Income Tax Appellate Tribunal - Delhi
Kasper Information Technology Pvt. ... vs Ito Ward-14(2), New Delhi on 18 March, 2021
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH "C" NEW DELHI
BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER
&
SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER
I.T.A. No.4691/DEL/2016
Assessment Year 2012-13
Income Tax Officer, v. M/s. Angel Cement Pvt. Ltd.,
Ward-2(4), 58, 1st Floor, Jaipuria
New Delhi. Enclave,
Kaushambi, Ghaziabad.
TAN/PAN: AAHCA6602J
(Appellant) (Respondent)
I.T.As. No.5974/DEL/2017 & 6401/DEL/2017
Assessment Years 2012-13 & 2014-15
Income Tax Officer, v. M/s. Delight Resorts Pvt.
Ward-7(1), Ltd.,
New Delhi. F-1-200/13, Sector-3A,
Vaishali, Ghaziabad.
TAN/PAN: AAACE0061C
(Appellant) (Respondent)
I.T.A. No.5398/DEL/2017
Assessment Year 2012-13
M/s. Jawahar Credit & v. ITO, Ward-13(3),
Holdings Pvt. Ltd., New Delhi.
Bhushan Center,
11th Floor, Hyatt Regency
Complex, Bhikaji Cama Place,
New Delhi.
TAN/PAN: AAACJ2322D
(Appellant) (Respondent)
2
I.T.A. No.5526/DEL/2017
Assessment Years 2012-13
ITO, Ward-13(3), v. M/s. Jawahar Credit &
New Delhi. Holdings Pvt. Ltd.,
Bhushan Center,
11th Floor, Hyatt Regency
Complex, Bhikaji Cama
Place,
New Delhi.
TAN/PAN: AAACJ2322D
(Appellant) (Respondent)
I.T.A. No.5397/DEL/2019
Assessment Year 2012-13
M/s. Jingle Bells Aluminium v. ITO, Ward-13(3),
Pvt. Ltd., New Delhi.
116A, 1st Floor,
Somdutt Chambers-1,
5, Bhikaji Cama Place,
New Delhi.
TAN/PAN: AACCJ1177G
(Appellant) (Respondent)
I.T.A. No.5527/DEL/2019
Assessment Year 2012-13
ITO, Ward-13(3), v. M/s. Jingle Bells Aluminium
New Delhi. Pvt. Ltd.,
116A, 1st Floor,
Somdutt Chambers-1,
5, Bhikaji Cama Place,
New Delhi.
TAN/PAN: AACCJ1177G
(Appellant) (Respondent)
3
I.T.A. No.9287/DEL/2019
Assessment Year 2012-13
ITO, Ward-14(2), v. M/s. Kasper Information
New Delhi. Technology Pvt. Ltd.,
77, 3rd Floor, Vidyut Nikuni,
112 I.P. Extn. Patparganj,
New Delhi.
TAN/PAN: AAECK1995R
(Appellant) (Respondent)
I.T.As. No.9357/DEL/2019 & 510/DEL/2019
Assessment Years 2012-13 & 2013-14
M/s. Kasper Information v. ITO, Ward-14(2),
Technology Pvt. Ltd., New Delhi.
77, 3rd Floor, Vidyut Nikuni,
112 I.P. Extn. Patparganj,
New Delhi.
TAN/PAN: AAECK1995R
(Appellant) (Respondent)
I.T.A. No.509/DEL/2019
Assessment Year 2013-14
Landsky Real Estates Pvt. v. ITO, Ward-15(1),
Ltd., New Delhi.
C-17, Flat No.4, Marg No.4A,
Vinod Nagar, Delhi.
TAN/PAN: AAABCL9271E
(Appellant) (Respondent)
I.T.A. No.5736/DEL/2016
Assessment Year 2012-13
ITO, Ward-23(4), v. M/s. Sintex Consumers
New Delhi. Electronics Pvt. Ltd.,
3573, 2nd Floor, Kucha Raja
Daya Ram Chawri, Bazar,
Delhi
TAN/PAN: AAMCS9874K
(Appellant) (Respondent)
4
I.T.A. No.6070/DEL/2016
Assessment Year 2012-13
ACIT, v. Star Light Consumer
Central Circle-3, Electronics Pvt. Ltd.,
New Delhi. R/o 315, 3rd Floor, E-Block,
International Trade Tower,
Nehru Place,
New Delhi.
TAN/PAN: AAKCS9791D
(Appellant) (Respondent)
I.T.A. No.5744/DEL/2016
Assessment Year 2012-13
ITO, v. Stylish Construction Pvt.
Ward-24(2), Ltd.,
New Delhi. 1027, Top Floor, Ward
No.08,
Mehra Chowk, Mehrauli,
New Delhi.
TAN/PAN: AAICS4664H
(Appellant) (Respondent)
I.T.A. No.5741/DEL/2016
Assessment Year 2012-13
ITO, v. Sukhna Steel Pvt. Ltd.,
Ward-24(3), F-Block, 1st Floor,
New Delhi. International Trade Tower,
Nehru Place,
New Delhi.
TAN/PAN: AACCS2511F
(Appellant) (Respondent)
5
I.T.A. No.5742/DEL/2016
Assessment Year 2012-13
ITO, v. Sukhna Real Estate Pvt.
Ward-24(3), Ltd.,
New Delhi. 125, Shakti Khand-I,
Indirapuram,
Ghaziabad.
TAN/PAN: AAJCS5947E
(Appellant) (Respondent)
I.T.A. No.5740/DEL/2016
Assessment Year 2012-13
ITO, v. Sunlight Tour and Travels
Ward-24(3), Pvt. Ltd.,
New Delhi. Plot No.206, Aparna
Apartments,
B-17, Shalimar Bagh,
Sahibabad.
Uttar Pradesh.
TAN/PAN: AAJCS6819H
(Appellant) (Respondent)
I.T.A. No.5832/DEL/2016
Assessment Year 2012-13
ACIT, v. Superstar Agency Pvt. Ltd.,
Central Circle-3, 211, Somdutt Chamber-II,
New Delhi. Bhikaji Cama Place,
New Delhi.
TAN/PAN: AAKCS9725M
(Appellant) (Respondent)
6
I.T.A. No.5650/DEL/2016
Assessment Year 2012-13
ITO, v. Supreme Placement Services
Ward-24(4), Pvt. Ltd.,
New Delhi. E-60, Near Anand Pradhan,
Om Vihar Phase-V, Uttam
Nagar,
New Delhi.
TAN/PAN: AAICS4665G
(Appellant) (Respondent)
I.T.A. No.2920/DEL/2017
Assessment Year 2013-14
Globus Real Infra Pvt. Ltd., v. DCIT,
(Formerly Sur Buildcon Pvt. Circle-10(1),
Ltd.), New Delhi.
211 Somdutt Chamber-2,
Bhikaji Cama Place,
New Delhi.
TAN/PAN: AALCS7467F
(Appellant) (Respondent)
I.T.A. No.2024/DEL/2012
Assessment Year 2012-13
ITO, v. M/s. Track Casting India
Ward-25(3), Pvt. Ltd.,
New Delhi. 117, Shubham Appartments,
34, I.P. Extension,
New Delhi.
TAN/PAN: AABCT4544N
(Appellant) (Respondent)
I.T.A. No.5831/DEL/2016
Assessment Year 2012-13
7
ACIT, v. Sur Buildcon Pvt. Ltd.,
Central Circle-3, 211, Somdutt Chamber-II,
New Delhi. Bhikaji Cama Place,
New Delhi.
TAN/PAN: AALCS7467F
(Appellant) (Respondent)
Assessee by: S/Shri S.K. Tulsiyan, Adv., Ashwani
Kumar, CA, Bhoomija Verma, Adv.,
Aditya Kumar, CA and Bhavesh
Jindal, CA
Department by: Ms. Sunita Singh, CIT-D.R.
Date of hearing: 21 12 2020
Date of pronouncement: 03 2021
ORDER
PER BENCH:
The aforesaid bunch of 22 appeals relating to above named 16 assessees pertain to quantum of assessment passed u/s 143(3) for the assessment years 2012-13 and 2013-14 arising out of 9 separate impugned appellate orders. The issues involved in all the 22 appeals are arising out of identical set of facts and are inextricable interconnected with each other and common issue is permeating in all the appeals with similar additions.
