Officer for
his perusal, all the information contained in the statutory share
application documents. A delicate balance must be maintained
while walking the tightrope of sections 68 and 69 of the Income -
Tax Act. The burden of proof can seldom be discharged to the hilt
by the assessee; if the Assessing Officer harbours doubts of the
legitimacy of any subscription, he is empowered, to carry out
thorough investigations. But if the Assessing Officer fails to
unearth any wrong or illegal dealings, he cannot adhere to his
suspicions and treat the subscribed capital as the undisclosed
income of the company".
(19) Further Your Honor's kind attention is also invited to the decision
of their Lordship of the Hon'ble Supreme Court in the case of CIT vs
Lovely Exports Pvt Ltd [(2008) 216 CTR 195 (SC)] wherein the special
leave petition filed by the Department against the order of the Delhi High
Court has been dismissed with the following remarks:-
"We find no merit in this Special Leave Petition for the simple
reason that if the share application money is received by the
Assessee Company from alleged bogus shareholders, whose names
are given to the AO, then the Department is free to proceed to
reopen their individual assessments in accordance with law.
Hence, we find no infirmity with the impugned judgement".
33
I.T. Appeal No. 6178/Del/2013
C. O. No. 262/Del/2015
Assessment Year : 2009-10.
(20) The above decision of the Hon'ble Supreme Court follows the earlier
decision of the Hon'ble Supreme Court in the case of Steller Investment
Ltd, cited supra and further reinforces the arguments put forward for
and on behalf of the Appellant Company.
(21) In particular, with regard to the issue of establishing the
creditworthiness of the parties, Your Honour's attention is invited to the
following recent judgements wherein it has been conclusively held,
relying on the decisions in the case of M/s Lovely Exports Pvt Ltd cited
above, that as long as the identity of the share applicant was proved, the
burden of proving the creditworthiness was not on the Assessee:-
Commissioner of Income-tax, Udaipur v. Bhaval Synthetics [(2013)
35 Taxmann.com 83 (Rajasthan)];
Shree Barkha Synthetics Ltd v. Assistant Commissioner of Income-
tax [(2006) 155 Taxman 289 (Raj)];
Commissioner of Income-tax, Bhopal (M.P) v. Peoples General
Hospital Ltd [(2013) 35 taxmann.com 444(Madhya Pradesh);
Commissioner of Income-tax, Meerut v. Kamna Medical Centre (P)
Ltd [(2013) 35 taxmann.com 470(Allahabad)];
Commissioner of Income-tax, Faridabad v. GP International Ltd
[(2010) 186 Taxman 229 (Pun &Har)];
CIT v Dwarkadhish Investment Pvt Ltd and Dwarkadhish Capital
Pvt Ltd [(2011) 330 ITR 298 (Delhi)];
CIT v. Winstral Petrochemicals Pvt Ltd [(2011) 330 ITR 603 (Delhi)];
34
I.T. Appeal No. 6178/Del/2013
C. O. No. 262/Del/2015
Assessment Year : 2009-10.
Commissioner of Income Tax v. Gangour Investment Ltd [(2011)
335 ITR 359 (Delhi)];
MOD Creations Pvt Ltd vs. Income Tax Officer [(2012) 354 ITR
282(Delhi)].
(22) It should be specifically noted in the instant case there was no
denial at any stage of the investigation or the assessment proceedings by
any of the subscribers to the share capital of their having invested money
by way of share application money in the Appellant Company.
Moreover there is no shred of evidence, direct, indirect or even peripheral
of the share application money having emanated from the coffers of the
Appellant Company. In fact, the investor companies, in their replies
filed before the Department (in response to summons u/s 131 of the Act),
have duly confirmed, the factum of their having made the investment
and have further buttressed the same with the following documents:-
(a) Confirmations;
(b) Acknowledgement for filing of Income Tax Returns;
(c) Bank statements reflecting the transactions with the
Appellant Company;
(d) Copies of Annual Accounts.
(23) In view of the above, no doubt remains as to the identity of the
investors, their credit worthiness and the genuineness of the
transactions and correspondingly no adverse inference is called for.
35
I.T. Appeal No. 6178/Del/2013
C. O. No. 262/Del/2015
Assessment Year : 2009-10.
