Income Tax Appellate Tribunal - Indore
M/S Agrawal Power P Ltd, Bhopal vs Dcit Central, Bhopal on 29 October, 2021
Agrawal Power P. Ltd. 1
(SS)113 of 2018 and (SS) 90 of 2020
आयकर अपील य अ धकरण, इंदौर यायपीठ, इंदौर
IN THE INCOME TAX APPELLATE TRIBUNAL,
INDORE BENCH, INDORE
BEFORE SHRI MANISH BORAD, ACCOUNTANT MEMBER
AND
MS. MADHUMITA ROY, JUDICIAL MEMBER
VIRTUAL HEARING
IT(SS)A No.113/Ind/2018
Assessment Year 2011-12
ACIT, (Central)-2
Bhopal : Appellant
V/s
M/s Agrawal Power Pvt. Ltd.
Bhopal : Respondent
PAN :AAGCA2666M
IT(SS)ANo.90/Ind/2020
Assessment Year 2012-13
M/s Agrawal Power Pvt. Ltd.
Bhopal
PAN :AAGCA2666M : Appellant
V/s
DCIT, (Central)
Bhopal : Respondent
Revenue by Shri Rajeeb Jain, CIT-DR
Assessee by Shri S.S. Deshpande, CA
Date of Hearing 17.08.2021
Date of 29.10.2021
Pronouncement
Agrawal Power P. Ltd. 2
(SS)113 of 2018 and (SS) 90 of 2020
ORDER
PER MANISH BORAD, A.M
The above captioned appeals filed at the instance of the Revenue and the Assessee for Assessment Year 2011-12 & 2012- 13 are directed against the orders of Ld. Commissioner of Income Tax (Appeals)-3 (in short 'Ld. CIT], Bhopal dated 28.06.2018 & 31.01.2020 which are arising out of the order u/s 153C/143(3) of the Income Tax Act 1961(In short the 'Act') dated 27.02.2014 framed by DCIT-1, Bhopal.
The Revenue has raised following grounds of appeal in IT(SS)ANo.113/Ind/2018:
"On the facts and in the circumstances of the case, the Ld. CIT(A) erred in deleting the addition of Rs.2,03,50,000/- made by the Assessing Officer on account of unexplained share application money u/s 68 of the Income Tax Act, 1961 without appreciating the fact that the addition made by the Assessing Officer was based on incriminating loose papers seized from the premises of 250, Sagar Plaza, M.P. Nagar, Zone-2, Bhopal.
2. On the facts and in the circumstances of the case, the Ld. CIT(A) erred in inferring that the assessing officer did not record the satisfaction before initiating the proceeding u/s 153C of the Act particularly when the assessing officer duly recorded his satisfaction before commencing the proceedings u/s 153C of the Income Tax Act 1961 and which was available on record.
3.On the facts and in the circumstance of the case, the Ld. CIT(A) erred in not appreciating that corroborative and cogent evidences were found during the course of search which clearly establish that the assessee was in receipt of share application money of which the identity, genuineness and creditworthiness could not be proved by the assessee to the satisfaction of the assessing officer during the assessment proceedings.
Agrawal Power P. Ltd. 3 (SS)113 of 2018 and (SS) 90 of 2020 The appellant reserves his right to add, amend or alter the grounds of appeal on or before the date. The appeal is finally heard for disposal.).
The assessee has raised following grounds of appeal in IT(SS)A No.90/Ind/2020:
1. That on the facts and in the circumstance of the case, the decision of the learned lower authorities is contrary to law, materially incurred and unsustainable in law as well as facts.
And that all the adverse findings recorded therein are opposed to facts, equity, and law.
2. That on the facts and in the circumstances of the case and in law the initiation of proceedings u/s 153C of the IT Act is without jurisdiction and the issue of notice do not satisfy the judicial requirements of the law and, therefore, the assessment is bad in law and without jurisdiction hence the same be kindly cancelled.
3. That on the facts and in the circumstances of the case and in law the Learned lower authorities does not considered the evidences and documents furnished in support of the claim of share capital received by the appellant. And the therefore, the said unlawful and unjustified addition be kindly deleted.
4. That on the facts and in the circumstances of the case and in law the Learned lower authorities and wrongly appreciated the treatment of the share capital as income of the appellant to the tune of Rs.2,41,25,000/- without any evidence and without appreciating the facts of the case and purely on the basis of presumptions and surmises.
5. That the appellant craves leave to add, amend, modify, any of the grounds of appeal.
2. At first, we shall take up the revenue's appeal for A.Y. 2011-
12. Brief facts of the case as culled out from the records are that the assessee is a Private Limited Company engaged in the business of distribution work of MPMKVV, Pole factory and Agrawal Power P. Ltd. 4 (SS)113 of 2018 and (SS) 90 of 2020 project work under the RGGSY scheme. A search action u/s 132 of the Act was conducted at various premises of the concern/business associates of Sagar Group on 21.10.2011.
During the course of search at office premises, various documents belonging to the assessee were found and seized as per Annexure LPS-2 pages 24-33 and 59-61, LPPS-3 pages 6 to 8 of the Panchnama dated 22.102011. Consequently, notices u/s 153C of the Act was issued to the assessee on 11.09.2013 for A.Ys. 2006-07 to 2011-12. In response to notice u/s 153C of the Act the assessee stated that assessee company was incorporated on 19.04.2007, hence the first year of the assesse is A.Y. 2008-
09. Assessee filed returns of income for A.Y. 2008-09 to 2011-12 on 29.10.2013. During the course of assessment proceedings, Ld. Assessing Officer found that the assessee has received share application money of Rs.2,03,50,000/- in A.Y. 2011-12. The Assessing Officer asked the assessee to explain the same. In response, the assessee filed its replies stating that it has provided all the requisite details relating to the share holders e.g. complete names and addresses, relevant documents. However, the Assessing Officer did not accept the contentions of the assessee Agrawal Power P. Ltd. 5 (SS)113 of 2018 and (SS) 90 of 2020 stating that the assessee failed to offer satisfactory explanation in respect of the nature and source of the share application money credited in the books of accounts in the relevant assessment year and added Rs.2,03,50,000/- to the income of the assessee on account of undisclosed income u/s 68 of the I.T. Act. Being aggrieved, the assessee approached the ld. CIT(A) and ld. CIT(A) quashed the assessment on legal grounds. Now, the Revenue is in appeal before this Tribunal.
3. Before us, ld. CIT-DR defended the order of the Assessing Officer and submitted that since the assessee failed to offer satisfactory explanation in respect of the nature and source of the share application money credited in the books of account, the Assessing Officer was justified in making addition on account of undisclosed income u/s 68 of the I.T. Act.
4. Per contra, ld. Counsel for the assessee reiterating the submissions made before Revenue Authorities relied upon the order of the ld. CIT(A).
5. We have heard rival contentions of both the parties and perused material available on record. We find that before the Ld. Agrawal Power P. Ltd. 6 (SS)113 of 2018 and (SS) 90 of 2020 Assessing Officer, the requisite details were filed by the assessee which included the confirmations, share application forms, affidavits of the Director, Bank statement, copy of Pan Card and balance sheets of the company. However, we find that the ld.
CIT(A), having discussed the facts in detail in the light of the judicial pronouncements, quashed the assessment observing that that no satisfaction as contemplated u/s.153C of the I.T. Act has been recorded by the AO of the searched person which is the sine qua non for assumption of jurisdiction u/s 153C of the Act and also observing that no incriminating material was found which suggested that the share application money represented unaccounted income of the assessee. The relevant portion of the order of the ld. CIT(A) is reproduced hereunder:
"6.9 From the facts on record and categorical remand report from AO, it can safely be concluded that no satisfaction was recorded by the AO. of searched person before transferring the records/material to A.O. of the assessee and the same has been impliedly accepted by Id AO vide his remand report dated 04.05.2018 wherein he has unequivocally admitted that satisfaction note of the AO. of the searched person is not traceable from the record and, therefore, it cannot be ascertained from the available records that whether any satisfaction was recorded by the then AO. on transferring documents of Agarwal Power Pvt Ltd. In view of the remand report, it is obvious that no satisfaction as contemplated u/s.153C of the LT. Act has been recorded by the AO. of the searched person which is the sine qua non for assumption of jurisdiction u/s 153C of the Act and, therefore, in view of the Agrawal Power P. Ltd. 7 (SS)113 of 2018 and (SS) 90 of 2020 decision of the Apex Court in the case of CIT Vs. Calcutta KriitWare (supra) and M.P. High Court in the case of CIT Vs. Mechmen (Supra) and the CBDT Circular No. 24/2015 doted 31.12.2015, the assessments made by the A.O. for AY. 2009 10 to 201112 ore held unsustainable in law ond. therefore, the same are hereby quashed.
