Income Tax Appellate Tribunal - Chandigarh
Secl Industries Limited, Bathinda vs Dcit, Ludhiana on 29 March, 2019
आयकर अपील य अ धकरण,च डीगढ़ यायपीठ "बी", च डीगढ़
IN THE INCOME TAX APPELLATE TRIBUNAL,
CHANDIGARH BENCH 'B' , CHANDIGARH
ी संजय गग , याय क सद य एवं ीमती अ नपण
ू ा ग'ु ता, लेखा सद य
BEFORE: SHRI SANJAY GARG, JUDICIAL MEMBER
AND SMT.ANNAPURNA GUPTA, ACCOUNTANT MEMBER
आयकर अपील सं./ ITA No.798/Chd/2017
नधा रण वष / Assessment Year : 2012-13
SECL Industries Limited, बनाम The D.C.I.T.,
# 21605, Street No.6/1A, Central Circle-III,
Power House Road, Ludhiana.
Bathinda.
थायी लेखा सं./PAN NO: AALCS6651H
नधा रती क ओर से/Assessee by : Shri Sudhir Sehgal, Adv.
राज व क ओर से/ Revenue by : Smt.Mona Mohanti, CIT DR
सन
ु वाई क तार!ख/Date of Hearing : 18.02.2019
उदघोषणा क तार!ख/Date of Pronouncement: 29.03.2019
आदे श/ORDER
Per Anna pur na Gupta, Account ant Member The present ap peal has been fi l ed by the as sessee agai nst the order of the Commi ssi oner of I ncome Ta x ( Appeal s) -5, Ludhi ana (in short 'CI T( A) ' dated 17.3.2017 passed u/s 250( 6) of the I ncome Ta x Act, 1961 ( herei nafter referred to as 'Act') .
2. The assessee has raised the following grounds of appeal:
"1. That the Ld. CIT(A), Bathinda erred on facts and law in confirming the addition of Rs.2,96,00,000/- made by the AO vide order u/s 143(3) dated 16.03.2015.
2. That the Ld. CIT(A), Bathinda erred on facts and law in confirming the action of the AO of making an 2 ITA No.798/Chd/2017 A.Y.2012-13 addition of Rs.2,96,00,000/- u/s 68 of the Income Tax Act, 1961 on account of share capital/premium received by the assessee. The explanation submitted during the course of assessment as well as appellate proceedings has been rejected without rebutting the same.
3. Notwithstanding the above grounds of appeal, the Ld. CIT(A), Bathinda has erred on facts and law in confirming the action of the AO of making an addition of Rs.2,96,00,000/- u/s 68 of the Income Tax Act, 1961 on account of share capital/premium received by the assessee while rejecting the contention of the assessee that the Proviso to section 68, putting the onus on the person in whose name credit is recorded in the books of the assessee company to offer an explanation about the nature and source of sum so credited, was brought on the statute w.e.f A.Y. 2013- 14 but the case of the assessee company related to A.Y. 2012-13. Hence the provisions of the amended section 68 did not apply to the case of the assessee company and, thus, the CIT (A) has ignored the binding judgment of Hon'ble Supreme in the case of Roshan Di Hatti as reported in 107 ITR 938.
4. That the Appellant craves leave to add or amend the grounds of appeal before the appeal is finally heard or disposed off."
3. The sole issue in the present appeal relates to addition made of share capital introduced in the assessee company during the year amounting to Rs.296 lacs, on account of the same remaining unexplained.