Brief Background of the case
2. The above named assessee-companies are essentially controlled and managed by the promoters of the erstwhile company, M/s Bhushan Steel Ltd., now known as TATA Steel Ltd. (TSL) after the acquisition of BSL by Bamnipal Steel Ltd. which is a wholly owned subsidiary of TATA Steel Ltd on 18th 8 May, 2018 under the Insolvency and Bankruptcy Code, 2016. In nutshell the primary addition in all the appeals pertain to additions u/s.68 on the credits in the form of share capital/share premium and/ or loan and advances appearing in the books of assessee companies in the Assessment Year 2012-13 in 15 cases; in A.Y. 2013-14 in 3 cases; and Assessment Year 2014-15 in one case. The core contention of the assessee before us has been in a nutshell is that the funds have been channeled from the regular books of account of Bhushan Energy Ltd. which is a subsidiary of Bhushan Steel Ltd. into a maze of group companies in the form of share capital and/or loan and advances. The accounted funds, i.e., recorded in the Bhushan Energy Ltd. have been routed through web of group companies and finally re-routed back into the books of Bhushan Energy Ltd. The Assessing Officer on the other hand has treated the share capital/ share premium and or loan and advances appearing in the balance sheet of aforesaid assessee companies as alleged introduction of unaccounted funds of the assessee companies into the regular books of account which has been added u/s.68. In six cases, the bonus share issued by the respective assessee company has also been added by the Assessing Officer which was merely in the nature of transfer entries representing capitalization of reserve and surplus. Apart from that, commission expenses on notional basis u/s.69C alleged to have been paid by the assessee for availing such accommodation entries from the group companies has also 9 been added by Ld. CIT (A) by way of enhancement. Though in majority of cases Ld. CIT (A) has deleted the addition made u/s 68. At a glance the addition made in the case of the assessee can be tabulated in the following manner:
Sl. Name of the Assessee Date of A.Y Asses Quantum of Details of No. & Asst. sment addition(s) original nature of additions made by Order Order made by the Ld. return -
the A.O. u/s A.O date of
filing of ITR
& income
declared
1. Angel Cement Pvt. Ltd. 31.03.20 2012- 143(3) 26.09.2012
- Share Capital - sec 68 15 13 66,00,00,000 3,803/-
- Current liabilities (payables) - 54,70,00,000
sec 68
2. Delight Resorts Pvt. Ltd. 30.03.20 2012- 143(3) 29.09.2012
- Share Capital - section 68 15 13 10,00,00,000 (-)
- Advance - section 68 66,56,47,519 3,80,468/-
- 50% disallowance of employee 5,22,890
benefit expenses
3. Delight Resorts Pvt. Ltd. 30.11.20 2014- 143(3) 30.09.2014
- Advance - section 68 16 15 37,70,00,000 47,080/-
4. Jawahar Credit & Holdings Pvt. 27.03.20 2012- 143(3) 24.09.2012
Ltd. 15 13 73,50,00,000 2,70,000/-
- Share Capital - section 68
5. Jingle Bells Aluminium Pvt. Ltd. 27.03.20 2012- 143(3) 26.09.2012
- Share Capital - section 68 15 13 62,00,00,000 3,167/-
6. Kasper Information Technology 16.03.20 2012- 143(3) 27.09.2012
Pvt. Ltd. 15 13 46,00,00,000 1,738/-
- Share Capital - section 68
7. Kasper Information Technology 28.03.20 2013- 143(3) 22.09.2013
Pvt. Ltd. 16 14 16,00,00,000 2,47,050/-
- Share Capital - section 68
8. Landsky Real Estate Pvt. Ltd. 31.03.20 2013- 143(3) 22.09.2013
- Share Capital - section 68 15 14 16,00,00,000 2,48,450/-
- Advances - section 68 2,60,00,000
9. Sintex Consumer Electronics Pvt. 25.03.20 2012- 143(3) 26.09.2012
Ltd. 15 13 78,22,80,000 4,026/-
- Share Capital (including
bonus shares of Rs.
18,22,80,000/-) - section 68
10. Starlight Consumer Electronic 24.03.20 2012- 143(3) 22.09.2012
Pvt. Ltd. 15 13 32,25,00,000 5,340/-
- Share Capital - section 68 30,18,00,000
- Current Liabilities - section
68
11. Stylish Construction Pvt. Ltd. 24.03.20 2012- 143(3) 29.09.2012
- Share Capital - section 68 15 13 30,00,00,000 15,48,189/-
- Current Liabilities - section 31,60,00,000
68 23,32,000
- 14A
12. Sukhna Real Estates Pvt. Ltd. 26.03.20 2012- 143(3) 29.09.2012
- Share Capital (including 15 13 80,63,40,000 2,77,294/-
10
bonus shares of Rs.
20,63,40,000/-) - section 68
13. Sukhna Steel Pvt. Ltd. 26.03.20 2012- 143(3) 20.09.2012
- Share capital (including 15 13 26,16,80,000 7,844/-
bonus shares of Rs.
16,80,000/-)- section 68
14. Sunlight Tours & Travel Pvt. Ltd. 26.03.20 2012- 143(3) 29.09.2012
- Share Capital (including 15 13 52,01,68,000 3,69,875/-
bonus share of Rs.
12,01,68,000/-) - section 68
15. Super Star Agency Pvt. Ltd. 27.03.20 2012- 143(3) 22.09.2012
Share Capital - section 68 15 13 42,25,00,000 4,840/-
16. Supreme Placement Services Pvt. 27.03.20 2012- 143(3) 29.09.2012
Ltd. 15 13 72,43,00,000 9,73,438/-
- Share capital (including
bonus shares of Rs.
12,43,00,000/-) - section 68
17. Globus Realinfra Pvt. Ltd. (Sur 26.03.20 2012- 143(3) 24.09.2012
Buildcon) 15 13 98,49,40,000 7,18,936/-
- Share Capital (including
bonus shares of Rs.
17,09,40,000/-) - sec 68
18. Globus Realinfra Pvt. Ltd. (Sur 31.03.20 2013- 143(3) 28.09.2013
Buildcon) 16 14 5,60,00,000 34,44,000/-
- Share Capital - section 68 2,95,00,000
- Unsecured loans - section 68
19. Track Casting India Pvt. Ltd. 27.03.20 2012- 143(3) 28.09.2012
- Share Capital - section 68 15 13 31,00,00,000 69,015/-
- Unexplained expenses 7,75,000
(alleged commission
expenses) - sec 69C
TOTAL 10,65,22,85,409
Apart from that there were certain minor additions of disallowance of employee benefit expenses in the case of Delight Resort Pvt. Ltd. for Assessment Year 2012-13 which has been deleted by CIT(A) and no appeal has been filed by the Revenue; and disallowance u/s.14A in the case of Stylish Construction Pvt. Ltd. which has been contested.
3. In so far as the addition made u/s.68 and 69 is concerned, the ld. CIT(A) in the various cases have adopted divergent view in the case of different assessee despite there 11 were identical set of facts and circumstances. In majority of the cases the addition made u/s.68 and 69C by the Assessing Officer have been deleted by CIT(A) primarily on the ground that assessee has discharged the onus of establishing the requisite ingredients u/s.68 and after examining the fund flow statement as to how the money has originated from Bhushan Energy Ltd and gone back to same company. In certain cases additions have been confirmed by the ld. CIT(A) mainly relying upon the reasoning given by the Assessing Officer. In tabular form the additions confirmed and deleted by the ld. CIT (A) in all the appeals are as under:
Sl. Name of the Assessee & A.Y Asst. Quantum of Confirmatio Appeal before No. nature of addition made by Order Addition n (C) or the Hon'ble the Ld. A.O u/s Deletion (D) ITAT filed by by the Ld. Revenue (R) C.I.T (A) or Assessee(A)
1. Angel Cement Pvt. Ltd. 2012-13 143(3)
- Share Capital - sec 68 66,00,00,000 Deleted (D) R
- Current liabilities (payables) 54,70,00,000 D R
- sec 68
2. Delight Resorts Pvt. Ltd. 2012-13 143(3)
- Share Capital - section 68 10,00,00,000 D R
- Advance - section 68 66,56,47,519 D R
- 50% disallowance of 5,22,890 D Not challenged employee benefit expenses
3. Delight Resorts Pvt. Ltd. 2014-15 143(3)
- Advance - section 68 37,70,00,000 D R
4. Jawahar Credit & Holdings Pvt. 2012-13 143(3) Ltd. 73,50,00,000 D R
- Share Capital - section 68 1,47,00,000 Fresh A
- Alleged Undisclosed addition Commission Income [added made by by C.I.T (A)] C.I.T (A)
5. Jingle Bells Aluminium Pvt. 2012-13 143(3) Ltd. 62,00,00,000 D R
- Share Capital - section 68 1,24,00,000 Fresh A
- Alleged Undisclosed addition Commission Income [added made by by C.I.T (A)] C.I.T (A)
6. Kasper Information Technology 2012-13 143(3) Pvt. Ltd. 46,00,00,000 D R
- Share Capital - section 68 92,00,000 Fresh A
- Alleged Undisclosed addition Commission Income [added made by by C.I.T (A)] C.I.T (A) 12 Sl. Name of the Assessee & A.Y Asst. Quantum of Confirmatio Appeal before No. nature of addition made by Order Addition n (C) or the Hon'ble the Ld. A.O u/s Deletion (D) ITAT filed by by the Ld. Revenue (R) C.I.T (A) or Assessee(A)
7. Kasper Information Technology 2013-14 143(3) Pvt. Ltd. 16,00,00,000 C A
- Share Capital - section 68
8. Landsky Real Estate Pvt. Ltd. 2013-14 143(3)
- Share Capital - section 68 16,00,00,000 C A
- Advances - section 68 2,60,00,000 C A
9. Sintex Consumer Electronics 2012-13 143(3) Pvt. Ltd. 78,22,80,000 D R1
- Share Capital (including bonus shares of 18.228 crores) - section 68
10. Starlight Consumer Electronic 2012-13 143(3) Pvt. Ltd. 32,25,00,000 D R
- Share Capital - section 68 30,18,00,000 D R
- Current Liabilities - section 68
11. Stylish Construction Pvt. Ltd. 2012-13 143(3)
- Share Capital - section 68 30,00,00,000 D R
- Current Liabilities - section 31,60,00,000 D R 68 23,32,000 Restricted to R
- 14A 5 lacs
12. Sukhna Real Estates Pvt. Ltd. 2012-13 143(3) Share Capital (including bonus 80,63,40,000 D R shares of Rs. 20,63,40,000) -
section 68
13. Sukhna Steel Pvt. Ltd. 2012-13 143(3)
- Share capital (including 26,16,80,000 D R bonus shares of 16.80 lacs)- section 68
14. Sunlight Tours & Travel Pvt. 2012-13 143(3) Ltd. 52,01,68,000 D R2
- Share Capital (including bonus share of 12,01,68,000) - section 68
15. Super Star Agency Pvt. Ltd. 2012-13 143(3)
- Share Capital - section 68 42,25,00,000 D R
16. Supreme Placement Services 2012-13 143(3) Pvt. Ltd. 72,43,00,000 D R3
- Share capital (including bonus shares of Rs. 12.43 crores) - section 68
17. Globus Realinfra Pvt. Ltd. (Sur 2012-13 143(3) Buildcon) 98,49,40,000 D R
- Share Capital (including bonus shares of Rs.