6.10 Coming back to the facts of this case it is undisputed that, no satisfaction was recorded by the AO of searched person. The AO even in the remand report has unequivocally admitted the same and said that he was unable to trace the satisfaction note in the case record of the appellant. From verification of case records received from AO., it is definite that 'no satisfaction' was recorded by the AO. of the searched person, because it is not available with AO. as well as on the case records. Considering the aforesaid judicial view on the scope of initiation of proceedings u/s 153C and assumption of jurisdiction in the unabated cases which is consistently followed by Hon' ble MP High Court and Circular no 24/2015 issued by Board, I have no option but to respectfully follow the view, that in search cases recording of satisfaction by both the AOs. i.e. the AO of searched person and AO. of the assessee before issuing notice u/s 153C is a sinequa-non and in absence of the same proceedings u/s 153C are bad-inlow. Having decided that issue of notice cts 153C was without legal jurisdiction and consequently assessment orders passed u/s 153C r.w.s 143(3) ordered to be quashed, the additions made in the said assessment order are not sustainable as a matter of consequence. In view of this, ground # 2 & 3 and additional grounds #1 & 2 are hereby allowed. Ground # 4 raised by appellant' pertains to alternative plea of the appellant that additions made u/s 68 of the Act are also bad in law because in the course of search, no cogent material or incriminating material was found which suggested that the share application money represents unaccounted income of the assessee. Appellant has placed reliance on several case laws in support of this proposition that regular items of additions cannot be made in proceedings u/s 153C of the Act in absence of incriminating material. There are numerous case laws which supports this proposition that in absence of any incriminating material found/seized during search operation, no addition can be made on the basis of examination of return/books of accounts because having "incriminating material" is sine qua non for making addition in assessment order passed u/s 153C/153A of the Act. The relevant case laws are as under:-
(i) Jai Steel (India), Jodhpur Vis. ACIT reported in (20] 3) 36 Agrawal Power P. Ltd. 8 (SS)113 of 2018 and (SS) 90 of 2020 taxmann.com 523 (Raj.)
(ii) CIT (Central) Vis. Mls.Murli Agro Products reported in (20 ]4) 49 taxmann.com ] 72 (Bom.)
(iii) CIT Vis. Continental Warehousing Corporation reported in (20] 5) 374 ITR 645 (Bom)
(iv) CIT Vis. Kabul Chawla reported in (20] 5) 380 ITR 573 (Del)
(v) PClT V Is. Kurele Paper Mills Ltd. reported in (20] 5) 380 ITR 57] (Del)
(vi) PCITVls. Saumya Construction (P.) Ltd. (20]6) 3871TR 529 (Guj.)
(vii) CIT V Is. Lancy Constructions (20] 6) 66 taxmann. com 264 (Kar.)
(viii) CIT Vis. IBC Knowledge Park (P.) Ltd. (20]6) 3851TR 346 (Kar.)
(ix) PCIT V Is. Ms. Lata Jain (20] 6) 384 ITR 543 (Oe/.)
(x) CIT Vis. Gurinder Singh Bawa (20]7) 79 taxmann.com 398 (Bom.)
(xi) PCIT V Is. MeetaGutgutia (2017) 395 ITR 526 (Oe/.)
(xii) CIT Vis. SKS Ispat& Power Ltd. (20] 7) 398 ITR 584 (Bom.HC)
(xiii) CIT Vis. Oeepak Kumar Agrawal &Ors. (2017) 299 CTR 62 (Bom.HC)
(xiv) ACfT Vis. Budhia Marketing Pvt. Ltd - ]73 ITJ 649
(xv) . M ukeshSangfa V Is. DCIT - 2] IT J ] 72 (lnd) (xvi) Amandeep Singh Bhatia Vis. ACiT - 291TJ 1 (lnd) (xvii) Sanjay Agarwal V Is. OCfT - ] 69 ITJ 282/291 (xviii) (Hyd) Himanshu B Kanakiya - 46 ITR (Trib) 756 (Mum) (xix) Anant Steef Pvt Ltd V Is. ACiT - 28 ITJ 47 (lnd) (xx) OCfT V Is. Kalani Brothers (Indore) Pvt Ltd - (20] 6) 27 ITJ 286 (lnd-Trib) Agrawal Power P. Ltd. 9 (SS)113 of 2018 and (SS) 90 of 2020 (xxii) ChandrabhanLa/chandani V is. ACIT- J (J j, Bhopal - ITA No.IT(SS)A (xxiii) Rawal Das Jaswani v is. ACIT (2015) 43 CCH 606 (Raipur-Trib)
7.1. It has been held in the case of CIT V /s Kabul Chawla (supra) that in absence of any incriminating material, the completed assessment cannot be reopened and reassessment cannot be made. The word 'assess' in section 153A is relatable to abated proceedings and the word 'reassess' to completed assessment proceedings. Completed assessments can be interfered with by the Assessing Officer while making the assessment u/s.153A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment. Decision of Kabul Chawla (Supra) has been followed in subsequent decisions in the cases of CIT V Is. Mahesh Kumar Gupta 2016- T10L-2994-HC-Del and CIT-9 V Is. Ram Avtar Verma in ITA No. 61/2017 & 62/2017 Dtd. 7.02.2017 and Pr.CIT vis Meeta Gutgutia in tTA No. 306/2017 dt.2S.0S.2017 (Del). In the case of Pr.CIT V Is, Meeta Gutgutia (supra) after considering a catena of judgments on the scope of search assessments u/s.153A, Hon'ble Delhi High Court has held that Section 153A of the Act is titled "Assessment in case of search or requisition ". It is connected to Section 132 which deals with 'search and seizure'. Both these provisions, therefore, have to be read together. Section 153A is indeed an extremely potent power which enables the Revenue to reopen at least six years of assessments earlier to the year of search. It is not to be exercised lightly. It is only if during the course of search under Section 132 incriminating material justifying the re-opening of the assessments for six previous years is found that the invocation of Section 153A qua each of the A Ys would be justified. If in relation to any assessment year, no incriminating material is found, no addition or disallowance can be made in relation to that assessment year in exercise of powers under section 153A of the Act and the earlier assessment shall have to be reiterated. In a recent decision in the case Pro CIT (Central)-3 V Is. Dharampal Premchand ltd. (2017) 99 CCH 0202 Del HC, it has been reiterated that the decision of CII vs Kabul Chawla is still good law and observed that there was no incriminating material seized qua each of the A.Yrs which were sought to be re- opened, so assumption of jurisdiction for those years was not justified. Further held that even for A.Y. 2010-11, what was Agrawal Power P. Ltd. 10 (SS)113 of 2018 and (SS) 90 of 2020 seized did not constitute incriminating material, then essential jurisdictional fact justifying the assumption of jurisdiction u/s 153A of the Act did not exist.
Further, in the case of lMJ International ltd vs. DCII (2008) 119 TTJ (Kol) 214 it as held that "where nothing incriminating is found in the course of search relating to any assessment years, the assessments for such years cannot be disturbed; items of regular assessment cannot be added back in the proceedings u/s 153C when no incriminating documents were found in respect of the disallowed amounts in the search proceedings. Further, it is again reiterated that as per the provisions of section 153C, additions can be made only when there is any. undisclosed income/unexplained cash or unexplained investment found on the basis of incriminating documents found during course of search".