(24) In fact, in the instant case, reliance is placed on the decision of
the Delhi High Court in the case of CIT vs Kamdhenu Steel & Alloys
Limited and Others [(2012)206 Taxman 254(Delhi)] wherein the
following has been held :
"38. Even in that instant case, it is projected by the Revenue that
the Directorate of Income Tax (Investigation) had purportedly found
such a racket of floating bogus companies with sole purpose of
landing entries. But, it is unfortunate that all this exercise is going
in vain as few more steps which should have been taken by the
Revenue in order to find out causal connection between the cash
deposited in the bank accounts of the applicant banks and the
assessee were not taken. It is necessary to link the assessee with
the source when that link is missing, it is difficult to fasten the
assessee with such a liability.
39. We may repeat what is often said, that a delicate balance has
to be maintained while walking on the tight rope of sections 68 and
69 of the Act. On the one hand, no doubt, such kind of dubious
practices are rampant, on the other hand, merely because there is
an acknowledgement of such practices would not mean that in any
of such cases coming before the Court, the Court has to presume
that the assessee in questions as indulged in that practice. To
make the assessee responsible, there has to be proper evidence. It
is equally important that an innocent person cannot be fastened
36
I.T. Appeal No. 6178/Del/2013
C. O. No. 262/Del/2015
Assessment Year : 2009-10.
with liability without cogent evidence. One has to see the matter
from the point of view of such companies (like the assessee herein)
who invite the share application money from different sources or
even public at large. It would be asking for a moon if such
companies are asked to find out from each and every share
applicant/subscribers to first satisfy the assessee companies about
the source of their funds before investing. It is for this reason the
balance is struck by catena of judgements in laying down that the
Department is not remediless and is free to proceed to reopen the
individual assessment of such alleged bogus shareholders in
accordance with the law. That was precisely the observation of the
Supreme Court in Lovely Export (supra) which holds the fields and
is binding.
40. In conclusion, we are of the opinion that once adequate
evidence/material is given, as stated by us above, which would
prima facie discharge the burden of the assessee in proving the
identity of shareholders, genuineness of the transaction and
creditworthiness of the shareholders, thereafter in case such
evidence is to be discarded or it is proved that it has 'created"
evidence, the Revenue is supposed to make thorough probe of
the nature indicated above before it could nail the assessee and
fasten the assessee with such a liability under Sections 68 and 69
of the Act.
37
I.T. Appeal No. 6178/Del/2013
C. O. No. 262/Del/2015
Assessment Year : 2009-10.
(25) It would also be pertinent, topical and relevant to mention here
that the Special Leave Petition field before the Hon'ble Supreme Court by
the Revenue against the above decision of the Hon'ble Delhi High Court
has been subsequently dismissed by Their Lordship of the Supreme
Courts and as such the decision of the Delhi High Court in the case of
CIT vs Kamdhenu Steel & Alloys Limited and Others (supra) has attained
conclusive judicial finality.
(26) To conclude it may be said that on the basis of the facts discussed
supra and the ratio of the above judgements makes it clear that if the
share applicants are identified and it is established that they have
deposited money in the Company, no recourse can be made to the
provisions of S 68. The Appellant Company had provided all the
requisite particulars to establish the identity of the share applicants in
the confirmations, ITRs and bank statements already filed before the
Assessing Officer. The various arguments advanced by the Learned
Assessing Officer are frivolous and irrelevant and the onus enjoined upon
the Appellant Company by the provisions of section 68 stands not only
adequately but also completed satisfied.
(27) Accordingly since it is clear that if the shareholders / share
applicants are identified and it is established that they have invested
money in the purchase of shares, no recourse can be made to the
provisions of S 68. In the instant case the Appellant Company had
provided all the requisite particulars to establish the identity of the
38
I.T. Appeal No. 6178/Del/2013
C. O. No. 262/Del/2015
Assessment Year : 2009-10.
share applicants in the confirmations already filed before the
Assessing Officer. "
The ld. AR also placed reliance on the following
decisions :-
(i) CIT Vs. Gangeshwari Metal Pvt. Ltd.
ITA. No. 597/2012 [judgement dated
21.01.2013 (Delhi High Court);
(ii) Pr. CIT Vs. N. C. Cables Ltd. (2017)
391 ITR 11 (Del.);
(iii) Pr. CIT Vs. Softline Creations P. Ltd. (2016)
387 ITR 636 (Del.);
(iv) CIT Vs. Real Time Marketing P. Ltd. (2008)
306 ITR 35 (Del.);
(v) CIT Vs. Value Capital Sergvices P. Ltd. (2008)
307 ITR 334 (Del.);
(vi) CIT Vs. Orbital Communication (P) Ltd. (2010)
327 ITR 560 (Del.);
(vii) CIT Vs. Winstral Petrochemicals P. Ltd. (2011)
330 ITR 603 (Del.);
(viii) CIT Vs. Kamdhenu Steel and Alloys Ltd. (2014)
361 ITR 220 (Del.).
39
I.T. Appeal No. 6178/Del/2013
C. O. No. 262/Del/2015
Assessment Year : 2009-10.