4. Brief f act s relat ing t o t he case are t hat t he ass essee is a priv at e limi t ed comp any engage d in t he business of works c ont ract or. During ass essment procee dings, on examinat ion of t he account s of t he asse ss ee, it was not iced by t he Assessing O ffic e r (A.O.) t hat t he asses see has issued 29 60 0 shares of Rs .1 0/- each at a pr emium of Rs.9 90 /- each and recei ve d huge amo unt , i.e Rs.2, 9 6, 00 0/- as share a ppl icat ion money and 3 ITA No.798/Chd/2017 A.Y.2012-13 Rs.2, 9 6, 00, 0 00 / - as share pr emium money from t he follo wing c omp a nies:
Sr. Name Address No. of Nominal Total value No shares value of of shares shares (including premium)
1. Skyhigh Buildtech Pvt. 119, MJ Shopping 10750 107500 10750000 Ltd. Centre, 3, Veer Savarkar Block, Shakarpur, Delhi-92
2. Anubhav Buildmart DA/4, 106, Dua 2000 20000 2000000 Private Limited Business Centre, Main Vikas Marg, Shakarpur, Delhi-92
3. Greenvalue 119, MJ Shopping 8300 83000 8300000 Agrofarms Pvt. Ltd. Centre, 3, Veer Savarkar Block, Shakarpur, Delhi-92
4. Ankay Associates 106, Dua Business Centre, 1800 18000 1800000 Private Limited Above Malhotra Jewellers, Main Vikas Marg, Shakarpur, Delhi-92
5. Vishal Digital Studio A-22, Ground Floor Guru 3000 30000 3000000 & Color Lab Pvt. Ltd. Nanak Pura, Laxmi Nagar, Delhi-92
6. Jyoti International Rz-122, Shahdara 1000 10000 1000000 Extension, Delhi-1 10022
7. Gop al an A g ro C-17, Guru Nanakpura, 1000 10000 1000000 Farms Private Opposite Scope Tower, Limited Laxmi Nagar, Delhi-92
8. Samman Trading 107/77A, Lane No.78, 1750 17500 1750000 Private Limited East Azad Nagar, Krishna Nagar, Delhi-92 Total 29600 296000 29600000
5. Th e asse ssee w a s aske d t o ex pla in t he genuineness of t hese receipt s. Furt her not ices u/s 13 3( 6) o f t he I ncome Tax Act , 19 6 1 w ere issue d to t hese compani es a ski ng t hem t o confirm t he invest ment s made and t o fil e doc ument s alongwit h informat ion a bout their t ax asse ssment , PAN and a ddres s of Asse ssing O fficer w it h whom t he returns had been file d and co py of t he income t ax ackn owle dg ement for t he A.Y.20 12- 13 , Copie s of Comput at ion of income, Pro fit & Loss Account & Balance Sheet as on 31.0 3.2 0 12 , Copi e s of Bank St at ement and account number for relevant perio d (0 1. 03 .2 01 1 to 4 ITA No.798/Chd/2017 A.Y.2012-13 30 .0 4. 20 12 ) wit h narrat ion of credit ent ries excee ding Rs.2 0, 00 0/-, in order to verify t heir ident it y, credit wort hiness and genuineness of t he t ransact ion. From t he replies receive d, t he A.O. f ound t hat t he credit wort hiness of t he inv est ing com panies , f o r making such huge invest ment s, had not been est a blishe d since out of t he eight companies , four i .e. at S.No. 1, 2, 4 &6 ha d neit her file d t heir b ank st at ement s nor t heir profit and loss a ccount , wh ile t he ba lance f our comp any ha d not file d t heir bank st at e ment and t heir Profit and lo ss ac count was found t o reflect meager pro fit s ,not sufficient f or making such huge invest ment in t he assessee com pany. He therefore hel d th at i n t he absen ce of the bank a ccounts of the i nvesti ng compani es, the genui neness of the i nvestments in shares at premi um was not proved, as the credi ts appeari ng i n the bank, from where the mone y had come, remai ned une xami ned. The asse ssee was theref ore asked to produce the Directors of these compani es to veri f y the i denti t y, genui neness and credi t w orthi ness of the investors. But the assessee fai l ed to produc e any of the Di re ctors of the i nvesti ng compani es. It was ho wever submi tted by the assessee that the i denti t y, genui n eness and credi t worthi ness of the compani es stood proved as the transacti ons had been made through banki ng channel and the account number/name of the bank had been furni shed al ong wi th detai l s of the i nvesti ng compani es, thei r nature of busi ness, thei r Copy of I TR, profi t & l oss account and bal ance sheet, 5 ITA No.798/Chd/2017 A.Y.2012-13 and al so that no buy-back of shares had been made. I t was contended that t he di rector of th e company's cou l d not be produced at su ch a short noti ce as the y wer e bus y in busi ness of the c ompany bei ng th e end of the fi na nci al year. The repl y of t he assessee w as consi dered but found unacceptabl e by the A.O. As p er the A.O. eve n the wel l reputed compani es, at nati onal l evel , i n thi s fi el d di d not command such a huge premi um duri ng the peri od under consi derati on, and the assessee had fai l ed to p rovide the ci rcumstances under whi ch i t h ad charged hug e premium from i ts al l eged share purchasers and ho w i t came into contact wi th these compani es for sal e of shares to them at such huge premium, when other compani es i n simi l ar fi el d, were e xperi enci ng e xodus i n their capi tal . The A.O., based on the above facts, concl uded that the enti re transacti on was onl y a desi gn to i ntroduce the assessee's o wn unaccounted mo ne y i n the shape of share capi tal and share premi um route through above menti oned i nvesti ng compani es. For t he above concl us i on, the AO pl ace d rel i ance on vari ous judi ci al deci si ons. The A.O. hel d th at i n the facts & ci rcumstances, the share capi tal /share premi um credi ted at Rs.2,96,00,000/- i n the books of account of the assessee remai ned une xpl ai ned and added the same to the i ncome of the assessee u/s 68 of the I ncome Ta x Act, 1961.