In the case of Global Realty Creations ltd & Ors Vs. DCII & Ors. Reported in (2017) 49 CCH 0454 (Del- Trib), wherein it is held as under:-
Search and seizure-New scheme of assessment in search cases-Assumption of jurisdiction u/s 153C-Addition- Unexplained cash credit-Appellant-assessee company was engaged in business of lending money, securities and property and to discount, buy and sell and deals in biJJs, notes, warrant coupons and other negotiable or transferrable securities and documentsAO observed that, on perusal of ledger account of share application money filed by assessee revealed that assessee company received fresh share application money from different concerns-Accordingly, show cause notice was issued requiring it to prove identity and creditworthiness of parties as well as genuineness of those transactions and in response to same assesse filed only share application forms-AO completed assessment on account of unexplained cash credit u/s 68 vide his Order passed u/s 153C r. w.s. section 143(3)-c/T(A), vide impugned Order dismissed appeal of osseseee=Assessee claimed that, CIT(A) had erred on facts and in law in confirming assessment of appel/ant passed without satisfying substantive and procedural requirements u/s 153C and CIT(A) erred in confirming additions which were not based on incriminating material found and seized during course of search-Assessee chal/enged assumption of jurisdiction u/s 153C besides scope of assessment u/s 153A/153C- Held, High Court upheld assumption of jurisdiction u/s 153C on account very compelling specific facts evidencing that documents/assets not only belonged to those person Agrawal Power P. Ltd. 11 (SS)113 of 2018 and (SS) 90 of 2020 but those documents assets evidenced clear existence of undisclosed income-Confessional statement that assets/document belonged to person in whose case action u/s 153C was taken was made by directors of very same companies who were subjected to 153C proceedings-Also, there was no dispute in these two cases as to whom documents/assets belonged to-AO had completed assessment u/s 153C, 1961 and made addition in dispute without any incriminating material found during search and seizure operation-Addition was purely based on material already available on record, which was not sustainable in eyes of law, hence, needed to be deleted.
Assessee's appeal aIlowed.
From the aforesaid, it is very clear that in both the above cases, relied by Ld ClT{DR}, Hon'ble High Court upheld the assumption of jurisdiction under section 153C on account very compelling specific facts evidencing that the documents/assets not only belonged to those person but those documents assets evidenced clear existence of undisclosed income. Confessional statement that the assets/document belonged to the person in whose case action under section 153C was taken was made by the directors of the very same companies who were subjected to the 153C proceedings. Also, there was no dispute in these two cases {either from the searched party or the other party} as to whom the documents/assets belonged to. On account of these compelling and exceptional circumstances, it appears; the Hon'ble Court held that the law should not be in interpreted too literally.
{Para 13.6} After perusing the assessment order as well as appellate order, court find that in the present case the AO has completed the assessment u/s. 153C of the I. T. Act, 1961 and made the addition in dispute without any incriminating material found during the search and seizure operation and the addition in this case was purely based on the material already available on record, which is not sustainable in the eyes of law, hence, needs to be deleted. Also on ttie perusa! nf the assessment order undisputedlv indicates that no reference whatsoever has been made to any material found/ seized during the course of search.
{Para 13.7} Agrawal Power P. Ltd. 12 (SS)113 of 2018 and (SS) 90 of 2020 Assumption of jurisdiction u/s 153C on account af very compelling specific focts evidencing that documents/assets not only belonged to those person but those documents assets evidenced clear existence of undisclosed income and when AO made addition without any incriminating material found during search and seizure operation, addition would not be sustainable. Respectfully following the binding precedent on this issue, in absence of any incriminating material found during the search and seizure operation and the impunged additions being purely based on material already available on record, additions of regular nature are not sustainable in the eyes of law and hence deserves to be deleted. Hence, on this count also additions of Rs. 1,00,00,000/- Rs. 68,00,000/- and Rs. 2,03,50,000/- made in A Y 2009-10, 2010- 11 & 2011- 12 respectively are directed to be deleted. Ground of appeal # 4 of all the appeals are allowed."
6. On consideration of above facts, we find that before the Ld. CIT(A) it was submitted that no satisfaction was recorded either in the case of the searched person or in the case of the assessee.
It was also submitted that inspite of the repeated requests, the AO did not supply the certified copy of the satisfaction note. We find that the fact that no satisfaction was recorded either in the case of the searched person or in the case of the assessee has been confirmed by the Ld AO in the remand report dated 04/05/2018. Even in the reasons recorded for issuance of notice, there is no allegation about any undisclosed income/ investment.
The Ld. AO merely recorded that the books/ documents are found during the course of search. We find that in the recent Agrawal Power P. Ltd. 13 (SS)113 of 2018 and (SS) 90 of 2020 judgment in the case of Supermall Private Limited VS PCIT, Civil Appeal Nos.2008 to 2013 of 2020, order dated 05.3.2020, the Hon'ble Supreme Court observed in para 6.1 that "he must be conscious and satisfied that the documents seized/ recovered from the searched person belonged to the other person. In such a situation, the satisfaction would be qua the other person".
7. On going through the facts on record and categorical remand report from AO, we find that no satisfaction was recorded by the AO. of searched person before transferring the records/material to A.O. of the assessee and the same has been accepted by Id AO vide his remand report dated 04.05.2018 wherein he admitted that satisfaction note of the AO. of the searched person is not traceable from the record and, therefore, it cannot be ascertained from the available records that whether any satisfaction was recorded by the then AO. on transferring documents of Agarwal Power Pvt Ltd. Thus, from the remand report, it is clear that no satisfaction as contemplated u/s.153C of the LT. Act was recorded by the AO. of the searched person which is illegal for assumption of jurisdiction u/s 153C of the Act, and, Agrawal Power P. Ltd. 14 (SS)113 of 2018 and (SS) 90 of 2020 therefore, in view of the decision of the Apex Court in the case of CIT Vs Calcutta Knitware 362 ITR 673 and the Delhi High Court in the case of Pepsi Food 367 ITR 112 and the decision of the MP High Court in Machen 380 ITR 591. CIT Vs. Calcutta Knitware (supra) and M.P. High Court in the case of CIT Vs. Mechmen (Supra) and CBDT Circular No. 24/2015 dated 31.12.2015, the assessment made by the A.O. was rightly quashed by the ld.
CIT(A). Therefore, we do not find any infirmity in the order of the ld. CIT(A). We confirm the order of the ld. CIT(A) on this issue.
Since, the assessment itself is quashed, the ground raised in the appeal of the Revenue with regard to challenging the absence of incriminating material has now, being academic in nature, become infructuous and consequently, the grounds raised in the appeal of the Revenue stand dismissed.
8. Now, we shall take up the appeal filed by the assessee i.e. IT(SS)A No.90/Ind/2020 for the assessment year 2012-13.
The appeal is time-barred by 83 days. Ld. Counsel for the assessee submitted that the delay in filing the appeal is due to country-wide lockdowns imposed by the government in wake of Covid-19 outbreak and taking cognizance of the same the Agrawal Power P. Ltd. 15 (SS)113 of 2018 and (SS) 90 of 2020 government had introduced the taxation and other laws (Relaxation and Amendment of Certain Provisions) Act 2020 in order to relax/extend the statutory timelines for various compliance under various laws including the Income Tax Act 1961. Prayer was made to condone the delay. Ld. DR opposed the request. We, however, under the given facts and circumstances of the case, are satisfied with the reason giving rise to delay in filing the instant appeal. We condone the delay and admit the appeal for adjudication. Ground nos.1 & 2 were not pressed, therefore, same are dismissed as not pressed. So far as ground nos.3 & 4 relating to addition of Rs.2,41,25,000/-
made u/s 68 are concerned, the brief facts of the case as culled out from the records are that the assessee is a Private Limited Company engaged in the business of distribution work of MPMKVV, Pole factory and project work under the RGGSY scheme. A search action u/s 132 of the Act was conducted at various premises of the concern/business associates of Sagar Group on 21.10.2011. During the course of search at office premises, various documents belonging to the assessee were found and seized as per Annexure LPS-2 pages 24-33 and 59-61, Agrawal Power P. Ltd. 16 (SS)113 of 2018 and (SS) 90 of 2020 LPPS-3 pages 6 to 8 of the Panchnama dated 22.102011.
Assessee filed return of income for the assessment year 2012-13 on 03.9.2013 declaring total income at Rs.3,00,86,890/-. Notice u/s 143(2) of the I.T. Act was issued to the assessee on 16.9.2013. The Assessing Officer asked the assessee to explain the share application money received at Rs.2,41,25,000/-. In response, the assessee filed its replies stating that it has provided all the requisite details relating to the share holders e.g. complete names and addresses, relevant documents. However, the Assessing Officer did not accept the contentions of the assessee stating that the assessee failed to offer satisfactory explanation in respect of the nature and source of the share application money credited in the books of accounts in the relevant assessment year and added Rs.2,41,25,000/- to the income of the assessee on account of undisclosed income u/s 68 of the I.T. Act. Being aggrieved, the assessee approached the ld. CIT(A) and ld. CIT(A) confirmed the order of the Assessing Officer observing that the assessee failed to prove the identity of the alleged lenders, the credit worthiness of the lenders and the genuineness of the transactions. Now, the assessee is before this Tribunal.