17,09,40,000/-) - sec 68
18. Globus Realinfra Pvt. Ltd. (Sur 2013-14 143(3) Buildcon) 5,60,00,000 C4 A
- Share Capital - section 68 2,95,00,000 C A 13 Sl. Name of the Assessee & A.Y Asst. Quantum of Confirmatio Appeal before No. nature of addition made by Order Addition n (C) or the Hon'ble the Ld. A.O u/s Deletion (D) ITAT filed by by the Ld. Revenue (R) C.I.T (A) or Assessee(A)
- Unsecured loans - section 68
19. Track Casting India Pvt. Ltd. 2012-13 143(3)
- Share Capital - section 68 31,00,00,000 D R
- Unexplained expenses 7,75,000 D Not challenged (alleged commission expenses) - sec 69C TOTAL 10,68,85,85,409
4. Thus, out of total addition of Rs. 10,65,22,85,409/- made u/ss. 68, 69C & 14A in the cases of the Assessees herein, additions aggregating to Rs. 10,22,02,85,409/- have been deleted from the first appellate stage. The additions to the extent deleted by the Id. C.I.T (A)s have been contested in appeal before the Hon'ble ITAT by the Department. The confirmation of balance additions (as and where applicable) has been contested by the respective Assessees before the Hon'ble ITAT. Further, in the cases of three Assessees, namely
i) Jawahar Credit & Hoidings Pvt. Ltd. (A.Y. 2012-13); ii) Jingle Bells Aluminium Pvt. Ltd, (A.Y. 2012-13); and iii) Kasper Information Technology Pvt. Ltd. (A.Y. 2012-13), the Ld. C.I.T (A), while deleting the additions made by the A.Os u/s. 68 has made fresh additions on account of alleged commission income aggregating to Rs. 3,63,00,000/- for providing facility to route the impugned transactions. Thus, the Ld. CIT(A) at the first appellate stage have adopted divergent views with respect to the sustainability of identical additions made by the Ld. A.O(s) u/s 68 in the cases of the 14 Assessees herein under identical facts and circumstances. Whereas in most of the captioned cases the additions made by the Ld. A.O(s) u/s 68 have been deleted by the Ld. CIT (A)s on the ground that the Assessees have effectively established the necessary ingredients of section 68, whereas in few cases the Ld. CIT(A)s have upheld the additions made by the A.Os u/s 68 on the ground that the concerned Assessees have availed accommodation entries in the garb of share capital and/or loans & advances. In the remaining cases the Ld. C.I.T(A)s have opined that the Assessees have essentially worked as entry providers for providing facility to route transactions in lieu of certain commission income. Another peculiar fact to be noted is that, even with respect to the same Assessee, divergent views have been taken by different officers at the first appellate stage in relation to similar additions u/s 68 made in different A.Ys. For instance:-
• In SI. No. 6 - Kasper Information Technology Pvt. ltd. wherein addition u/s 68 has been deleted by the Ld. CI.T(A) for A.Y. 2012-13 as against SI. No. 7 - Kasper Information Technology Pvt. ltd. wherein similar addition u/s 68 has been confirmed by the Ld. CIT (A) for A.Y. 2013-14.
• In Sl. No, 17- Globus Real Infra Pvt. Ltd. A.Y 2012-13 wherein addition u/s 68 has been deleted by the CIT(A) as against Sl. No. 18 - Globus Real Infra Pvt. Ltd. A.Y. 2013- 14 wherein similar addition u/s 68 stands confirmed by 15 the Id. CIT(A).
5. In the grounds of appeal as raised by the assessee in respective appeals can be summarized as under:
Sl. Name of the A.Y GROUNDS TAKEN BY THE ASSESSEE BEFORE THE HON'BLE No. Assessee & ITA ITAT No. Ground challenging the Other Grounds upholding of addition u/s 68 on account of Share Capital/ Share Premium and/or Loans & Advances
1. Globus Realinfra 2013-14 Ground 2: Ground 1:
Pvt. Ltd. (Sur Ld. C.I.T(A) was not Ld. C.I.T(A) was not justified in Buildcon) justified in upholding passing the order exparte order on addition of Rs. Rs. 8.555 the basis of material available on [ITA NO. crores (comprising of share records without giving the 2920/DEL/2017] application money Appellant a reasonable opportunity amounting to Rs. 5.6 of being heard crorse and Unsecured Loans of Rs. 2.995 crores) received from various parties by resorting to section 68 on the ground that the appellant company had allegedly failed to discharge its onus as mandated by the said section.
2. Jawahar Credit & 2012-13 N.A. As per the Revised Grounds of Holdings Pvt. Ltd. Appeal filed on 19.10.2020 Ground 1:
(Cross appeal) The Ld. C.I.T.(A)-05, New Delhi while correctly deleting the addition [ITA NO. of Rs. 73,50,00,000/- made by the 5398/DEL/2019] Ld. A.O. u/s 68, erred in making fresh addition of Rs.
1,47,00,000/- to the income of the Appellant Company on account of alleged charges received by the Appellant Company @ 2% for providing facility to route the impugned transaction of Rs. 73,50,00,000/- purely on the basis of surmises and conjectures although the same is not backed by any substantive or tangible evidence on record.
Ground 2:
That the Ld. C.I.T.(A)-05, New Delhi acted beyond jurisdiction in enhancing income of the Appellant u/s 251(1)(a) of the Income-tax Act, 1961 (the 'Act') by introducing and assessing new source of income to the extent of Rs.
1,47,00,000/- beyond the record 16 Sl. Name of the A.Y GROUNDS TAKEN BY THE ASSESSEE BEFORE THE HON'BLE No. Assessee & ITA ITAT No. Ground challenging the Other Grounds upholding of addition u/s 68 on account of Share Capital/ Share Premium and/or Loans & Advances (i.e. the return of income and assessment order) and outside the subject matter of assessment appealed against.
Ground 3:
That the Ld. C.I.T(A)-05, New Delhi erred in making fresh addition of Rs. 1,47,00,000/- and thus enhancing the income of the Appellant to the said extent without issuing a prior show cause notice as mandated u/s 251(2) of the Act for providing a reasonable opportunity to the Appellant of showing cause against such enhancement, thus resulting in gross violation of principles of natural justice.
3. Jingle Bells 2012-13 N.A. As per the Revised Grounds of Aluminium Pvt. Appeal filed on 19.10.2020 Ltd. Ground 1:
The Ld. C.I.T.(A)-05, New Delhi (Cross appeal) while correctly deleting the addition of Rs. 62,00,00,000/- made by the [ITA NO. Ld. A.O. u/s 68, erred in making 5397/DEL/2019] fresh addition of Rs.
1,24,00,000/- to the income of the Appellant Company on account of alleged charges received by the Appellant Company @ 2% for providing facility to route the impugned transaction of Rs.
62,00,00,000/- purely on the basis of surmises and conjectures although the same is not backed by any substantive or tangible evidence on record.
Ground 2:
That the Ld. C.I.T.(A)-05, New Delhi acted beyond jurisdiction in enhancing income of the Appellant u/s 251(1)(a) of the Income-tax Act, 1961 (the 'Act') by introducing and assessing new source of income to the extent of Rs.
1,24,00,000/- beyond the record (i.e. the return of income and assessment order) and outside the subject matter of assessment appealed against.
Ground 3:
That the Ld. C.I.T(A)-05, New Delhi erred in making fresh addition of Rs. 1,24,00,000/- and thus 17 Sl. Name of the A.Y GROUNDS TAKEN BY THE ASSESSEE BEFORE THE HON'BLE No. Assessee & ITA ITAT No. Ground challenging the Other Grounds upholding of addition u/s 68 on account of Share Capital/ Share Premium and/or Loans & Advances enhancing the income of the Appellant to the said extent without issuing a prior show cause notice as mandated u/s 251(2) of the Act for providing a reasonable opportunity to the Appellant of showing cause against such enhancement, thus resulting in gross violation of principles of natural justice.
4. Kasper Information 2012-13 N.A. As per the Revised Grounds of Technology Pvt. Appeal filed on 19.10.2020 Ltd. Ground 1:
The Ld. C.I.T.(A)-05, New Delhi [ITA NO. 357/DEL/ while correctly deleting the addition 2019] of Rs. 46,00,00,000/- made by the Ld. A.O. u/s 68, erred in making fresh addition of Rs. 92,00,000/-
to the income of the Appellant Company on account of alleged charges received by the Appellant Company @ 2% for providing facility to route the impugned transaction of Rs. 46,00,00,000/- purely on the basis of surmises and conjectures although the same is not backed by any substantive or tangible evidence on record.