6. The matter was carried in appeal before the Ld.CIT(A) where the assessee filed detailed submissions in writing, reproduced at para 2.1 of the 6 ITA No.798/Chd/2017 A.Y.2012-13 order, reiterating his contention made before the A.O. and relying upon various judicial decisions in support of his contention that the onus to explain the genuineness of share capital introduced in assessee's company stood discharged. The written submissions filed by the assessee were forwarded to the A.O. who in reply to the same reiterated his contention made in the assessment order. The Ld.CIT(A) after considering the contentions of both the parties upheld the order of the A.O.
7. Aggrieved by the same, the assessee has come up in appeal before us. During the course of hearing before us the Ld. counsel for assessee vehemently argued that the onus to demonstrate the genuineness of the transaction stood discharged by the assessee in the present case. Our attention was drawn to the Paper Book filed before us and the Ld. counsel for assessee pointed out therefrom that all necessary documents to prove the identity, creditworthiness and genuineness of the transaction had been filed in the case of all the investors which was compiled in the Paper Book from page-1 to page-110.Taking us through the Paper Book, the Ld. counsel for assessee pointed out that in relation to all the eight investors the following documents had been filed before the lower authorities:
1) Confirmation
7 ITA No.798/Chd/2017
A.Y.2012-13
2) Application for issue of equity shares
3) Details of the company extracted from the
Master data with the Registrars of
Companies.
4) Reply filed by the investor confirming the
allotment of shares to it by the assessee company in response to notice issued by the department u/s 133(6) of the Act.
5. Copy of the audited financial statements.
8. The Ld. counsel for assessee stated, therefore, that it was clearly evident that the assessee had established identity of the investors from the registration data recorded with the Registrars of Companies, established their creditworthiness from the audited financial statements reflecting sufficient reserves and surpluses in the same for making the impugned investments and their confirmations affirming the genuineness of the transaction. The Ld. counsel for assessee thereafter stated that the addition had been made for the reason that the directors could not be produced by the assessee. The Ld. counsel for assessee stated that having discharged its onus, this could not be the ground for making addition without finding any infirmity in the documents submitted by the assessee. The Ld. counsel for assessee relied upon various decisions in support of his contention, copies of which were placed at Paper Book filed before us. Reliance was also placed on the decision of the I.T.A.T. in the case of M/s Pooja Industries Ltd. Vs. ITO in ITA No.1016/Chd/201`6 dated 8.10.2018 pointing therefrom that in identical 8 ITA No.798/Chd/2017 A.Y.2012-13 facts and circumstances the I.T.A.T. had deleted the addition made of unexplained share capital. In view of the above, the Ld. counsel for assessee pleaded that the addition made be deleted.