Agrawal Power P. Ltd. 17 (SS)113 of 2018 and (SS) 90 of 2020
9. Before us, ld. Counsel for the assessee reiterated the submissions made before ld. CIT(A) and submitted that
10. Per contra, ld. CIT-DR defended the order of the Assessing Officer and submitted that since the assessee failed to prove the identity of the alleged lenders, the credit worthiness of the lenders and the genuineness of the transactions, the Assessing Officer was justified in making addition on account of undisclosed income u/s 68 of the I.T. Act.
11. We have heard rival contentions of both the parties and perused material available on record. We find that the Assessing Officer made the addition u/s. 68 in respect of the share application money received from the following persons :-
S.No. Name of share PAN Amount Evidences furnished applicant 1 Chabadiya Developers AACCC7553 500000 (1) Share application form.
Pvt Ltd R 0 (2) Confirmation letter
F-77, B, Second Floor, from the company
Laxmi Nagar, Delhi (3) Board Resolution
110092
(4) Receipt of share
2. R.J.Febtax Pvt Ltd AADCR3947 500000 certificate
1/42, Gali No. 04, D 0
(5) Affidavit of director
Vishwas Nagar, Delhi
(6) Bank statement of the
110032
Agrawal Power P. Ltd. 18
(SS)113 of 2018 and (SS) 90 of 2020
3. B.G.R. Fabrication AABCB8092 500000 company
30/99A, Vishwas K 0 (7) Copy of Income Tax
Nagar, Shahadara, Return
Delhi 110032
4 Czar Hotel Pvt Ltd AAECC00898 500000 (8) Copy of audited final
A-115, Bakil N 0 accounts (Balance sheer, P
Chanmbers, & L A/c etc.).
Shakarpur, Delhi (9) Certification of
110092. incorporation
(10) Memorandum &
Articles of Associations of
the company.
5. A.A. Ansari AAUPA6646E 25000 (1) Form No. 16
Plot No. 62-A, Hajrat
Nizamuddin Colony,
Bhopal.
6. Alok Dubey AIKPD8848D 50000 (1) Form No. 16
C-47, Sector, Raisen
Road, Bhopal.
7. Alok Kumar 25000 (1) Form No. 16
H.No. 27, Sagar Green
Estate, Ayodhya Bye
Pass Road, Bhopal.
8. Amit Arora AGGPA5550P 25000 (1) Form No. 16
Arera Cloth Stores,
Sindhi Market, Sarala
Bagas Badra Dist.
Gwalior.
9. Anjana Verma 25000 (1) Form No. 16
P-46, Bijali Nagar
Colony, Bhopal.
10. Arifa Khan AXZPK4949C 50000 (1) Form No. 16
159-A, Naveen Nagar
Honotiya, Bhopal.
11. Arun K. Sunaniya CAZPS0538L 25000 (1) Form No. 16
Staff Quatters SIRTS
Complex, Ayodhya Bye
Pass Road, Bhopal.
12. Ashish Acharya AFPPA1071B 25000 (1) Form No. 16
D-9, Tulsi Parishar,
Avadhpuri, BHEL,
Bhopal.
Agrawal Power P. Ltd. 19
(SS)113 of 2018 and (SS) 90 of 2020
13. Ashish Dutta ANHPD9950C 50000 (1) Form No. 16
H.No.13, Patrakar
Colony, Link Road No.
3, Kolar Road, Bhopal.
14. Ashish Ramnhade 25000 (1) Form No. 16
MIG-6, Amar Complex
Near Sanchi Parlor,
kolar Road, Bhopal..
15. Aumreesh Kumar BJTPS3542L 25000 (1) Form No. 16
Saxena
113, A-Sector,
Indrapuri, Bhopal.
16. Chitra Rekha Tiwari AGNPT8501A 50000 (1) Form No. 16
H.No. 85, Main Road,
Barkhedi, Bhopal.
17. Dileep Kumar Jigyasi ABIPJ0435F 25000 (1) Form No. 16
H.No. 81 D.K. Cottage,
Near Dana Pani
Restaurant, Bhopal.
18. Dinesh Kumar Mudiya ABIPM8184E 50000 (1) Form No. 16
C-9, Surendra vihar,
Bag Mugalia, Bhopal.
19. Dr. Manoj Sharma AZOPS2709P 25000 (1) Form No. 16
231-D, LIG, Nehru
Nagar, Bhopal.
20. Dr. N.K. Agarwal AFCPA0841A 50000 (1) Form No. 16
Dr. No. F-1, Staff
Quarter SIRTS
Campus, Ayodhya Bye
Pass Road, Bhopal.
21. Dr. R.B. Goswami AGWPG9556 25000 (1) Form No. 16
44, Kakda Abhinav H
Homes, Bhopal.
22. Gaurav Goyanar AQEPG1535C 25000 (1) Form No. 16
D-132, New Minal
residency, Bhopal.
23. Jainendra Jain ADYPJ9662J 25000 (1) Form No. 16
22, Aakriti Garden,
Nehru Nagar, Bhopal.
24. Jyoti Jain ADVPJ9578N 25000 (1) Form No. 16
A-177, Sagar Estate
Ayodhya Bye Pass
Agrawal Power P. Ltd. 20
(SS)113 of 2018 and (SS) 90 of 2020
Road, Bhopal.
25. KVS Pundhir 25000 (1) Form No. 16
Flat No. MIG-302,
Kwality Home, Kolar
Road, Bhopal.
26 Kanchan Bhatiya ASIPB5111B 25000 (1) Form No. 16
3, Comfort Enclave,
Bawadia Kalan, E-8,
Bhopal.
27. Manish Bonde AHSPB5063D 25000 (1) Form No. 16
Q.No. G-3/25 (228
Qtrs), South T.T.Nagar,
Bhopal.
28. Minal Saxena BCVPS9519N 50000 (1) Form No. 16
J-167, Harshwardhan
Nagar, Bhopal.
29. Neelesh Jain AIVPJ8437H 25000 (1) Form No. 16
A-164, Sagar Avenue,
Ayodhya Bye Pass
Raod, Bhopal.
30. Neelima Goswami AMAPG0992R 25000 (1) Form No. 16
C-44, Kakda Abhinav
Homes Ayodhya Bye
Pass Road, Bhopal.
31. NIshi Prakash Jain AEIPJ0549P 25000 (1) Form No. 16
H.No.42, Janakpuri
colony, Ayodhya Bye
Pass Road, Bhopal.
32. Pooja Choubey AYSPM3704H 25000 (1) Form No. 16
E-100/17, Shivaji
Nagar, Bhopal.
33. Prabhat Khare AWQPK6305 25000 (1) Form No. 16
26, Comfort Heritage, G
Ayodhya Bye Pass road,
Bhopal.
34. R.K.Gupta 25000 (1) Form No. 16
175, B-Sector,
Indrapuri, BHEL,
Bhopal.
35. Ranju Pal 25000 (1) Form No. 16
113-A, Duregesh Vihar,
J.K.Road, Bhopal.
36. Ruchi Jain 25000 (1) Form No. 16
A-164, Sagar Avenue,
Agrawal Power P. Ltd. 21
(SS)113 of 2018 and (SS) 90 of 2020
Ayodhya Bye Pass
Raod, Bhopal.
37. Sanjeev Sharma 50000 (1) Form No. 16
99, BDA Complex, (-A,
Saket Nagar, Bhopal.
38. Sharad Salunke DHFPS8538Q 25000 (1) Form No. 16
188-A Park No.3,
Panchwati, Airport
Road, Bhopal.
39. Sheetal Singh BHHPS03655 25000 (1) Form No. 16
B-6, Windsor, Narela B
Shankari, Pipalani,
Huzur,. Bhopal.
40. Sonal Sharma 25000 (1) Form No. 16
H.No. 7, Geetganesh
Villas, Ayodhya Bye
Pass Road, Bhopal.
41. Sukhawant Singh CJYPS0404D 25000 (1) Form No. 16
B-34, Sagar Avenue,
Ayodhya Bye Pass
Road, Bhopal.
42. Suresh Chandra 50000 (1) Form No. 16
Bhageria
B-20, Alkapuri,
Habibganj, Bhopal.
43. Syed Shahnawaz Ali AGUPA1168R 25000 (1) Form No. 16
Municipal Building
No.1, Qrt. No..5,
Ginnori Road, Bhopal.
44. Vaibhav Jain 25000 (1) Form No. 16
256, Sector-2, Shakti
Nagar, Bhopal.
45. Vijay Karmakar 25000 (1) Form No. 16
H.No. 756, Agrawal
Colony, Garha Road,
Jabalpur.