Ground 2:
That the Ld. C.I.T.(A)-05, New Delhi acted beyond jurisdiction in enhancing income of the Appellant u/s 251(1)(a) of the Income-tax Act, 1961 (the 'Act') by introducing and assessing new source of income to the extent of Rs. 92,00,000/- beyond the record (i.e. the return of income and assessment order) and outside the subject matter of assessment appealed against. Ground 3:
That the Ld. C.I.T(A)-05, New Delhi erred in making fresh addition of Rs. 92,00,000/- and thus enhancing the income of the Appellant to the said extent without issuing a prior show cause notice as mandated u/s 251(2) of the Act for providing a reasonable opportunity to the Appellant of showing cause against such enhancement, thus resulting in gross violation of principles of natural justice.
18 Sl. Name of the A.Y GROUNDS TAKEN BY THE ASSESSEE BEFORE THE HON'BLE No. Assessee & ITA ITAT No. Ground challenging the Other Grounds upholding of addition u/s 68 on account of Share Capital/ Share Premium and/or Loans & Advances 5. Kasper Information 2013-14 Ground 1: NA Technology Pvt. Ld. C.I.T(A) was not Ltd. justified to uphold addition of Rs. 16 crores made by [ITA NO. 510/DEL/ the A.O on account of 2019] balance share capital/premium as an alleged unexplained cash credit u/s 68 on the ground that appellant had failed to discharge the onus cast on it at mandated by the said section and that the appellant has failed to prove the creditworthiness, genuineness and identification of the Investors. 6. Landsky Real 2013-14 Ground 1: NA Estate Pvt. Ltd. Ld. C.I.T(A) was not justified to uphold addition [ITA NO.509/ of Rs. 16 crores received DEL/2019] by the appellant company on account of balance share capital/premium as alleged unexplained cash credit u/s 68 on the ground that the appellant company had failed to discharge the onus cast on it by the said section. Ground 2: Ld. C.I.T(A) was not justified to uphold addition of Rs. 2.60 crores on account of advances taken by the appellant company from M/s. Cantabile Minerals & Minings Pvt. Ltd & M/s. Angel Cement Pvt. Ltd. by resort to section 68 on the ground that appellant company has filed to prove the identity, creditworthiness and genuineness of the transactions. i) Grounds challenging the confirmation/deletion by the Ld. C.I.T(A)of
additions made by the A.O u/s 68 on account of alleged 19 unexplained credit in the form of share capital/ share premium and/or loans & advances (as the case may be) received by the Assessee(s) - Challenged by the Department where the addition stands deleted by the Ld. C.I.T (A)(16 cases)and challenged by the Assessee(s)(3 cases)where the addition stands confirmed by the C.I.T (A).
ii) Department's Ground challenging the deletion by the Ld. C.I.T(A) of the additions made by the A.O u/s 68 with respect to increase in share capital of the Assessee-company on account of issue of bonus shares(3 cases).
iii) Assessee's Ground challenging the fresh addition (enhancement) made by the Ld. C.I.T (A)on account of alleged commission income @ 2% for providing facility to route the impugned financial transactions without introducing new source of income beyond record without issuing prior show cause notice u/s 251(2) -
challenged by the Assessee in the cases of Jingle Bells Aluminium Pvt. Ltd. (A.Y. 2012-13), Kasper Information Technology Pvt. Ltd. (A.Y. 2012-13) and Jawahar Credit & Holding Pvt. Ltd. (A.Y. 2012-13).
iv) Department's Ground challenging the order of the Ld. C.I.T(A)restricting addition to Rs. 5 lacs from an addition of Rs. 23,32,813/- made by the A.O u/s 14A of the I.T. Act, 1961 read with Rule 8D of the I.T. Rules, 1962 - challenged by the Department in the case of Stylish Construction Pvt. Ltd. for A.Y. 2012-13.
v) Department's Ground challenging the alleged admission of additional evidence by the Ld. C.I.T(A) without giving opportunity to the Ld. A.O in violation of Rule 46A of the I.T. Rules, 1962 - challenged by the Department in the cases of Angel Cement Pvt. Ltd. (A.Y. 2012-13), Delight Resorts Pvt. Ltd. (A.Y. 2012-13) and Stylish Construction Pvt. Ltd. (A.Y. 2012-13).
vi) Assessee's Ground challenging the passing of exparte order by the Ld. C.I.T. (A) - urged by the Assessee in the case of Globus Realinfra Pvt. Ltd. (earlier known as Sur Buildcon Pvt. Ltd.) for A.Y. 2013-
14.
6. Now we come to the grounds challenging confirmation of deletion by the ld. CIT (A) on the addition made by the 20 Assessing Officer u/s.68 on account of sums credited in the books of the assessee in the form of share capital/share premium and / or loans and advances as a lead case.
7. We will take up the appeal in the case of M/s. Jawahar Credit and Holdings Pvt. Ltd., in ITA No.5398/Del/2019 for the Assessment Year 2012-13 as a lead case. Ld. Assessing Officer noted that the company was engaged in the activities of investment in shares in various companies. On perusal of the balance sheet, he noticed that during the year under consideration the company has received Rs.4,35,00,000/- as share capital and Rs.69,15,00,000/- as share premium by issue of Rs.3 lac fully paid up share at the face value of Rs.10 each and a premium of Rs.190 per share; and further Rs.15 lac partly paid share converted into fully paid up share @ 90 from the following parties:-
SI.No. Name of the parties Share Share Total Capital Premium 1 Bhushan Finance Pvt. Ltd. 15000000 285000000 300000000 2 NRA Iron & Steel Pvt. Ltd. 15000000 285000000 300000000 3 Sri Brij Bhushan Singal 4500000 40500000 45000000 4 B B Singal (HUF) 900000 8100000 9000000 5 Sri Kishori Lal(HUF) 675000 6075000 6750000 6 Smt. Uma Singal 2025000 18225000 20250000 7 Smt. Archna Mittal 1350000 12150000 13500000 8 Sri Neeraj Singal 900000 8100000 9000000 9 Neeraj Singal (HUF) 1350000 12150000 13500000 10 Smt. Ritu Singal 1800000 16200000 18000000 Total 43500000 691500000 735000000
8. In response to the show cause notice Assessing Officer required to prove the genuineness and identity and creditworthiness of the subscribes from whom the assessee 21 company has received share capital and share premium aggregating to Rs.73,50,00,000/-, the assessee vide reply dated 22.12.2014 submitted the details of address along with PAN, their confirmation letters and their bank statements highlighting the relevant entries. In order to verify the genuineness of the transaction, the Assessing Officer sent u/s. 133(6) dated 09.01.2015 from the subscriber company, namely, Bhushan Finance Pvt. Ltd. and NRA Iron and Steel Pvt. Ltd. and asked to furnish the following details:-
1. Copy of Bank Statement from where funds have been given to above assessee company (JCHPL).
2. Source of funds raised for making investment in the above company, (JCHPL). Please provide complete chain details of funds received in your bank account giving Name/Address/PAN of the person from whom the said funds have been received.
3. Name of the person, who offered the shares of the company on behalf of JCHPL. Also submit offer prospects in this regard. Also provide justification of buying the share premium supporting with documentary evidences.
4. Name of the person (Mediator) through whom the deal was negotiated for making investments in share/share application money.
5. Copy of application form in respect of share application money paid to JCHPL.
6. Copy of acknowledgement of receipt share application Form and share certificate.
7. Copy of share certificate of the above company (JCHPL).22
8. Please state what is the current status of these shares, whether these are still in your possession or have been sold.
9. In case the above certificates have been sold, please confirm with respect to your bank statement. Also give the name/address/PAN of the party to whom these shares of JCHPL have been sold.
10. Please provide the cop of ITR/Balance Sheet/Computation of Income for the A. Y. 2012-13 and the year in which the transaction mentioned in point no.9 above has been made, reflecting clearly the above transactions in respective balance sheets of your company.
11. Provide copy of ITR of Director/Substantial share holders of your company."
9. In response, these parties had given reply to the assessee. The Assessing Officer further sought for information u/s. 133(6) from the individual investors and in response to which again replies have been received. With regard to the details of security premium received during the year and justification of the premium charged on the issue of share the assessee vide letter dated 12.01.2015 had stated as under:
"(a) During the year the Assessee Company has issued 3000000 fully paid up shares each at a premium of Rs.190/-, 15,00,000 partly paid up shares converted into fully paid up shares at a premium of Rs. 90/- each to various parties (details already filed earlier) With regard to the issue of shares at a premium and the justification for the same it s submitted as under:
(b) Although the term share premium has not been defined in any 23 statute, the commonly accepted meaning thereof refers to it being the amount paid over and above the nominal value of the shares and securities of a company.
(g) The calculation of premium which a company can garner is the combined result of the interplay of various factors intrinsic, normative and even perceptual some or most of which are not capable of any degree of quantification/enumeration. The decision to ask for a premium was based on perceptions as to the company's ability to raise funds based on future business prospects, planning and outlook In the financial markets the ability of an investor to command a premium and the willingness of an investor to invest at the said premium are based on the intangible factors and issues such as the economic outlook, future business plans etc and the same should be considered as genuine reasons.
Such decisions and activities are invariable based on intangible perceptions and thought processes and not based on any nuts and bolts, any physical genuine reasons. The decision of the Investor Companies to invest in the shares at a premium Mm based on the thought process, and ground realities prevailing at that, point of time. Moreover as already discussed above there are/were no specific guidelines/rectification/stipulations as to the manner of calculation of premium in the case of an unlisted company. As such it becomes the prerogative of the Board of Directors of a investor company to decide the premium which it can command and the wisdom of an investor as to whether he would be willing to pay the same. In the given case the calculation of premium which the Assessee Company could command was based on its future plans and the expected inflows therefrom with facts and projections were found to be acceptable to the investors and accordingly no adverse 24 view can be arrived at with regard to the same."