9. The Ld. DR, on the other hand, heavily relied upon the order of the CIT(A). He drew our attention to the findings of the CIT(A) at pages 25 to 29 as under:
"T he f ac ts of the c ase, the b as is of add i tion made by the AO and the argu men ts of the AR dur ing th e appel l ate proceed ings h ad been cons idered. T he AR dur ing the co urse of appel l ate proceed ings sub mi tted th at the inves ting co mp an ies co mpl ie d wi th the l e tters sen t b y the A. O. and onl y f e w of the m d id no t s end the P&L Accoun t and B an k Accoun t. T he AR h ad re pe ated th e argu men ts th at the assessee sub mi tted inf or mation of al l th e co mp an ies and the p ay me n ts had been rou te d through b ank ing ch annel . T hus as per AR, th e iden ti ty, c ap ac i ty and genu ine ness of al l th e cred itors s tood e s tabl ished. T he AR h ad rel ied upo n c ase l a ws in f avo ur of the appel l an t. It was f urther sub mi tted th at there is no mater i al on record to es tabl ish th at the assessee h ad in troduced i ts o wn un accoun ted mone y in the gu ise of share appl ic ation mo ne y through the af oresai d co mp an ies. As per AR al l the subscr ibers we r e ex is ting assesse es and the docu me n ts rel ating to th is h ad been f il ed bef ore the A. O. It is i mpor tan t to no te th at d ur in g the course of the asse ss men t proceed ings, the Assess ing Of f icer h ad asked th e assessee to prod uce the D irec tors of the subscr ibe r co mp an ies wh o h ad al l egedl y g i ven cheques as sh are appl ic ation mone y, to g ive e v idence reg ard in g the genu ineness of the tr ans ac tion and the ir cred it wo r th iness. As per the A. O. inf or mation was c al l ed u/s 133( 6) and in res ponse co mpl e te and f ul l inf or mation re pl y was no t rece i ved f ro m al l th e inves tors/co mp an ies to wh o m n o tices we re sen t. Fur ther i t is i mp or tan t here th at even thos e co mp an ies wh o h ad res ponded to the A. O. and f il ed the ir IT R, P&L ac coun t e tc. , d id n o t f il e the ir B ank Accoun t S tate me n t f ro m wh ere the cheques we r e issued. T he A. O. h ad men tioned th at th is coul d h ad reve al ed the re al des ign beh ind the arr ange men t. Fur ther the l i mi ted inf or mation f il ed sho ws th at those co mp an ies d id no t h ave su ff icien t inco me o r source of the ir o wn to make such a huge inves tme n t 9 ITA No.798/Chd/2017 A.Y.2012-13 wi th the assesse e. T heir cred i t wo r th iness was thu s no t es tabl ished. Merel y bec au se the p ay me n ts we r e made b y ch eques and rece iv ed by cheque do no t render the tr ans ac tion inge nu ine. G iven th e c ircu ms tances, i t was qu i te app are n t th at the p aper docu men ts f il ed by the assessee we re sh am and the p aper ev ide nce h ad been cre ated al though these we re no t genu ine tr ans ac tions. T he othe r co mp an ies h ad no t f il ed even these l i mi te d inf or mation in re s ponse to no tice s issued to the m u/s 133( 6). T hus the ir ex is tence / iden ti ty re main s doub tf ul . Mos t i mpor tan tl y the assessee wh en asked to produc e the D irec tors of the inves ting co mp an ies b y the A. O. , f ail ed to pr oduce the m. T his is f atal to the c ase of the ass essee. T he three cr iter i a of iden ti ty, cred i two r th iness an d genu ineness of the tr ans ac ti ons h ad to b e es tabl ished se p ar atel y. Fur ther , accord ing to Sec tion 68, the p r i mar y burden is on the assessee to s atisf ac tor il y ex pl ain the cred i t en tr ies in the books of accoun ts of the prev io us ye ar. If the ex pl an ation g iv en by the assessee is not s atisf ac tor y or the source of f ered by the assess ee is no t genu ine, the amoun t is to be taken as th e inco me of the as sessee. T he ex plan ation reg ard in g the n ature an d source of cred it shoul d b e s atisf ac tor y in the o p in ion of the assess i ng au thor i ty an d S ec tion 68 se ts up a presu mp tio n ag ains t the asse ssee wh enever u nex pl ained cred i ts are f ound in the books of the ass essee. T he in i ti al burden is on the assessee to ref ute the presu mp tio n r aised and the burden sh if ts onl y wh en th e assessee es tabl ishes the au th en tic i ty of the tr