46. Vijay Kumar Job 25000 (1) Form No. 16
A-73, New Minal
Residency, J.K. Road,
Bhopal.
47. Pushpendra Singh 150000 (1) Form No. 16
Rajput
Q.No. G-3/25 (228
Qrts) South T.T. Nagar,
Agrawal Power P. Ltd. 22
(SS)113 of 2018 and (SS) 90 of 2020
Bhopal.
48. Deepa Agrawal 25000 (1) Form No. 16
J-22, Siddarth Avenue,
Gulmohar Colony,
Bhopal.
49. Sarvesh Shukla 25000 (1) Form No. 16
49, Payal Siddhipuram,
Damkhda, Kolar Road,
Bhopal.
50. Shailesh Pathak 1050000 (1) Form No. 16
A-702, Lagoon
Apartment, Ambience
Ice Land, NH-8,
Gurgaon
51 Mayank Trivedi 1050000 (1) Form No. 16
LTH-314, B-Laburnum
Apartment, Shushant
Lok Sector-28,
Gurgaon.
52. Ragoo Jee Gupta 550000 (1) Form No. 16
Sector-. Qrt 2009,
Bokaro Steel City,
Jharkhand.
The comments of the assessee with regard to Summons issued by DDIT (Inv) Delhi, Notice issued by the AO us 133(6) & Comments on Inspectors Report are summarised as under: -
Comments on Summons issued by DDIT (Inv) Delhi Sn Name of Company Comments Reply of Appellant of DDIT on Summons issued 1 Span Amusement Left It is being submitted that the said (P) Ltd. address was the old address of the said company, the company had changed the address and the appellant had no knowledge of it, that Agrawal Power P. Ltd. 23 (SS)113 of 2018 and (SS) 90 of 2020 is the reason the inspector does not got any body at the said address. The new address is evident from the data downloaded from the MCA site, copy of the same is attached at page no 425 of paper book. It is further stated that for the said company the AO had called directly the bank statement of the company, and therefore the contention that the company does not exists is absolutely wrong.
2 Happening Motors Baar Baar It is submitted that this does not
(P) Ltd. Janne par mean that the company does not
Tala Band exists at the said address. It is
Mila further stated that for the said
company the AO had called directly
the bank statement of the company,
and therefore the contention that the company does not exists is absolutely wrong.
3 White Hat IT No Such It is being submitted that the said Services (P) Ltd. Person address was the old address of the said company, the company had changed the registered Office and the appellant had no knowledge of it, that is the reason the inspector does not got any body at the said address. The new address is evident from the data downloaded from the MCA site, copy of the same is attached at page no 432 of paper book.
4 Accumen Paper No such It is submitted that the version of the Binder (P) Ltd. firm at inspector is not correct because MCA such site which is a government record, address shows that the company is active and be present at the said address, copy of the data downloaded from the MCA site, copy of the same is attached at page no 424 of paper book. It is further stated that for the said company the AO had called directly the bank statement of the company, and therefore the contention that the company does not exists is absolutely wrong.
Agrawal Power P. Ltd. 24 (SS)113 of 2018 and (SS) 90 of 2020 Notice issued by the AO us 133(6) Sn Name of Company Comments Reply of Appellant of the AO 1 Happening Motors Reply not This shows that the company existed (P) Ltd. received till at that place and the summons was date properly delivered. It is further stated that for the said company the AO had called directly the bank statement of the company, and therefore the contention that the company does not exists is absolutely wrong.
2 White Hat IT Refused This shows that the notice was sent Services (P) Ltd. to the assessee served upon it, but there was a refusal to accept. The refusal was due to the reason that the company has changed the address and shifted to the new address, which is evident from the MCA record which is placed at page no. 432.
3 Span Amusement No Such It is being submitted that the said
(P) Ltd. firm at address was the old address of the
such said company, the company had
address changed the address and the
appellant had no knowledge of it, that is the reason of the said remark. The new address is evident from the data downloaded from the MCA site, copy of the same is attached at page no 425 of paper book.
4 Acumen Paper No Such It is submitted that the version of the Binder firm at inspector is not correct because MCA such site which is a government record, address shows that the company is active and be present at the said address, copy of the data downloaded from the MCA site, copy of the same is attached at page no 424 of paper book.
5 R.J. Febtex (P) Ltd. No Such firm at such Agrawal Power P. Ltd. 25 (SS)113 of 2018 and (SS) 90 of 2020 address 6 Star Vision Media No Such Address of the said party is correct as (P) Ltd. firm at D-25 Laxmi Nagar, Delhi - 110092 such and which is evident from the data address downloaded from the MCA site, copy of the same is attached at page no 427 of paper book.
7 Shri Balaji Sainath Reply not This shows that the company existed Buildwell (P) Ltd. received till at that place and the summons was date properly delivered.
8 Bhagirathi Reply not This shows that the company existed Industries Limited received till at that place and the summons was date properly delivered. It is further stated that for the said company the AO had called directly the bank statement of the company, and therefore the contention that the company does not exists is absolutely wrong.
9 Mcgrip Marketing Reply not
(P) Ltd. received till
date
10 Startrans Logistic Incomplete It is being submitted that the said
(P) Ltd. address, address was the old address of the
returned said company, the company had
back changed the registered Office and the
appellant had no knowledge of it, that is the reason the inspector does not got any body at the said address. The new address is evident from the data downloaded from the MCA site, copy of the same is attached at page no 431 of paper book.
11 B.G.R. Fabrication No Such It is being submitted that the said
India (P) Ltd. firm at address was the old address of the
such said company, the company had
address changed the address and the
appellant had no knowledge of it, that is the reason of such comment of the postal company. The new address is evident from the data downloaded from the MCA site, copy of the same is attached at page no 428 of paper book.
12 CZAR Hotels (P) Reply not This shows that the company existed Ltd. received till at that place and the summons was Agrawal Power P. Ltd. 26 (SS)113 of 2018 and (SS) 90 of 2020 date properly delivered.
13 Chabadia Incomplete The company is existing at that place Developers (P) Ltd. address, and the AO is wrong.
returned back 14 R.G. Additives (P) No Such It is being submitted that the said Ltd. firm at address is correct and it is evident such from the data downloaded from the address MCA site, copy of the same is attached at page no 430 of paper book.
15 Shailesh Pathak Left It is being submitted that the said person was present at the said address but it appears that the said person must have gone to the new address. The remark left shows that the person exists, but for some other reason left the premises.
16 Mayank Trivedi Left It is being submitted that the said person was present at the said address but it appears that the said person must have gone to the new address. The remark left shows that the person exists, but for some other reason left the premises.
17 Ragho Ji Gupta Reply not This shows that the person existed at received till that place and the summons was date properly delivered.
Comments on Inspectors Report Sn Name of Company Comments of the Reply of Appellant Inspector 1 Bhagirathi Address of this It is being submitted that there Industries Ltd. company as per is no denial of Mr. Arun Kumar bank record is Jain regarding the address of different from the the Bhagirathi Industries Ltd. address given by Had the inspector enquired the Sagar Group. from Mr. Arun Kumar Jain that Both the the truth would have prevailed.
addresses were It is the common practice in big
verified. Given cities that there is sharing of
Agrawal Power P. Ltd. 27
(SS)113 of 2018 and (SS) 90 of 2020
Office 201 office spaces.
belongs to Mr.
Arun Kumar Jain
CA c/o Sanyam
Share Saloe &
Securities. No
such company is
located at this
premise. The
another address
A-115,
Shakarpur, Delhi
is closed since
long and on
enquiry it was
found that there
is no such
office/company in
given locality.
2 G.S. Trading Co. It is one story The assessee had no
building. There transaction with this company
are 6 shops at
first floor and all
are closed since
long as appears
from physical
look. On
enquiring no
such company
was located.
3 Span Amusement It is one story It is being submitted that the
(P) Ltd. building. There said address was the old
are 6 shops at address of the said company,
first floor and all the company had changed the
are closed since address and the appellant had
long as appears no knowledge of it, that is the
from physical reason the inspector does not
look. On got any body at the said
enquiring no address. The new address is
such company evident from the data
was located. downloaded from the MCA site,
copy of the same is attached at
page no 425 of paper book. It is
further stated that for the said
company the AO had called
directly the bank statement of
the company, and therefore the
Agrawal Power P. Ltd. 28
(SS)113 of 2018 and (SS) 90 of 2020
contention that the company
does not exists is absolutely
wrong.