10. The Assessing Officer further asked the assessee company to furnish details of business activities done by the company, year wise details of dividend received during the year and the last three years, year wise break up of profit and loss account incurred by the assessee during the year and last three years, details of EPS and book value of shares, details of declaration of premium received during the year. In response the assessee had filed its detailed reply vide letter dated 20.03.2015 as mentioned by the Assessing Officer. Further the assessee again was required the identity, genuineness and creditworthiness of the subscribers in view of Section 68 the assessee had filed confirmation and bank statement the gist of which have been reproduced in the assessment order which are as under:
1. NRA Iron & Steel Pvt. Ltd. Bank: Induslnd Bank., G.K, New Delhi, A/c No. :0012-B49553-060 Rs.
Date Debit Credit
22.03.2012 40,00,00,000
23.03.2012 30,00,00,000
2. Bhushan Finance Pvt. Ltd. Bank: Axis Bank Ltd, New Delhi A/c No.: 910020042325288 25 Rs.
Date Debit Credit
22.03,2012 30,00,00,000
23.03.2012 3,00,00,000
4. Uma Singal. Bank: Punjab National Bank, C,P, New Delhi A/c No. 0133002l60006815 Rs.
Date Debit Credit
26.03.2012 2,00,00,000
26.03.2012 5,00,000
26.03.2012 2,02,50,000
5. Neeraj Singal HUF. Bank: Punjab National Bank, C.P, New Delhi A/c No. 0133002100006891 Rs.
Date Debit Credit
26.03.2012 1,35,00,000
26.03.2012 1,35,00,000
6. Neeraj Singal Bank: Punjab National Bank, C.P, New Delhi A/c No. 0133002100006792 Rs.
Date Debit Credit
26.03.2012 2,25,00,000
26.03.2012 90,00,000
7. Kishori Lai HUF Bank: Punjab National Bank, C.P, New Delhi A/c No. 0133002100006905 Rs.
Date Debit Credit
26.03.2012 68,00,000
26
26.03.2012 67,50,000
8. BB Singal (HUF). Bank: Punjab National Bank, C.P, New Delhi A/c No. 0133002100006706 Rs.
Date Debit Credit
26.03.2012 92,00,000
26.03.2012 90,00,000
On the perusal of the bank statement Assessing Officer observed that these subscriber company and individual investment did not have their own creditworthiness and they were just an accommodation entry. He further observed that on perusal of the financials of the assessee company it can be seen that it has not done any business activity and the major part of the turnover derived from the dividend and miscellaneous income. He has also analyzed the books profit of the assessee company before issue of share on premium as on 31.03.2011 which was as under:
A. Equity
1. Share Holder's funds (in Rs.) Share Capital 88000000 Reserves Reserve and Surplus 172746598 Total 260746598 No. of shares 10150000 Value per share 25.68 per share
2. Profit /Loss of the company Profit/Loss A.Y. 2011-12 114440 27 A.Y. 2012-13 (820515)
11. Thus, from the above he deduced his inference in the following manner:-
The assessee company has very nominal business profit. It is only common sense that past performance should be given suitable weight age for the valuation of a company and its shares but the same has been totally ignored in the instant case. Furthermore, no correspondence or any documentary evidence has been brought on record in the assesses company replies submitted in the course of the assessment proceedings to justify the so called bright future prospects of the company which would enhance the profitability and consequentially lead to higher valuation of the shares.
To test the credibility of the valuation, an effort was made to verify the future results of Assessee Company with reference to the financial results filed for A.Y. 2011-12 and 2012- 13. The comparative figures are as under:
A.Y. income Interest, Total Net Profit EPS from Dividend & Claimed by the Income, Operation other assessee Income 2011-12 393934 2380822 2774756 114440 0.01 2012-13 368137 368137 (0.05) (820515)
12. Thereafter, he has quoted the judgment of Hon'ble Supreme Court in the case of Mc. Dowell and Co. Ltd. in (1985) 154 ITR 148 and after detail reasoning and referring to catena of judgments, he held that the credits aggregating to Rs.73,50,00,000/- is to be taxed u/s.68, because the 28 assessee has failed to prove the genuineness of the transaction and the creditworthiness of the parties.
13. Ld. CIT(A) though held that on the facts and circumstances of the case, addition u/s.68 could not be made, but held that these companies must have charged 2% as commission on the total transaction as profit on such entries and in this case it was worked out at Rs.1,47,00,000/-. Before the ld. CIT (A), the assessee has filed the very elaborate submission containing all the details and information and also how the money has been routed through from the main company to through web of group companies and along with the cash flow chart. The detailed remand report of the Assessing Officer has been incorporated from pages 21 to 28 of the appellate order.
14. After considering the entire gamut of facts and the material on record, Ld. CIT(A) observed and held as under:-
"6.1 I have gone through the submissions by the appellant, assessment order, report of AO, rejoinder by appellant and perused the case laws relied upon.
6.2 The appellant has raised two grounds of appeals which is related to the addition of Rs.73,50,00,000/- and interlinked. Therefore, both the issues are taken together.
7. It is seen from the assessment order that appellant has not provided proper confirmation at the first instance, however, notices issued u/s 133(6) of the Act to the investors, has been replied with. There is no financial capacity of various investors 29 to subscribe share capital with high premium in the appellant company. The appellant expressed their inability to produce the directors of the investor companies or the individuals. It is also seen by the AO that the amount has been received by the investors, just before subscribing the shares in the appellant company. The subscribers did not have their own creditworthiness as in most of the cases the amount has been received on transfer and there is hardly any business activity by those investors.
7.1 It is observed by the AO that the appellant company is showing very nominal income having limited resources and reserves, therefore, such high premium is not justified. The origin of funds to the subscribers/investors is not clear and there is no economical/logical explanation for the transactions. Accordingly, the AO held that it is unexplained being a sham transaction in the guise of capital introduction, without the tax payments. Accordingly, after relying upon various case laws, this addition was made, invoking provisions of section 68 of the Act.
7.2 It is contended by the appellant that it has provided all the documents of the investors such as audited account, copy of ITR, confirmation, bank account and other details to substantiate that these transactions are genuine and payments have been received through banking channels. It is also contended, as reproduced above, that desired information has been duly provided in compliance to notice u/s 133(6) of the Act, all the investors are assessed to tax and assessment order u/s 143(3) of the Act has been provided in few cases. It 30 is also stated that for the year under consideration, there was no statutory requirement to evidence and justify the source of source of the funds invested. The appellant also relied upon various judgments, as quoted in its submission, reproduced above, to justify that these transactions are genuine and addition u/s 68 is not called for as onus cast upon the appellant company has been duly discharged. It is also argued that the issue of share premium is a matter to be decided upon by the various investors and the companies concerned and not within the powers of AO to step into the shoes of business entities. It is also stated that reasons for making impugned additions are generic in nature and based on the interpretation by AO without clinching evidence.
7.3 On going through the submissions of the appellant, it is observed that all the ten investors are submitting their return of income, the transactions has been done through the banking channels.
7.4 The appellant has cited a number of decisions of the jurisdictional High Court and other jurisdictions, wherein the Hon'ble Court has disapproved the attempt of the AO to look into the source of the source of the deposits, which was not the mandate of the law in the year under appeal. The amendment of section 68 w.e.f. 01.04.2013 cannot be held, or interpreted, to be retrospective in nature. The appellant has also relied on decisions of the Hon'ble High Court of Delhi wherein it has been held that share capital cannot be assessed in the hands of the company even if the subscribers to the increased share capital were held to be not genuine.31
Such addition could only be made in the hands of the alleged bogus share holder. The order of the Hon'ble Delhi High Court in the case of CIT vs. Lovely Exports Pvt. Ltd. 299 ITR 268 has been upheld by the Apex Court. In the case of CIT vs. Kamdhenu Steel and Alloys Ltd. 206 Taxman 254, the Hon'ble Delhi High Court has held that the assessee cannot be fastened with the liability u/s 68 unless a causal connection between the cash deposit in the bank and the assessee is established. The Hon'ble Delhi High Court in the case of ClT vs. Nova Promotors and Finlease (P) Ltd. has held that the AO is duty bound to investigate the creditworthiness of the creditor and genuineness of the transaction. Where the complete particulars of the share applications are furnished to the AO and the AO has not conducted any enquiry into the same or has no material in his possession to show that those particulars are false, then no addition can be made in the hands of the company u/s 68.
7.5 However, it is observed in this case that the appellant could not justify the immediate payment towards investment in shares for the funds received from investors and similarly the amount has been invested by appellant company in various investments made in shares immediately after receiving the share capital. The appellant could not produce the directors of few investor companies, who have heavily invested in the appellant company for no cogent reason. It is also observed from the assessment order of all such persons that they are not carrying out any worthwhile activities nor have actual worth to invest in the appellant company at such 32 high premium. The source and destination companies are having common address. In the report of AO, it is also mentioned that appellant company is not having worth for which such heavy premium in shares can be invested and justified. Further, the appellant company is not showing any worthwhile income since past and it has limited reserves and surplus.