ans ac tions. Sec tion 68 appl ies equ al l y to sh are appl ic ation mone y rece ived b y the assessee and th e burden is on the assessee to pro ve the n ature an d source thereof to the s atisf ac tion of the A ssess in g Of f icer regard ing the three ingre d ien ts i. e. proof reg ard ing iden ti ty of the sh are appl ic an ts, the ir cred it wo r th iness to purch ase th e sh ares and th e genu ineness of the tr ans ac tion as a wh ol e, as hel d in C IT vs. You th Cons truc tion P. L td. 2013 357 IT R 197 ( Del ). T he burden of proving the source of a c ash cred i t is on the assessee and the Assess in g Of f icer is n o t re qu ired to prove the source. Mere f urnish ing of par ticul ars is no t enough, mere p ay men t b y ac coun t p ayee b y cheque is no t s acros anc t as he l d in H indus tan T ea T rad ing Co . L td. vs C IT 2003 [ 263 IT R 289, 297 ( C al ) ]. Wher e there is unex pl ai ned c ash-cred i t, i t is o pen to the Assess ing Of f icer to hol d th at i t is inco me of th e assessee and no f urther bur den l ies on th e Assess ing Of f icer to sho w th at th e inco me is f ro m an y p ar ticul ar source as hel d in C IT vs. Dev i Pr as ad V is wan ath Pr as ad 1969 7 2 IT R 194 ( SC).10 ITA No.798/Chd/2017
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7. It is a f ac t in th is c ase th at the A. O. asked the assessee to ex pl ain the source of cred its dur ing th e assess men t proc eed ings and g av e the assessee an o ppor tun i ty to produce the D irec tors of thes e concerns to g ive ev idence reg ard ing the ir cred it wo r th iness and the gen u ineness of th e tr ans ac tions wi t h the assessee . Ho we ver, the assessee co mp an y h ad no t produ ced an y D irec tor of the inves ting co mp an ies. T he AO has r igh tl y me n tioned th at en tr y of share pre miu m or sh ar e appl ic ation mon ey through ch eque does no t excl us ivel y or con cl us ivel y prove th e genu ineness of the f unds. It h as been hel d in the jud ic i al pronounce men ts th at it is essen ti al on the p ar t of Revenue Au thor i ties to l ook in to re al n ature o f tr ans ac tion and wh at h appens i n the re al wo rl d and con tex tu al iz e the s ame to su ch tr ans ac tions i n the re al marke t s itu ation. T he Hon'bl e Supre me Cour t, in the c ase of CIT VS. Durg a Pr as ad Mor e ( 1971) 82 IT R 540 ( SC) h as c ateg or ic al l y hel d th at the reve nue is en ti tl ed to l ook in to the c ircu ms tances, to f ind ou t the re al i ty of the rec i tal s mad e in the doc u men ts. T he rel ev an t observ ation s and f ind ings of Hon'bl e Supreme Cour t, in th e matte r of disch arge of onus of proof and th e rel ev ance of surround ing c ircu ms tances of the c ase are th at though an assessee' s s tate men t mus t be cons idered re al u n til i t was sho wn th at there we r e re asons to bel ie ve th at the app aren t was no t the re al , in a c ase wh ere the p ar ty rel ied on self serv ing rec i tal s, the tax ing au thor i ties we re en ti tl ed to l ook in to the surround ing c irc u ms tances to f in d ou t the re al i ty of such rec ital s.
8. T he case l a ws quo ted b y the AR are no t appl ic abl e to the f acts of the prese n t c ase as in the presen t c ase th e cred it wo r th ine ss of the p ar tie s and genu ineness of the tr ans ac ti on h as no t been es tabl ished ( even if it c an be pres u med, though no t acce p ted, th at th e iden ti ty is es tabl ished). So me of the inves ting co mp an ies h ave no t f il ed f ull inf or mation l ike P&L Accoun t, B al ance Shee t, B ank Accoun t e tc. , in r es ponse to the n o tices sen t b y th e A. O. Even the assessee h as n o t been abl e to produce the D ir ec tors of an y of the inves ting co mp an y bef ore the A. O. wh en an o ppor tun i ty was prov ided dur ing the assess me n t p roceed ings. Fro m the f ac ts i t is app aren t th at the asse ssee h as re - in troduced i ts un accoun ted inco me in its books of accoun ts in the sh ape of Share Appl ic ation/Sh ar e Pre miu m amo un ts by rou ting i t through p aper co mp an ies wh o h ave no suf f ic ie n t re al bus iness ac tiv i ties of the i r o wn and are c re ated on p apers f or such type of sh am tr ans ac ti ons. T he persons