4 Accumen Paper No Such It is submitted that the version
Binder (P) Ltd. company at the of the inspector is not correct
given address. because MCA site which is a
This is a multi government record, shows that
stories building the company is active and be
and at all the present at the said address,
floors nil paper copy of the data downloaded
binding company from the MCA site, copy of the
is available. same is attached at page no
424 of paper book. It is further
stated that for the said
company the AO had called
directly the bank statement of
the company, and therefore the
contention that the company
does not exists is absolutely
wrong.
5 Blue Star Impex (P) No Such premises The assessee had no
Ltd. at the given transaction with this company
address. Could
not locate due
improper address
6 Happening Motors Could not locate The assessee provided complete (P) Ltd. due to incomplete address and It is further stated address. that for the said company the AO had called directly the bank statement of the company, and therefore the contention that the company does not exists is absolutely wrong.
7 White Hat IT No Such premises This shows that the notice was Services (P) Ltd. at the given sent to the assessee served address upon it, but there was a refusal to accept. The refusal was due to the reason that the company has changed the address and shifted to the new address, which is evident from the MCA record which is placed at page no. 432.
8 Shiv Om Sales Could not locate The assessee had no Corp. due to incomplete transaction with this company Agrawal Power P. Ltd. 29 (SS)113 of 2018 and (SS) 90 of 2020 address.
9 Kartikay No Such premises The assessee had no Enterprises at the given transaction with this company address 10 Universal Agencies No Such premises The assessee had no at the given transaction with this company address 11 Pacific Sales (India) No Such premises The assessee had no at the given transaction with this company address 12 Jai Shree No Such premises The assessee had no International at the given transaction with this company address 13 Ishant Enterprises No Such premises The assessee had no at the given transaction with this company address On going through the facts and material available on record, we find that the Assessing Officer noted that the Inspector visited the premises of the investor company and in some of the cases, he could not locate the said companies at the given address.
However, the learned Counsel for the assessee submitted that in metro cities, like Delhi Mumbai, due to tenancy law problems or for several other genuine reasons, the company shifts its office from one place to another, therefore, in some cases, the Inspector might have visited the old premises. It was also submitted that in the metro towns like Delhi Mumbai, even one room is shared by so many persons and even the tables are also used on time Agrawal Power P. Ltd. 30 (SS)113 of 2018 and (SS) 90 of 2020 sharing basis. It was further submitted that the companies are not living human beings. They are represented by the directors who are living humans. The said directors do the transactions of the company and manage its day to day affairs. In big/metro cities, the neighbors or nearby persons know the person who is the director of the company but do not know in which trade name or in which company's name, the said person is doing the business and that could be the reason that at many places the Inspector could not trace the office. It is a well established principle that the summons are issued in the name of living human being may be in the capacity of the director or individual then it could be served but if the summon issued in the case of non-living human being, then it is not possible to serve because the neighbors or nearby person does not know the trade name of the person who happens to be a director of the company. In such circumstances, the A.O. is wrong and not justified in holding that some of the share applicants did not found existed at the given address. We find that the income tax Inspector also in his report said that he visited the commercial complexes and there are many offices and shops and then he came to know from persons Agrawal Power P. Ltd. 31 (SS)113 of 2018 and (SS) 90 of 2020 that there are no such companies. However, learned Counsel for the assessee submitted that the Inspector did not mention in his report that who was the person who gave this information. No identification of the person was given in his report. There is no statement of such person. The report of Inspector shows that he has only completed the rituals of the verification and, therefore, such report is not a reliable piece of evidence. We find that the Assessing Officer noted that he called the bank accounts of the investor companies directly for verification and on that basis he noted that the companies are not found involved in trading & manufacturing activity and assuming that the companies must have involved in providing accommodation entries and on that basis, he made the addition u/s.68. However, learned Counsel for the assessee submitted that when the A.O. was able to call the bank accounts of the companies directly, then it is wholly wrong to note that the share applicant companies did not exist.
The bank accounts of the share applicant companies directly called by the A.O. positively proved that the companies are existing companies and the income tax Inspector did not put any efforts seriously to find out from some responsible person, the Agrawal Power P. Ltd. 32 (SS)113 of 2018 and (SS) 90 of 2020 exact place in the building where the companies' offices were situated. The learned Counsel for the assessee submitted that the ITAT Patna Bench in its Third Member decision in the case of Dwarika Prasad Agarwal Vs. ITO reported in 63 ITD 1 (TM) held that bank account is a crucial document to prove all the three ingredients essential to establish the truth of the cash credit. The bank account cannot be manufactured or concocted to suit the convenience of any party. An extract of the books of account maintained by the bank is very much relevant under the Bankers Books Evidence Act. Further, the learned Counsel for the assessee also submitted that from the said bank accounts of share applicants, which were directly called by the A.O form the bankers of the creditors, did not show at all that the money deposited in those accounts belongs to the assessee as there is no finding of the A.O. that the assessee is the owner of the credit entries appearing in those bank accounts or the assessee is the owner of the bank account. There is also no cogent or concrete evidence on record which shows that it is the money of the assessee has been deposited in those bank accounts and then the same came under the guise of share application money. The Agrawal Power P. Ltd. 33 (SS)113 of 2018 and (SS) 90 of 2020 balance sheets of the share applicant companies filed by the assessee, clearly show the sources of their funds which were used for making investment in the share capital of the assessee.
Thus, learned Counsel for the assessee submitted that entire addition u/s.68 is solely based on assumptions, presumptions, conjectures and surmises which is unjustified in view of the ratio laid down by the Hon'ble Apex Court decision of Supreme Court in the case of State of Kerala Vs. M.M. Mathew reported in (1978) 42 STC 348 (SC) wherein the Hon'ble Court held that "Strong suspicion, strange coincidence and grave doubts cannot take the place of legal proof." We find that the A.O. in his order has given the names of individual share applicants. However, the learned Counsel for the assessee explained that these persons are individual and due to fear psychosis, they were not prepared to come along the assessee before the A.O. and, therefore, at the request of the assessee, the summons were issued. The said summons were also duly served upon such persons but it appears that despite the summons, they did not appear and due to this reason, the A.O. has made the addition. But, if the person did not attend before the A.O. then the assessee should not be Agrawal Power P. Ltd. 34 (SS)113 of 2018 and (SS) 90 of 2020 blamed and no addition on that basis would be justified as service of the summons, positively proves the identity of the person as per ratio laid down by the the Hon'ble Allahabad High Court in the case of Nathuram Prechand Vs. CIT reported in 49 ITR 561 (All) wherein it was held that "if despite the service of summon u/s.131, the person did not attend before the A.O. then the assessee should not be blamed and no addition on that basis would be justified."
12. On consideration of above facts, we find that in the course of assessment proceedings, confirmation letters were filed, affidavit of directors are also filed. The full addresses of the companies were also given. Further the bank accounts of the creditors were also furnished. In the said bank accounts, there are also no cash deposits by the creditors before issuing cheque to the assessee. No cogent material or any other incriminating material was found which showed that it is the assessee's money which has gone to the aforesaid share applicants in cash and then it came back to the assessee in the form of share capital. We also find that there are no findings of the A.O. that the creditors' bank accounts are the benami bank accounts of the assessee.
Agrawal Power P. Ltd. 35 (SS)113 of 2018 and (SS) 90 of 2020 There are also no evidences which show the various credits in the bank accounts of the creditors are the undisclosed income of the assessee deposited in those bank accounts and, therefore, the receipt of share application from the aforesaid share applicants could not be assessed as a deemed income of the assessee u/s.68 of the I.T. Act. We find that all transactions are from the regular banking channel verifiable from the bank account of the assessee as well as the bank accounts of the share applicants, therefore, the assessee by placing these evidences had duly discharged its burden laid u/s.68 of the I.T. Act. In the case of ACIT Vs. Supretech Diamond Tools Pvt Ltd reported in 146 TTJ (Jd) 596, it was held as under :-
There is no evidence that assessee had paid any commission and has refunded the amount received under the garb of share application money. Whether those companies were fictitious or bogus, the moot question here is that whether the assessee company had received share application money or not. It is seen that share capital was received through account payee cheques along with premium amount from five private limited companies. All these companies are assessed to tax and they are registered under the Companies Act. Return of allotment of shares in prescribed Form No. 2 to the RoC was also filed before AO as well as before CIT(A). It is further seen that the addition is based on alleged statement of PJ recorded under s. 131 behind the back of the assessee. The assessee was not even afforded any opportunity of cross-examination nor PJ was examined in the course of assessment proceedings in case of assessee nor was he examined in presence of assessee company nor was he confronted with the documents of contemporary period showing investment in shares made by those five companies through Agrawal Power P. Ltd. 36 (SS)113 of 2018 and (SS) 90 of 2020 regular banking channel. Therefore, the inference drawn by AO was not correct. The CIT(A) has already taken a recourse for taking action against the respective shareholders as the AO was directed to take necessary action against the purchaser company for such investment in purchase of shares.--CIT vs. Lovely Exports (P) Ltd. (2008) 6 DTR (SC) 308, CIT vs. Divine Leasing & Finance Ltd. (2007) 207 CTR (Del) 38 : (2008) 299 ITR 268 (Del), CIT vs. Shree Barkha Synthetics Ltd. (2003) 182 CTR (Raj) 175, Barkha Synthetics Ltd. vs. Asstt. CIT (2005) 197 CTR (Raj) 432, CIT vs. Steller Investment Ltd. (1991) 99 CTR (Del) 40 : (1991) 192 ITR 287 (Del) and CIT vs. Steller Investment Ltd. (2000) 164 CTR (SC) 287 : (2001) 251 ITR 263 (SC) relied on.