7.6 It is also stated in the report of AO that the investment made by various investors, in the appellant company has received funds from the companies and persons related to Bhushan Steel Ltd which was further routed through the appellant company and further invested in eight companies as share application. In its reply, the appellant has not given any satisfactory reply to this fund flow and also the payments made by investors, immediately after receiving the funds from above companies.
7.7 Further, the address of the investors and the investment made by appellant company are same.
7.8 All these features as discussed in the foregoing paragraphs, 7.5 to 7.7 indicates that though the documentations are complete with respect to the investors and the appellant/company, payments received and made through banking channels and other formalities are complete, however, inability to produce directors in the case of investor company, investment at such high premium without justification and having no net worth or reserves and surplus and immediate investment in appellant company after receiving the funds, which was further invested by the 33 appellant company to other companies for such amount received, same address etc. shows that the appellant company and its investors, especially companies are nothing but a creation of paper companies to transfer its funds from Bhushan Steel Ltd. and other individuals related to them, to various companies as shown in flow chart, through the appellant company.
7.8 As stated earlier, there is no worth/reserve of the appellant company nor any business carried out, the investor companies and other persons are also hot carrying out any visible business activity, therefore, this is nothing but routing of its funds by the Bhushan Steel Ltd. and its related parties where neither the investors and other persons nor the appellant company are ultimate beneficiary. The funds received were given to the other companies, as soon as it is received and the assets in the balance sheet is shown in the form of investment in shares for the share application money and premium thereon received. The appellant has also not given any cogent reasoning for the fund flow shown by the AO in his report.
7.9 Therefore, looking to the facts and circumstances of this case where basic requirement to justify the identity, creditworthiness and genuineness of transaction has been prima facie established but looking to the fact and analysis as narrated above, these transactions are found to be for routing finances of M/s Bhushan Steel Ltd. and other persons, through appellant Company and it is just paper company where appellant is not the ultimate beneficiary because it has 34 further passed on those funds to various companies as shown in the flow chart.
7.10 In view of above, it is to be stated that as per the practice and also seen in various cases, the said person (in this case appellant) charges the amount to provide such entries which is generally 2% of the total transactions. Therefore, considering that the appellant has been providing the facility to route these financial transactions, the 2% of the total amount is treated as undisclosed income of the appellant, not shown in its return of income. This comes to Rs. 1,47,00,000/-.
7.11 Since the details have been duly provided with respect to the referred companies and the additions are out of the ambit of provisions of section 68 of the Act due to the reason that these investors companies are held to be just a paper company or conduit in the case of other investors for providing entries and routing the finances, therefore, the addition to the extent of Rs. 1,47,00,000/- is sustained for charges received in providing such entries, not disclosed by the appellant. For the balance amount, the appellant gets a relief."
15. By and large similar nature of finding has been given by the Assessing Officer in all the appeals before us. In tabular form, the summary of the finding and observation of the Assessing Officer and the finding of the ld. CIT (As) in all the appeals are as under:-
351. Angel 2012-13 Section The assessee never came Appellant companies are Cement Pvt 68: forward to prove identity, having adequate reserves Ltd. Share creditworthiness & to make investment.
capital genuineness (ICG)of the
-Revenue's (SC) share transactions. The assessee has
Appeal premium The summons addressed to discharged its burden cast
- Rs. 66 contributors remained upon it to prove identity,
crores uncompiled with. creditworthiness &
Notice 133(6) returned back genuineness (ICG) of the
Other un-served from all the transactions(Page 37 -
payables parties (Page - 4, Para 3.2) CIT(A) order).
(current Summons returned back Investor companies have
liability) - un-served from three submitted documents to
Rs. 54.70 parties namely Cantabile prove the ICG of the
crores (Left), Sintex (No such firm), transactions. (Page 31 - 37
Supreme (no such firm) - CIT(A)'s order). The
Total: Rs. (Page- 4, Para 3.2) source of funds invested in
120.7 The assessee adopted a share capital and share
crores prevaricate and non-co- premium by each investor
operation attitude (Page 6, stands explained (Page 37
Para 3.5) - CIT(A) order)
The confirmations
submitted by the assessee The source of funds by the
are not even self-serving to investor companies in the
prove ICG of the appellant in its share
transactions. ICG of the capital stands explained.
transaction is not (Page 37 - CIT(A) order).
established. (Page 6, Para
3.5) All the investor companies
Simply furnishing PAN or are assessed to tax in their
Assessment particulars/ jurisdiction either in Delhi
address is not enough, as or in Mumbai. The copies
they do not facilitate cross of assessment have been
verification. (Page - 7, Para submitted(Page 37 - CIT(A)
3.6 - AO's order) order).
Genuineness and
creditworthiness of these The appellant company
parties remain unverified. has filed copies of bank
The assessee failed to statement, profit & loss
discharge its onus account, balance sheets to
completely. (Page - 7, Para establish source of funds
- 3.7 - AO's order) in hands of investor
No sufficient balance in companies(Page 37 -
bank accounts, cheque CIT(A) order).
issued to assessee cleared The AO contention in
by way of receipt of making the addition on
transfer entry from another ground that the notice U/s
associated concern, nature 133(6) and summons U/s
of transaction reveal they 131 could not be served is
are not real business not acceptable as the
transactions, similar to trade investor companies have
of an entry operator. Thus been assessed to tax U/s
amount received can be 143 of the Act, therefore
termed as 'bogus all the details must have
accommodation entry' been filed before their
received by assessee (Page - respective AO's. Therefore
7, Para - 3.7 - AO's order). it can be said that these
companies are very much
36
List of case laws relied upon by present at the given
the A.O address and has got all
necessary establishments
• CIT V NR Portfolio Pvt Ltd. (Page 37/38 - CIT(A)
• CIT V Nova Promoters and order).
Finlease Pvt Ltd. The AO did not bring any
• Kale Khan Mohd. Hanif V adverse material to reject
CIT. the explanations and
• CIT V Lachhman Das Oswal evidences submitted by
• Nanak Chandra Laxman Dass the appellant except non-
V CIT (1982) 140 ITR 151 compliance of 131 and
(All.) 133(6) (Page 38 - CIT(A)
• R Dalmia V CIT (1976) 113 order).
ITR 522 (Del.) Neither any person has
• CIT V Debi Prasad given any statement nor
Vishwanath Prasad (1968) has made any allegation
72 ITR 194 (SC) against these
• CIT V Hero Cycles Pvt Ltd. companies(Page 38 -
• CIT V Stepwell Industries Ltd CIT(A) order)
and Others. The reasons given by AO
are very generic in nature
• SumatiDayal V CIT (1995)
and not backed by any
214 ITR 801 (SC)
concrete evidence(Page 38
• CGT V Dr. George Kuruvilla
- CIT(A) order).
(1969) 74 ITR 328 (SC)
There was no cash deposit
• CIT V Joseph John (1967) 67
in the bank accounts of
ITR 74 (SC)
the parties from share
• RB Seth Champa Lal Swarup
capital received(Page 38 -
V CIT (1965) 60 ITR 493 (SC)
CIT(A) order).
• CIT V R Venkataswamy
Naidu (1956) 29 ITR 529 (SC) List of case laws relied upon by
• Sreelekha Banerjee V CIT CIT(A)
(1963) 49 ITR 112 (SC)
• AnrajNarainDass V CIT • MoD Creatiosn Pvt Ltd V
(1951) 20 ITR 562 (Punj.) Income Tax Officer
• A.D. Jayaveerapandia Nadar (2013) 354 ITR 282
V CIT (1964) 54 ITR 401 (Delhi)
(Mad.) • CIT V Kamdhenu Steel
• Shankar Industries V CIT and Alloys Ltd and
(1978) 114 ITR 689 (Cal.) Others 206 taxmann 254
• Oriental Wire Industries P Delhi
Ltd. V CIT (1981) 131 ITR 688 • CIT V Gangeshwari
(Cal.) Metals Pvt Ltd (2013) 30
• Sikri & Co. Pvt Ltd V CIT taxmann.com 328
(1977) 106 ITR 682 (Cal.) • CIT V Oasis Hospitalities
• VeljiDeoraj& Co. V CIT (2011) 333 ITR 119
(1968) 68 ITR 708 (Bom.) (Delhi)
• KM Sandhu & Sons Pvt Ltd V • ITO V Neelkanth
CIT (1999) 239 ITR 77 (Cal.) Finbuild ITA No.
• CIT V Kerala Roadlines 2821/Del/2009 dated
Corporation 01/04/2015
• Roshan Di Hatti V CIT • ITO V NC Cables Ltd
4122/Del/2009
• ITO V Rakam Money
Matters P. Ltd
2821/Del/2011
• ACIT V Kisko Castings
Pvt Ltd
• CIT V Fair Finvest Ltd
• CIT V Expo Globe India
Ltd.
37
2. Delight 2012-13 (i) Section Regarding addition on account
Resorts Pvt. 68: That the address mentioned share capital received:
Ltd. Share by assessee in letter dated
capital September 5, 2014 as "F-1- Replies filed by
-Revenue's (SC) - 10 200/13, Sec-13A, Vaishali, appellant stands
Appeal crores Ghaziabad, Uttar Pradesh - corroborated by replies
201010", notices sent at this in response to notice
Advance address U/s 142(1), 143(2) U/s 133(6) of the Act
received - and again 142(1) in the (Page - 24, Para - 3.1 -
66.56 month of November, 2014 CIT(A)'s Order).
crore received back un-served
with postal remarks That Imperative
(ii) Adhoc "unclaimed", "unclaimed" Buildwell is an
disallowa and "no such person" investment company
nce (50% respectively (Page - 2 - AO's and R&S as on March
of order) 31, 2011 are of Rs. 19.95
employee No explanation submitted crores (Page - 24, Para -
benefit with regard to following: 3.1 - CIT(A)'s Order).
and other • Business dealing with Analysis of Sc and R&S
expenses) the parties involved has also been done by
- Rs. 5.22 • Why interest not paid CIT(A), though CIT(A) has
lacs on huge loans(Page 4 not made any comment
- AO's Order) on it but they are
Transactions of heavy loans reasonable enough to
received without paying any make investment (Page
interest fails the test of - 24, Para - 3.1 - CIT(A)'s
human probability (Page 4 - Order)
AO's Order).