o per ating such p aper co mp an ies co mpl e te th e 11 ITA No.798/Chd/2017 A.Y.2012-13 f or mal i ties of f iling the re turns e tc. , bu t no re al bus iness/ ac tiv i ti es are c arr ied ou t by thes e co mp an ies. T he b ank accoun ts are o pened an d o per ated onl y to l aunder mon ey and prov ide acco mmo d ation e n tr ies. It is an acce p ted pr inc ipl e of jur is prudence th at in cer tain exce p tion al c ase s the cour t is en ti tl ed to l if t the ve il of cor porate en ti ty and to p ay reg ard to the econo mic re al i tie s beh ind the l eg al f ac ade. T he cour t h as po we r to d isreg ard the co r por ate en ti ty if it used f or tax ev as ion or to c ircu mven t tax obl ig ation or to per pe tr ate f raud as hel d in Jug g il al K aml ap at v . C IT , ( 1969) 73 IT R 702 ( SC); U n ion of Ind i a v. Pl ay wo rl d El ec tro n ics Pv t. L td. ( 19 90) 184 IT R 308, 317 ( SC); CIT v. Sr i Meen aksh i M i l l s L td. , ( 1967) 63 IT R 609, 616 ( S C) e tc. Fur ther the l eg isl ature c an f orge a sl edge-h amme r c ap abl e of cr ack ing o pen the cor por ate shel l ; and i t c an, if it chooses, de mand th at the cour ts ignore al l the conce p tions an d pr inc ipl es wh ich are at the roo t of co mp an y l a w [ B ank Voor H an del enSchee pv ar t N. V. v. Sl atf ord, ( 1953) 1QB 248]. T he f ac ts and c ircu ms tances of the c ase, as men tioned abo ve, cl e arl y sugge s t th at the revenue c anno t take or acce p t such mak e bel ieve tr ans ac ti on, as presen ted by the assessees . T ruth or genu in eness of such tr ans ac tions mus t prev ail over the s moke screen, cr e ated b y way of pre med i tated s er ies of ste ps taken by th e assessees wi th a v ie w to i mp ar ting a col our of genu ineness and ch ar ac ter of re al inves tme n t as sh are appl ic ation/sh are pre miu m amo u n t Needl ess to s ay th at one h as to l ook at the wh ol e tr ans ac tions an d a ser ies o, s te ps taken to acco mpl ish suc h sh are tr ans ac tions, in an in tegr ated manne r ; wi th a v ie w to ascer tain ing the true n ature and ch ar ac ter of the mone y rece ived. T hese paper co mp an ies do no t c arry ou t an y re al bus iness an d he nce the amo un ts sho wn to h ave been rece ived f rom the m c anno t b e s aid to be re al inves tme n ts b y those co mp an ies. T he assessee h as no t been abl e to produce an y of the D irec tors to ex pl ain the source of the f unds an d mere f il ing of IT Re turns/PAN e tc. , does no t es tab l ish the cred it wo r th iness of th e co mp an ies an d genu ineness o f the tr ans ac tions. In the presen t c ase al so if the inves tors we re g enu ine then ther e shoul d no t h av e been an y d if f icul ty in produc ing the D irec tors. T he f act th at the s h are c ap i tal mo n ies, h ave co me through accoun t p ayee cheques is , at bes t, neu tr al . Co mpl i ance wi t h the s tatu to ry nor ms and requ ire men ts is o nl y one as pec t b u t in the presen t c ase the f ac ts me n tioned b y th e AO ex pose th e c amouf l age ad o p ted by the assessee an d es tabl ished th at the f unds rece ived by the assessee we r e ' acco mmo d ation en tr ies' onl y. T he cour ts h ave 12 ITA No.798/Chd/2017 A.Y.2012-13 hel d th at the rev enue au th or ities c anno t ignore the econo mic re al i ties and the marke t s itu ations. T he men ace of f l oating p aper co mp an ies and through the m l aunder ing the bl ack mone y h as been wid e s pre ad as re por ted in the ne ws p aper recen tl y. Even the Cen tr al Govern men t h as ackno wl edged the ex is tence of such shell co mp an ies and the ir use by the peo pl e f or routin g the ir un accoun te d inco me b y way of acco mmo d atio n en tr ies. T heref ore, the Appel l ate Au thor i ties al s o c anno t turn a bl ind e ye to s uch re al i tie s. As brough t ou t on re cord by th e AO, the assessee h as sho wn rece ip t of huge amoun t as sh are appl ic ation mo ne y/sh are pre miu m amo un ts f ro m those en ti ties wh o h ave sho wn onl y s mal l amo un ts as inco me and p aid no min al tax es f or f il ing the r e turns jus t to g iv e a col our of genuineness to the ir e x is tence. In re al i ty these co mp an ies do no t c arr y ou t an y re al bus ines s and mos t i mp or tan tl y i t is be yon d co mprehens ion as to wh y the y wil l purch ase the sh ares of th e assessee at such a huge pre miu m. In v ie w of the /f ac ts and c ircu ms tances, the Assess ing Of f icer was jus tif ie d in mak ing the add i tion u/s 68 af ter gr an ting adequ ate o ppor tun i ty to the assessee and af ter dul y reb u tting the sub mis s ions of th e assessee. T he AR in the re jo inder to A. O. re port h as me n tioned abo u t ame nd men t in sec tion 68, wh ic h al though is ef f ective w. e. f . 