(Para 9) There is a difference between cash creditor and shareholder. In case of cash creditor, the cash creditor has right to demand the money back from the assessee. However, in case of shareholder, there is no liability of the company to refund the amount as the shares can be sold in the market. Therefore, in case of cash creditor, heavy onus lies on the assessee to prove whether cash creditor was genuine or not. However, in case of shareholder. If shareholders are not genuine, then in that case no addition can be made in the hands of the company but the case can be reopened of the shareholders for enquiring about their source of buying the shares in the company.
(Para 10) The contention of Departmental Representative that cash was deposited in the accounts of the respective five companies before issuing cheque to the assessee company for allotting the shares, therefore, there is every likelihood that cash deposited in the account of those companies was belonging to assessee company for issuing cheque under the garb of issuing shares is without any evidence and if the cash was deposited in the accounts of those companies then onus lies on those companies to prove that from which source the cash has been deposited in their accounts. Therefore, the AO should examine the cases of those five companies instead of making addition in the hands of the assessee company. Accordingly, CIT(A) was justified in allowing the claim of the assessee.
(Para 10.1) Conclusion:
When the amount of share capital and share premium was received by the assessee company through regular banking channels from the five associate companies and all these companies are assessed to tax and they are registered under the Companies Act and return of allotment of shares in prescribed Agrawal Power P. Ltd. 37 (SS)113 of 2018 and (SS) 90 of 2020 Form No. 2 to the RoC was also filed, addition made by AO on account of share capital and share premium was rightly deleted by CIT(A) as onus lies on those alleged bogus companies to prove that from which source the cash has been deposited in their accounts.
13. Hon'ble Supreme Court in case of CIT Vs. Lovely exports Pvt Ltd - 319 ITR (St) 5 (SC) held:
"Can the amount of share money be regarded as undisclosed income u/s.68 of the I.T. Act ? 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 share holders, whose names are given to the assessing officer, then the department is free to proceed to reopen their individual assessments in accordance with law. '
14. Hon'ble Delhi High Court in case of CIT Vs, Value Capital Service Pvt. Ltd - 307 ITR 334 (Del) held:
The court that case held that the additional burden was on the department to show that even if share applicants did not have the means to make investments, the investment made by them actually emanated from the coffers of the assessee so as to enable it to be treated as undisclosed income of the assessee. In the absence of such findings, addition could not be made in the income of assessee u/s.68 of the I.T. Act.
15. Hon'ble Jurisdictional MP High Court in case of CIT Vs. Peoples General Hospital Ltd. - (2013) 356 ITR 65 held:
Income--Cash credit--Share application money--Genuineness of transaction and creditworthiness of creditor--Discharge of burden of proof by assessee, effect of--AO observed that company A had made share subscription to capital of assessee--AO doubted Agrawal Power P. Ltd. 38 (SS)113 of 2018 and (SS) 90 of 2020 creditworthiness of A and directed addition of amount of share subscription provided by A to assessee--CIT(A) and tribunal deleted addition made by AO--Held, if identity of person providing share application money is established then burden was not on assessee to prove creditworthiness of said person--Company A was not bogus or fictitious company--In instant case assessee had established identity of investor who had provided share subscription and it was established that transaction was genuine--No addition could be made u/s 68--Revenues' appeals dismissed Held :
If the identity of the person providing share application money is established then the burden was not on the assessee to prove the creditworthiness of the said person. However, the department can proceed against the said Company in accordance with law. The position of the present case is identical. It is not the case of any of the parties that M/s Alliance Industries Limited, Sharjah was a bogus company or a non-existent company and the amount which was subscribed by the said Company by way of share subscription was in fact the money of the respondent assessee. In the present case, the assessee had established the identity of investor who had provided the share subscription and it was established that the transaction was genuine though as per contention of the respondent the creditworthiness of the creditor was also established. No addition could be made under section 68 in the absence of any positive material or evidence to indicate that the shareholders were benamidars or fictitious persons or that any part of the share capital represented company's own income from undisclosed sources. Revenues' appeals dismissed. Commissioner of Income Tax vs. Divine Leasing & Finance Ltd. decided by Delhi High Court (2008) 299 ITR 268 (Del); Commissioner of Income Tax vs. Lovely Exports (P) Ltd, (2008) 11 ITJ 357 (SC), followed.
16. Hon'ble Delhi High Court in case of CIT Vs. Gangeshwari Metal Pvt Ltd - (2013)84 CCH 037 (Del) HC;
361 ITR 0010 held:
The CIT (A) had held that the genuineness of the transactions is established as the transactions are routed through banking channels. It was seen that the share application money was received through a/c payee cheques, detail of which had been filed by the assessee by filing the copy of the bank a/c of the share Agrawal Power P. Ltd. 39 (SS)113 of 2018 and (SS) 90 of 2020 applicants. Thus where the ROI was filed by the creditors of the assessee and was accepted by the AO and payments were through a/c payee cheques the genuineness of the transaction cannot be doubted. The revenue could not prove that the money received' by the appellant in the form of share application has come from its own sources. No evidences regarding this have been brought on record by the AO.
17. Hon'ble Delhi High Court in case of CIT Vs. Winstral Petrochemicals (P) Ltd - (2011) 330 ITR 603 (Del) held:
It has not been disputed that the share application money was received by the assessee company by way of account payee cheques, through normal banking channels. It is not the case of the Revenue that the payment of share application money was not made from the bank account of the applicant companies. Admittedly, copies of application for allotment of shares were also provided to the AO. It is not the case of the Revenue that the share applications were not signed on behalf of the applicant companies and were forged documents. It is also not the case of the Revenue that the shares were not actually allotted to the companies. Therefore, the CIT(A) and the Tribunal were justified in holding that the genuineness of the transactions had been duly established by the assessee. As regards identity of the subscribers, the assessee filed copies of certificate of incorporation, PAN cards, PAN details and company details, downloaded from the site of Department of Company Affairs besides written confirmation from the applicants. It is not the case of the Revenue that the copies of certificates of incorporation, PAN cards, PAN details or company details submitted by the assessee were forged documents. In fact, the AO did not even make an attempt to verify the genuineness of these documents by summoning the record of RoC or Department of Company Affairs. If he entertained any doubt about the genuineness of these documents, nothing prevented him from summoning the record from these authorities. If the AO so desired, the genuineness of the PAN cards and PAN details could easily have been verified by him from the record available with the Department. The assessee company also furnished written confirmations from the applicant companies. All the share applicants were duly served with the notices under s. 133(6). In these circumstances, the finding of CIT(A) and Tribunal that the identity of the subscribers stood duly established from the documents produced by the assessee, cannot be said to be perverse and does not call for interference by this Court.
Agrawal Power P. Ltd. 40 (SS)113 of 2018 and (SS) 90 of 2020 (Paras 7 & 8) The finding of fact recorded by the Tribunal, which is the final fact finding authority, cannot be said to be perverse merely because some of the applicants had a common address and the Inspector deputed by the AO to make field inquiries did not find five applicants functioning at the addresses provided to him. There is no legal bar to more than one companies being registered at the same address. 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 cheque, they cannot be said to be non-existent, even if they, after submitting the share application had changed their address or had stopped functioning.
(Para 9) The identity of the share applicants would be established if details of address or PAN card are furnished to the Department along with the copies of shareholders' register, share application forms, share transfer register, etc. In this case, share application forms were duly produced before the AO and this is not the case of the Revenue that the AO had asked the assessee to produce shareholders' register and share transfer registers, but the assessee company had failed to do so.--CIT vs. Divine Leasing & Finance Ltd. (2007) 207 CTR (Del) 38 : (2008) 299 ITR 268 (Del) followed.