17. Having gone through the above cited decisions, we find
that the ratio laid down therein is that the primary onus lies upon
the assessee to establish identity and creditworthiness of the creditors /
investors as well as genuineness of the transaction and after
discharging of the same, onus shifts upon the Revenue to prove the
documents filed by the assessee while discharging its primary onus,
as false to attract addition under section 68 of the Act. In its recent
decision dated 11.01.2017 in the case of Pr. CIT Vs. N.C. Cables
Ltd. (supra) the Hon'ble jurisdictional High Court of Delhi has been
pleased to hold that no addition can be made under section 68 of
the I. T. Act where assessee in the case of share application money
had furnished documents to evidence genuineness of transactions
and identity and creditworthiness of parties, but there was failure
on the part of the Assessing Officer to conduct adequate and proper
enquiry into materials while invoking section 68 of the Act. Again
in the case of Pr. CIT Vs. Softline Creations P. Ltd. (supra), the assessee
in support of receipt of share application money had furnished PANs,
bank details of share applicants and affidavits of Directors of those share
applicant companies. The Hon'ble High Court of Delhi has been pleased
to hold that share application money cannot be considered as
40
I.T. Appeal No. 6178/Del/2013
C. O. No. 262/Del/2015
Assessment Year : 2009-10.
unexplained cash credits in the hands of the assessee. In the case of CIT
Vs. Value Capital Services P. Ltd. (supra) the Hon'ble jurisdictional High
Court of Delhi while dismissing the appeal of the Revenue has been
pleased to hold that the additional burden was on the Department to
show that even if the share applicants did not have the means to make
the investment, investment made by them actually emanated from the
coffers of the assessee so as to enable it to be treated as the undisclosed
income of the assessee. In the case of CIT Vs. Orbital Communication P.
Ltd. (supra) the Hon'ble jurisdictional High Court of Delhi in the case of
the claimed share application money has been pleased to hold that where
substantial evidence has been produced by the assessee to prove
creditworthiness of the creditors and genuineness of share applications,
failure to produce creditor is not material. In the case of CIT Vs.
Winstral Petro Chemical P. Ltd. (supra) in the case of cash credits /
share application money, the Hon'ble jurisdictional High Court of Delhi
on the issue of burden of proof, has been pleased to hold that initial
burden is on assessee to prove identity of creditors, the burden then
shifts to Revenue to prove that credits were not genuine. In that case
while dismissing the appeal of the Revenue, the Hon'ble High Court was
pleased to hold that it had not been disputed that the share application
41
I.T. Appeal No. 6178/Del/2013
C. O. No. 262/Del/2015
Assessment Year : 2009-10.
money was received by the assessee company by way of account payee
cheques through normal banking channels. Admittedly, copies of
application for allotment of shares were also provided to the Assessing
Officer. Since the applicant companies were duly incorporated, were
issued PAN Cards and had bank accounts from which money was
transferred to the assessee by way of account payee cheques, they could
not be said to be non-existent, even if they, after submitting the share
applications, had changed their addresses or had stop functioning, held
the Hon'ble High Court.
18. When we examine the facts of the present case in view of the
above cited ratio laid down by the Hon'ble jurisdictional High Court
of Delhi, we find that facts are almost similar. In the present case there
were 11 investor companies claimed to have invested Rs.9,30,00,000/-
in total in the assessee company. In support of their identity and
creditworthiness as well as genuineness of the transactions, as discussed
above, the assessee had filed before the Assessing Officer, their (investor
companies) confirmations, Income Tax return acknowledgements (except
in the case of Real Gold Trading Company Pvt. Ltd.), bank accounts with
this submission that entire amount had been received by the assessee
42
I.T. Appeal No. 6178/Del/2013
C. O. No. 262/Del/2015
Assessment Year : 2009-10.