1. 04. 2013 and no t appl ic abl e f or A. Y. 2012-13 bu t goes ag ains t the assessee, s i nce the l eg isl ature h as ackno wl edge the pr ac tice of tak in g acco mmo d ation en tr ies and theref ore, wi th a v ie w to curb the s ame, h ad ame nded the prov is ions o f Sec tion 68 to make it mo re s tr ing en t. T he amende d prov is ions are appl ic abl e to th e pr iv ate l i mi te d co mp an ies l ike the assessee. T heref ore, under the f acts and c ircu ms tances of the c ase, the argu me n ts of the AR are no t f ound acce p tab l e and the ac tion of the A. O. in mak ing the add i tion of Rs. Rs. 2, 96, 00, 000/-, tre ating the share appl ic ation/sh ar e pre miu m mon ey as assessee' s o wn un accoun ted f unds, is f ound sus tain abl e. T he A. O. h ad dul y me n tioned the f ac ts and the l eg al pos ition in supp or t of the add i ti ons made on th e issue and henc e the add i tion on th is issue i s conf ir med.
10. Drawing our attention to the same, he stated that in view of the categorical finding of the Ld.CIT(A) that the assessee had failed to discharged its onus of establishing genuineness of the transaction since 13 ITA No.798/Chd/2017 A.Y.2012-13 copies of bank statements were not filed to prove the creditworthiness of the investors and in a few cases even the Profit & Loss Account was not filed, the addition made had been rightly upheld.
11. We have heard the rival contentions and perused the orders of the authorities below. We have also gone through the contents of the Paper Book filed before us.
12. The issue to be adjudicated is whether the transaction of share capital of Rs. 296 lacs introduced during the year in the assessee company stood explained.
13. The undisputed facts, as culled out from the orders of the authorities below and the arguments made before us by both the parties alongwith the documents referred to before us are that, the following documents of the investor companies were filed by the assessee in the case of all the investors, to prove their genuineness:
• Confirmations • Application for issue of equity shares • Details of the company extracted from the
Master data with the Registrars of Companies. • Reply filed by the investor confirming the allotment of shares to it by the assessee company in response to notice issued by the department u/s 133(6) of the Act.
• 5. Copy of the audited financial statements. 14 ITA No.798/Chd/2017
A.Y.2012-13
14. No bank accounts of the investor company's were filed reflecting the investment made. No Balance Sheet & Profit & Loss Account was filed in the case of M/s Jyoti International & M/s Green Value Agro Farms Ltd. While in the case of M/s Samman Ankay Associates Limited, M/s Anubhav Buildmart Private Limited & M/s Skyhigh Buildtech Private Limited ,We have noted from the documents filed before us in the form of paper book containing 110 pages, the copy of allegedly audited financial statements were unsigned, bearing neither signatures of the directors nor the auditors. Also even the financial statements filed did not reflect sufficient profits. The factual findings of the A.O in this regard as reproduced at page 10 of the CIT(A)'s order are as under:
"Even the companies who have sent their P&L accounts i.e. M/s Samman Trading Pvt. Ltd and M/s Vishal Digital Studio & Colors Lab Pvt. Ltd., their P&L accounts show that they have meager profits of Rs.23,887/-& Rs.7,349/- (for the financial year ending on 31.03.2012 ,and 31.03.2011) and Rs.5770/- & Rs.5771/- (for the financial year ending on 31.03.2011 and 31.03.2010), the tax paid is Rs.7421/-, Rs.2360/- for the assessment year 2011-12 and 2012-13 and Rs.NIL, Rs. 17837- for the assessment year 2011-12 and 2010-11 respectively.