(Para 10) The AO was not justified in adding the amount of share application money to the income of the assessee, merely because the applicants did not respond to the notices sent to them. If the AO so wanted, he could have found out the current address of those applicants, who, according to the report of the Inspector, were not found functioning at the address given to the AO, by summoning the directors, etc. of those companies and asking them to furnish the current address of the company. The names and addresses of directors, if not available with the assessee, could have been obtained from the office of RoC or from the banks on which the cheques were drawn. No such attempt, however, was made by the AO. In these circumstances, there is no reason found to disturb the finding of fact recorded by the Tribunal.--CIT vs. Lovely Exports (P) Ltd. (2008) 216 CTR (SC) 195 : (2008) 6 DTR (SC) 308 relied on. (Para 11) Agrawal Power P. Ltd. 41 (SS)113 of 2018 and (SS) 90 of 2020
18. Hon'ble Delhi High Court in case of CIT Vs. Dwarkadhish Investment (P) Ltd - (2011) 330 ITR 298 (Del) held:
Income--Cash credit--Share application money--Though in s. 68 proceedings, the initial burden of proof lies on the assessee yet once he proves the identity of the creditors/share applicants by either furnishing their PAN or income-tax assessment number and shows the genuineness of transaction by showing money in his books either by account payee cheque or by draft or by any other mode, then the onus of proof would shift to the Revenue--Just because the creditors/share applicants could not be found at the address given, it would not give the Revenue the right to invoke s. 68--Revenue has all the power and wherewithal to trace any person--Moreover, it is settled law that the assessee need not to prove the 'source of source'--In the instant case, the Tribunal has confirmed the order of the CIT(A) deleting the impugned addition holding that the assessee has been able to prove the identity of the share applicants and the share application money has been received by way of account payee cheques--No question of law arises--CIT vs. Lovely Exports (P) Ltd. (2008) 216 CTR (SC) 195 : (2008) 6 DTR (SC) 308, CIT vs. Divine Leasing & Finance Ltd. (2007) 207 CTR (Del) 38 : (2008) 299 ITR 268 (Del) and CIT vs. Dwarikadhish Investment (P) Ltd. (2008) 2 DTR (Del) 7 : (2008) 167 Taxman 321 (Del) followed.
19. Hon'ble Karnataka High Court in case of CIT & Anr Vs. Arunananda Textiles (P) Ltd - (2011) 333 ITR 116 (Kar) held:
Income--Cash credit--Share application money--Assessee able to identify the shareholders--It is not for the assessee-company to establish but it is for the Department to enquire with the investors about the capacity to invest the amount in the shares--CIT vs. Lovely Exports (P) Ltd. (2008) 216 CTR (SC) 195 : (2008) 6 DTR (SC) 308 relied on Agrawal Power P. Ltd. 42 (SS)113 of 2018 and (SS) 90 of 2020
20. Hon'ble Delhi High Court in case of CIT Vs. Steller Investment Ltd - 192 ITR 287 (Del) held:
Reference--Question of law--Cash credits--Even if it be assumed that the subscribers to the increased share capital were not genuine, under no circumstances, can the amount of such capital be regarded as undisclosed income of assessee-company--If certain shareholders were bogus and money was provided by some other persons, reopening of assessment of such persons would be sensible--Tribunal, therefore, justified in setting aside revisional order and no question of law arises Cash credits--Genuineness--Share capital--Even if it be assumed that the subscribers to the increased share capital were not genuine, under no circumstances, can the amount of such capital be regarded as undisclosed income of assessee-company--If certain shareholders were bogus and money was provided by some other persons, reopening of assessment of such persons would be sensible--Tribunal, therefore, justified in setting aside revisional order and no question of law arises.
21. Hon'ble Supreme Court in case of CIT Vs. Orissa Corporation
- 159 ITR 78 (SC) held:
Income--Cash credit--Burden of proof--Assessee had given the names and addresses of the creditors--It was in the knowledge of the Revenue that the said creditors were income-tax assessees--Their index number was in the file of the Revenue--Revenue, apart from issuing notices under s. 131 at the instance of the assessee, did not pursue the matter further--Revenue did not examine the source of income of the said alleged creditors to find out whether they were creditworthy or were such who could advance the allowed loans--Tribunal came to the conclusion that the assessee has discharged the burden that lay on him then it could not be said that such a conclusion was unreasonable or perverse or based on no evidence--High Court was, therefore, right in refusing to refer the questions sought for.
Held :
Sec. 68 of 1961 Act was introduced for the first time in the Act. There was no provision in 1922 Act corresponding to this section. The section only gives statutory recognition to the principle that cash credits which are not satisfactorily explained might be assessed as income. The cash credit might be assessed either as business profits or as income from other sources.
Agrawal Power P. Ltd. 43 (SS)113 of 2018 and (SS) 90 of 2020 (Para 7) It is not in all cases that by mere rejection of the explanation of the assessee, the character of a particular receipt as income could be said to have been established; but where the circumstances of the rejection were such that the only proper inference was that the receipt must be treated as income in the hands of the assessee, there is no reason why the assessing authority should not draw such an inference. Such an inference is an inference of fact and not of law.
(Para 10) The assessee had given the names and addresses of the alleged creditors. It was in the knowledge of the Revenue that the said creditors were income-tax assessees. Their index number was in the file of the Revenue. The Revenue, apart from issuing notices under s. 131 at the instance of the assessee, did not pursue the matter further. The Revenue did not examine the source of income of the said alleged creditors to find out whether they were credit-worthy or were such who could advance the allowed loans. There was no effort made to pursue the so-called alleged creditors. In those circumstances, the assessee could not do any further. In the premises, if the Tribunal came to the conclusion that the assessee has discharged the burden that lay on him then it could not be said that such a conclusion was unreasonable or perverse or based on no evidence. If the conclusion is based on some evidence on which a conclusion could be arrived at, no question of law as such arises. It cannot, therefore, be said that any question of law arose in these cases. The High Court was, therefore, right in refusing to refer the questions sought for."
22. On consideration of above facts and discussion thereof in the light of the judicial pronouncements (supra), we find that it is not a case that the assessee had filed merely a confirmatory letters of share applicants but it is a case that the assessee had filed affidavit of the director, certification of incorporation of the share applicants, full particulars of directors of the share applicant companies, bank account of the share applicants, PAN of share applicants, tax returns of the share applicants, audited Agrawal Power P. Ltd. 44 (SS)113 of 2018 and (SS) 90 of 2020 final accounts i.e. balance sheet & profit & loss account of the share applicants. All these documents proved the identity of the share applicants, creditworthiness of the share applicants and genuineness of the transactions. Further, we also find that the assessee's case is on strong footing as by the Finance Act, 2012, the provision for source of source was inserted w.e.f. 1.4.2013 but the present matter pertains to the assessment year 2012-13.
Hence, the insertion of that provision is also not applicable in the present matter. Thus, totality of facts clearly indicates that the assessee in these circumstances had duly discharged its burden lay upon it u/s.68 of the I.T. Act. The case-laws referred by the Revenue Authorities are distinguishable on facts and they are not applicable on the facts of the assessee's case. Therefore, the addition made u/s.68 in assessment year 2012-13 is bad in law and unjustified and, therefore, we delete the addition of Rs.2,41,25,000/- in view of the facts, the evidences furnished, discussion thereof and decisions cited in the foregoing paras.
Accordingly, ground nos.3 & 4 raised in the assessee's appeal are allowed. Thus, appeal filed by the assessee for the assessment year 2012-13 is partly allowed.
Agrawal Power P. Ltd. 45 (SS)113 of 2018 and (SS) 90 of 2020
23. In the result, Revenue's appeal bearing IT(SS)A No.113/Ind/2018 is dismissed and assessee's appeal bearing IT(SS)A No.90/Ind/2020 is partly allowed.
The order pronounced as per Rule 34 of ITAT Rules, 1963 on 29.10.2021.
Sd/- Sd/-
(MADHUMITA ROY) (MANISH BORAD)
JUDICIAL MEMBER ACCOUNTANT MEMBER
दनांक /Dated : 29.10.2021
!vyas!
Copy to: The Appellant/Respondent/CIT concerned/CIT(A)
concerned/ DR, ITAT, Indore/Guard file.
By Order, Asstt.Registrar, I.T.A.T., Indore