company through normal banking channels by account payee cheques /
demand drafts. The confirmations filed revealed the source of funds,
particulars of the bank account through which payments were received
and the Income Tax particulars establishing the identity and
creditworthiness of the respective share applicants. We thus find that
the assessee had discharged its primary onus to establish identity and
creditworthiness of the investor companies as well as genuineness of the
transactions, as per the ratio laid down in the above cited decisions of
the Hon'ble High Court. The Assessing Officer, on the other hand, had
doubted the genuineness of the claimed receipt on the basis that some of
the investor companies could not be found at the given address and that
some of the investor companies responded to the summons by post, but
had not caused appearance before him. The Assessing Officer also held
that income of many of the investor companies was too low or meager to
enable them to make such large investments in the share capital of the
assessee company. The Assessing Officer also observed that there
appeared no justification for large components of share premium paid to
the assessee along with the share capital. The Assessing Officer also
remained suspicious about the claimed investor companies on the basis
of reasons recorded for initiation of reopening of assessment proceedings
43
I.T. Appeal No. 6178/Del/2013
C. O. No. 262/Del/2015
Assessment Year : 2009-10.
based on the report relating to survey conducted at the premises of the
assessee that the business premises of the assessee actually belong to
Bhushan Steel Ltd. and several other companies were having their
Registered offices in the same premises. The submission of the assessee
in this regard remained that there is no law that more than one company
cannot have its Registered office at one address and that there is no law
that companies cannot change their Registered offices. It was submitted
that business raise capital and such capital is rotated in economy for
increasing production and trade and for making more efficient use of
capital. Companies change and, sometimes in quick succession. This is
the normal formation of capital in any open economy and the process of
capital formation cannot be taken to be representing only unaccounted
funds or impeded. It was submitted that all the companies having
Registered office at the premises undisputedly belonged to Bhushan
Group. The sources of capital introduced in these companies were
established during the respective assessment proceedings. It was further
contended that no evidence was found during search to indicate
introduction of cash in the form of share capital. It is also pertinent to
mention over here that out of total 11 investor companies, notices could
not be served in case of 3 companies as they were not available on the
44
I.T. Appeal No. 6178/Del/2013
C. O. No. 262/Del/2015
Assessment Year : 2009-10.
given addresses. The remaining 8 companies had responded and had
filed their submissions. However, there is no dispute that in case of all
the 11 investor companies, the assessee had filed primary documents
and had accordingly discharged its initial onus to establish identity and
creditworthiness of the investor companies and genuineness of the
transaction as there is no dispute that all the transactions have been
done through banking channels i.e. through account payee cheques and
demand drafts. We thus find that the Assessing Officer has failed to
discharge its onus to prove that the documents filed by the assessee, as
discussed above, were false or fabricated as the Assessing Officer has not
made any efforts to verify those documents especially when there is no
dispute that all the investor companies were filing their returns of
income and were being assessed by the Department. The Assessing
Officer on the contrary remained suspicious on the claimed receipt from
the investor companies on some other factors like some of them were not
found on their given addresses, some of them had furnished their
submissions through posts and some of them were not having sufficient
income etc. as discussed above. Under these circumstances, we are of
the view that the ld. CIT (Appeals) was justified in deleting the addition of
Rs.9,30,00,000./- made under section 68 of the Act on account of
45
I.T. Appeal No. 6178/Del/2013
C. O. No. 262/Del/2015
Assessment Year : 2009-10.
unexplained share capital and share premium. Since the first appellate
order is based upon the ratio laid down in the above cited decisions of
the Hon'ble jurisdictional High Court of Delhi, we do not find reason to
interfere therewith. The same is upheld. The ground is accordingly
rejected.
19. In result, appeal is dismissed.
20. Consequently, cross objection preferred by the assessee and the
appeal filed by the Revenue, are dismissed.
21. The order is pronounced in the Open Court on: 18th August, 2017.
Sd/- Sd/-
( L. P. SAHU ) ( I. C. SUDHIR )
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated : the 18th August, 2017.
*MEHTA*
Copy of the Order forwarded to :-
1. Appellants;
2. Respondents;
3. CIT;
46
I.T. Appeal No. 6178/Del/2013
C. O. No. 262/Del/2015
Assessment Year : 2009-10.
4. CIT (Appeals);
5. DR, ITAT, ND.
BY ORDER
ASSISTANT REGISTRAR Date Draft dictated on 18.08.2017 Draft placed before author 18.08.2017 Draft proposed & placed before the second member Draft discussed/approved by Second Member.
Approved Draft comes to the Sr.PS/PS Kept for pronouncement on File sent to the Bench Clerk Date on which file goes to the AR Date on which file goes to the Head Clerk.
Date of dispatch of Order.