Mere proof of identity of a That the assessment of
creditor or that transaction both the companies has
was by cheque is not been done U/s 143(3) of
sufficient to discharge onus the Act (Page - 25, Para
lying on assessee to prove - 3.1 - CIT(A)'s Order)
genuineness of transaction
(Page 4 - AO's Order). Examination of Order
No interest is even paid to Sheet and assessment
parties who advanced hefty order reveals that AO
loans of about Rs. 30 crores perse has not given any
namely Paras Placement and direction to assessee to
Cantabile Minerals (Page 4 - produce the directors of
AO's Order). such company (Page -
The facts of the case indicate 25, Para - 3.1 - CIT(A)'s
that what is apparent is not Order).
real (Page 4 - AO's Order).
Substance of transaction Documents were filed
need be assessed by applying by appellant but AO did
taxing statute to determine not do any further
genuineness of a transaction verification or
(Page 4 - AO's Order). investigation to deny the
Transactions of advances evidences and
38
have been undertaken with explanationsof the
a purpose to defraud the Appellant (Page - 25,
revenue and is a colorful Para - 3.1 - CIT(A)'s
device (Page 4 - AO's Order).
Order). The assessee failed
to bring on record that why That Pace Iron is an
the Axis bank account is investment company
being maintained at Angul, and having SC of Rs 2.41
Orrisa, detail of the person crores and advances of
who maintains the account Rs. 32.7 crores as on
at such location (Page 4 - March 31, 2011 (Page -
AO's Order) 24, Para - 3.1 - CIT(A)'s
Bank account opened on Order).
March 22, 2012, major
advances received in bank There are no cash
account maintained at deposits in the bank
Orrisa only (Page 4 - AO's accounts of in case of
Order). All the bank accounts both the investors (Page
from where money - 24, Para - 3.1 - CIT(A)'s
transferred are apparently Order).
located at Angul, Orrisa
(Page 5 - AO's Order). All Group companies have
bank accounts are joint bank filed various details in
accounts including support of subscription
assessee's bank account made, replies U/s 133(6)
(Page 5 - AO's Order) filed by parties, AO
ICG of the transaction and having no credible
the investor are deeper and information to deny
obstructive than mere explanations of
completion of paper work or appellant with either
documentation (Page 8 - genuineness or
AO's Order). Assessee is a creditworthiness (Page -
private limited company, 30, Para - 3.3 - CIT(A)'s
neither came out with any Order).
public issue nor issued any
advertisement, still failed to Therefore it is held that
produce the persons who appellant has filed
invested towards share necessary details
capital shows that the regarding identity and
transactions are merely creditworthiness(Page -
accommodation entry (Page 30, Para - 3.3 - CIT(A)'s
- 8/9 - AO's Order) Order)
In a private limited company,
it is generally not difficult on
Regarding addition related to
part of assessee to produce
advances recived during the
persons who have invested
year :
substantially toward share
That the amount
capital (Page 9 - AO's
received as advance
Order). Sequence of events
have been adjusted
like, failure on assessee's
against sale of shares in
part to bring directors of
case of four companies
subscriber companies,
and balance refunded
failure to file future project
and wholly refunded in
reports, huge investments
case of one company
made into assessee
(Page - 31, Table Para -
company in the second year
4.1 - CIT(A)'s Order).
of operation, indicates that
what is apparent is not real
Appellant filed relevant
and only a colorable device
documents from the
to convert unaccounted
creditors (Page - 31,
money without paying any
Table Para - 4.1 -
39
taxes (Page 9 - AO's Order). CIT(A)'s Order)
There is no presumption
that a cash credit is genuine Creditors doing regular
merely because a payment business and advance
was made by cheque. adjusted against sale of
Assessing authority shall shares (Page - 31, Table
accept cash credit only if the Para - 4.1 - CIT(A)'s
transaction is true and Order).
genuine (Page 10 - AO's
Order). Assessment in case of
If the liability shown in the the most of the creditor
account is found to be bogus have been completed
and there is no plausible U/s 143(3) of the Act
and reasonable explanation (Page - 32, Table Para -
by the assessee, the amount 4.1 - CIT(A)'s Order).
can certainly be added to That AO did not conduct
income of the assessee (Page any further inquiry to
10 - AO's Order) suggest that creditors do
not have
Regarding expenses claimed and creditworthiness or
disallowed transactions are not
No evidence furnished in support genuine (Page - 32,
of expenses claimed as employee Table Para - 4.1 -
benefit and other expenses CIT(A)'s Order).
amounting to Rs 3.79 lakhs and
Rs. 6.22 lakhs being unverifiable Ratios of judicial
expenses (Page - 11 - AO's precedents discussed in
Order) previous ground (Share
capital) are equally
Case laws relied upon by A.O: applicable to this ground
of appeal. Therefore
• CIT-II V MAF Academy Pvt addition deleted. (Page -
Ltd (2014) 42 32, Table Para - 4.1 -
taxmann.com 377 (Delhi) CIT(A)'s Order)
• Nova Promoters
&Finlease, Delhi High Related to addition on
Court employees benefit expenses
• N. R. Portfolio (P) Ltd and other expenses:
[2014] 42 taxmann.com
339 (Delhi HC) The details produced during
• V.I.S.P. (P) Ltd. V appellate proceedings shows
Commissioner Of Income- that expenditure is incurred
Tax 265 ITR 202 (MP HC) for the business of the
company and bear a close and
intimate nexus with the
business of the company (Page
- 33, Table Para - 5 - CIT(A)'s
Order). Major portion of
expenditure incurred for
complying with statutory
formalities and compliances
necessary for operation of
company. Therefore AO is
directed to deleted the
disallowance (Page - 33, Table
Para - 5 - CIT(A)'s Order)
Case laws relied upon by
CIT(A)
• CIT V Lovely Exports 317
40
ITR 218 (SC)
• CIT V Fair Finvest Ltd
• CIT V Kamdhenu Steel
and Alloys Ltd 361 ITR
220 (Del. HC)
• CIT V Vrindavan Farms
(P) Ltd ITA NO. 71/2015
(Del. HC)
• CIT V Rakam Money
Matters ITA No. 778/
2015 (Del. HC)
• CIT V Gagandeep
Infrastrusctre Pvt Ltd
(Bombay HC)
3. Delight 2014-15 Section 68 The assessee company failed The ICG of transactions
Resorts Pvt Advance to file the requisite details have been established
Ltd received (Page 5, Para (6a) - AO's from the fact that both
during the order). companies are having the
Revenue's year The assessee has failed to closing balance of the R&S
Appeal Rs 37.70 discharge its onus to prove of Rs.261 crore (Janitor)
crores that the said transaction and Rs.65 crore (Bhisham)
was legitimate (Page 5, Para as on 31.03.2013. (Page 19, (6a) - AO's order). Para 3.4 - CIT(A)'s order) Closely held companies Shri Dinesh Kumar usually receive share capital Aggarwal, Director, M/s from friends, relatives and Janitor Infra attended the not from unknown third proceedings before CIT(A) parties. In the present case dated June 29, 2017 and there is no connection or furnished the new address, relationship between the explained the adjustment alleged subscribers and the of advance towards assessee, for advance purchase of shares, filed providers to become copy of accounts, order investors (Page - 6, Para 6(b) U/s 143(3) and also
- AO's order). explained the opening It is necessary to have some balance of Reserves and detail if not complete to Surplus being Rs 261 establish identity and crores (Page 18, Para 3.2) availability of funds and how Shri Rakesh Mehta, these unconnected parties Director, Bhisham Energy, decided to become investor attended the proceedings in absence of any business before CIT(A), furnished obligation(Page - 6, Para 6(b) the new address,
- AO's order) explained the adjustment No interest was paid, the of advance towards purpose of advance is purchase of shares in missing, huge fund subsequent year, filed transaction which clearly copy of accounts and also means dummy explained the opening transactions(Page - 6, Para balance of Reserves and 6(b) - AO's order). Surplus being Rs. 65 crores Both the companies have (Page 19, Para 3.3 meager income (Page - 6, There are no cash deposits 41 Para 6(b) - AO's order) in the bank account of These facts indicate and lenders, advances given reflect proper paperwork or are out of reserves documentation but available as on 31.03.2013 genuineness, (Page - 19, Para - 3.4, creditworthiness and CIT(A)'s order) identity are deeper and The present AO Ward 9(4), nd obstructive (Page 8, 2 Para) New Delhi was called in It may, as in the present CIT(A)'s office dated July case, required entail a 27, 2017 and was informed nd deeper scrutiny (Page 8, 2 of proceedings having been Para - AO's order) attended by the directors.