In another two cases i.e. M/s Gopalan Agro Farms Pvt. Ltd. and M/s Greenvalue Agrofarms Pvt. Ltd. shown their profits of Rs.2915/~ & Rs.16254/- (for the financial year ending on 31.03.2013 and 31.03.2012) and Rs.2156/- & Rs.5436/- (for the financial year ending on 31.03.2011 and 31.03.2010), the tax paid is Rs.901/- & Rs.7538/- for the assessment year 2013-14 and 2012-13 and Rs.NIL & Rs. 1680/- for the assessment year 2011-12 and 2010-11 by the respective companies. No copy of bank accounts has been sent by these companies."
15. The above factual findings have remained uncontroverted before us. Further, despite the A.O. 15 ITA No.798/Chd/2017 A.Y.2012-13 noting that there was no justification given by the assessee for the huge share premium, the assessee failed to justify the same before the CIT(A) and even before us. Also even the Directors of the investor companies were not produced for verification ,either before the AO or even the CIT(A)
16. Considering the above facts ,we have no doubt in holding that the assessee had miserably failed to discharge its onus of proving the genuineness of the share capital received during the year of 296 lacs. Merely filing confirmation from the investors or documents proving their existence and identity is not sufficient to prove the genuineness of the transaction. The assessee also had to demonstrate the creditworthiness of the investors, which it miserably failed since neither the bank statements of the investors were filed nor their audited financials in a few cases and in those case where the financials were filed, they did not reflect sufficient profits for making the investment. Added to it is the fact that no justification at all was given of the huge share premium of Rs.990/- per share, despite the A.O. having questioned it. Also even the directors were not produced for verification.
17. We are not in agreement with the Ld.Counsel for the assessee that the Balance sheet showing sufficient reserve and surplus was evidence enough for proving 16 ITA No.798/Chd/2017 A.Y.2012-13 the creditworthiness of the investors, more particularly when the bank statements were not filed in all the cases. In the absence of the same, the fact that the investments were made from the reserves and surplus remained unestablished. It could be the case that there was cash deposits in the bank before making the investments which would have raised suspicion and prompted further enquiry. We also do not find any merit in the contention of the Ld.Counsel for the assessee that it was not required to prove the source of the source, since in the present case, as we have held above the assessee has not established the creditworthiness of the source itself which is a primary requirement. The reliance placed by the Ld.Counsel for the assessee on the decision of the ITAT in the case of Pooja Industries (supra) is misplaced since the said decision is distinguishable on facts. In that case, we find, there is a clear finding of fact that the assessee had placed all documents on record in discharge of its onus of proving the genuineness of the transaction, including the bank statement and financial statements of the investors. In this background the ITAT held that the addition could not have been made by the Revenue authorities by merely relying on the statement of third parties, who had allegedly stated to have given accommodation entries, without even giving a copy of the said 17 ITA No.798/Chd/2017 A.Y.2012-13 statement to the assessee and without affording opportunity to the assessee to cross-examine them.
18. Considering all the above facts and circumstances, we have no hesitation in upholding the order of the CIT(A) that the share capital of Rs.296 lacs remained unexplained.
19. In view of the above, the addition made of Rs.2.96 crores is upheld.
20. I n the resul t, the appeal of the assessee i s dismi ssed.
O r d e r p r on o u n c ed i n t h e O p e n Cou r t .
Sd/- Sd/-
संजय गग अ नपण
ू ा ग'ु ता
(SANJAY GARG) (ANNAPURNA GUPTA)
याय क सद य/Judicial Member लेखा सद य/Accountant Member
+दनांक /Dated: 29th March, 2019
*रती*
आदे श क ' त(ल)प अ*े)षत/ Copy of the order forwarded to :
1. अपीलाथ+/ The Appellant
2. ',यथ+/ The Respondent
3. आयकर आयु-त/ CIT
4. आयकर आयु-त (अपील)/ The CIT(A)
5. )वभागीय ' त न0ध, आयकर अपील!य आ0धकरण, च2डीगढ़/ DR, ITAT, CHANDIGARH
6. गाड फाईल/ Guard File pआदे शानस ु ार/ By order, सहायक पंजीकार/ Assistant Registrar