It would be incorrect to state The facts of case were that the onus stands discussed with AO in detail discharged if the transaction (Page - 19, Para - 3.4 - is done through banking CIT(A)'s order).
channels or account payee Both the companied have rd instruments (Page 8, 3 Para the requisite capacity to
- AO's order) lend, basis the position of funds as on March 31, Case laws relied upon by A.O 2013 and during the • Kale Khan Mohammad assessment year (Page -
Hanif V CIT (1963) 50 ITR 3.5, Para - 3.5 - CIT(A)'s
1,4 (SC) order)
• Sreelekha Banerjee V CIT CIT(A) has held that the
(1963) 49 ITR 112 (SC) additions if any be
• Nanak Chandra Laxman considered/ made in case
Dass V CIT (1983) 140 ITR of lenders and they have
151 (All.) requisite capacity to lend
• A. D. Jayaveerapandia as they have adequate
Nadar V CIT (1964) 54 ITR balances lying under share
401 (Mad.) capital and reserves,
• Oriental Wire Industries P therefore the addition
Ltd V CIT (1981) 131 ITR made in case of appellant
688 (Cal.) is unwarranted. (Page 20 -
• Sikri & Co. Pvt Ltd V CIT CIT(A)'s order).
(1977) 106 ITR 682 (Cal.)
• VeljiDeoraj& Co. V CIT
(1968) 68 ITR 708 (Bom.) CIT(A) has not relied upon the
• AnrajNarainDass V CIT case laws except in the case of
(9151) 20 ITR 562 (Punj.) Lovely Exports, on the basis of
• K. M. Sandhukhan& Sons which CIT(A) has held that
Pvt Ltd V CIT (1999) 107 addition, if any, may be
Taxman 402/ 239 ITR 77 considered in case of lenders.
(Cal.)
• Shankar Industries V CIT
(1978) 114 ITR 689 (Cal.)
• CIT V Kerala Road Lines
(1986) 162 ITR 669 (Ker.)
• Nova Promoters &Finlease
• CIT V Nipun Builders &
Developers [2013] 350 ITR
407 (Delhi)
4. Jawahar 2012-13 Section On perusal of bank All the ten investors are
Credit & 68: statement, it is observed submitting their return
Capital Pvt Share that subscriber companies of income, transactions
Ltd capital/ and individual investors did have been done through
share not have their own banking channel (Page -
Revenue's& premium creditworthiness, as the 34, Para - 7.3 - CIT(A)'s
Assessee's Rs. 73.50 money come into their Order).
42
Appeal crores account seldom rests for a The amendment of
day, finds its destination section 68 to look into
immediately. It seems an the source of source
accommodation entry to w.e.f. 01.04.2014 cannot
evade tax (Page 6, Para be held to be
3.6.1 - AO's Order) retrospective in nature
Assessee company has not (Page - 34, Para - 7.4 -
done any business activity, CIT(A)'s Order)
major part of turnover is Appellant could not
derived from dividend and justify payment towards
miscellaneous income (Page investment in shares
6, Para 3.7.1 - AO's Order) and similar amount
Past performance totally invested by appellant
ignored for valuation of company (Page 35, Para
company, did not bring 7.5 - CIT(A)'s order)
anything on record to Appellant could not
justify bright future produce directors for no
prospect of the company cogent reason (Page 75,
which could enhance its Para 3.5 - CIT(A)'s order)
profitability leading to Investors not carrying
higher valuation (Page - 7, any worthwhile activity
Para - 3.7.2, Sub Para - (a)- (Page 35, Para 7.5 -
AO's Order) CIT(A)'s order)
EPS is negative, major net Source and destination
income constitutes companies are having
miscellaneous income common address (Page
nothing to do with 35, Para 7.5 - CIT(A)'s
objectives of company, order)
difficult to digest why Appellant company is
investors would invest in not showing any
such a company which has worthwhile income and
no future objectives. has limited reserves and
Prima facie appears that surplus (Page 35, Para
subscribers are well aware 7.5 - CIT(A)'s order)
of nature of transactions Appellant company has
(Page - 8 - AO's order) not given any
Assessee failed to justify satisfactory reply
charging of premium (Page regarding fund flow
- 8 - AO's order) (Page 35, Para 7.6 -
Transaction between CIT(A)'s order)
assessee company and its Though the
investor's are unusual in documentation is
nature and character, complete in all respects
transactions being off- like banking channel,
market unable to verify, confirmation etc
conclusion leading this considering inability to
transaction to be a sham produce directors, it
transaction is that money seem that appellant
received again invested in company and its
form of share capital (Page investor are nothing but
8, Para 3.8 - AO's order) a creation of paper
Assessee did not explain companies to transfer
case even after so many funds from Bhushan
opportunities (Page 8, Para Steel Ltd through
3.8 - AO's order) appellant company
The onus is on the assessee (Page 36, Para 7.7 -
to prove the ICG of the CIT(A)'s order)
transactions. The assessee No reserves/ No funds
has failed to discharge its nor any business, it is
onus(Page 10, Para 3.9.1 - nothing but routing of
AO's Order). funds by Bhushan Steel
43
The assessee has also failed (Page - 36, Para 7.8 -
to submit the documents CIT(A)'s order)
related to credits in the The basic requirement
books(Page 13, Para 3.9,7 - to justify the identity,
AO's order). creditworthiness and
Merely filing some papers genuineness of the
in support of transaction transaction has been
cannot be termed as prima facie
genuine transaction(Page established.(Page - 36,
13, Para 3.9,7 - AO's order). Para 7.9 - CIT(A)'s order)
Neither the appellant
Case laws relied upon by the A.O company nor the
investors are ultimate
• McDowell & Co Ltd. [1985] beneficiary of the
154 ITR 148 transactions but there is
• Workmen of Associated routing of funds from
Rubber Industry Ltd V Bhushan Steel Ltd. The
Associated Rubber Industry funds received are given
Ltd [1986] 157 ITR 77 (SC) to other companies as
• CIT V Durga Prasad More 82 soon as they are
ITR 540 (SC) received(Page - 36, Para
• Bombay Oil Industries Ltd V 7.9 - CIT(A)'s order)
DCIT [2000] 82 ITD 626 Therefore, the CIT(A)
• CIT V Sree Meenakshi Mills has deleted addition of
Ltd 63 ITR 609 Rs. 73.5 crores and
• CIT V Precision Finance Ltd made addition of Rs.
(1994) 208 ITR 405 1.74 crores @ 2 percent
• Bharati Pvt Ltd V CIT W.B. for routing these
(1978) 111 ITR 991 transactions of having
• CIT V Frostair (P) Ltd ITA No. been providing a fluid
183 0f 2002 and 1638 of mechanism from one
2006 company to another.
• CIT V Youth Construction (Page - 37, Para 7.10 -
(P) Ltd 44 taxmann 364 CIT(A)'s order)
• Vaibhav Cotton Co Pvt Ltd,
Indore V AssesseeITA No.
253/Ind/2010 Indore
Bench
• Bombay Oil Industries ltd V
DCIT [2000] 82 ITD 626
• Mancherial cement V
Income Tax Officer ITA No.
115/Hyd/2012
• Nipun Builders and
Developers Pvt Ltd )Delhi
HC) ITA No. 120/2012
• Nova Promoters &Finlease
Pvt Ltd
5. Jingle Bells 2012-13 Section 68 No replied received from The assessments U/s
Aluminium Share parties mentioned at Para 143(3) of the Act in case
Pvt Ltd capital/ 3.3(Page 3 - AO's order) of investor companies
share Replies received from 5 out have been completed
Revenue's & premium of 7 parties, incomplete accepting the contention
Assessee's Rs. 62 replies received for 6-7 of the said companies
Appeal crores points out of 11 points and no major addition
asked, replies received in has been made on this
same pattern, even print count (Para 7.3 - Page 37
outs are same. So - CIT(A)'s order)
genuineness of Though the
transactions are doubtful documentation is
44
(Para 3.7/ 3.7.1, Page 6 - complete in respect of
AO's order) investor companies, the
Speed post booked from findings of the AO that
Delhi but registered office non availability of investor
in Punjab and Chandigarh companies at the given
(Para 3.7.2 - Page 6 - AO's address, inability to
order) produce directors, no net
It shows that assessee worth, no justification for
itself replied to notices such a high premium,
sent U/s 133(6), IG is transferring of funds of
dubious (Para 3.7.3 - Page Bushan Steel to various
7 - AO's order) companies, shows that
Registered offices of investor and appellant
investor companies are company are nothing but
located in different cities a creation of paper
but are having their banks companies.(Page 39 -
operated from Delhi just to Para 7.8 - CIT(A)'s order)
facilitate assessee (Para CIT(A) has observed that
3.7.4, Page 7 - AO's order) neither the appellant
Summons were issued to company nor the
directors of Imperative investors are ultimate
Buildwell, Cantabile beneficiary of the
Minerals and Mining and transactions but there is
Classic Transportation, as routing of funds from
per inspector's report no Bhushan Steel Ltd. The
such company exist at such funds received are given
address (Para 3.5, Page 3 - to other companies as
AO's order) soon as they are
Subscriber companies did received.
not have creditworthiness The basis requirement to
as money seldom rests for justify ICG of transaction
a day in their accounts, has prima facie been
finds its destination established (Page - 39,
immediately; investor Para 7.10 - CIT(A)'s order)
companies have no profit Looking to the fact and
making apparatus no analysis, these
business activity. It is just transactions are found to
an accommodation entry to be routing finances of
evade taxes (Para 3.8.1, Bhushan Steel and these
Page 8 - AO's order) are just paper companies
Assessee company has very where appellant company
nominal business profit, is not the ultimate
(3.87) negative EPS, major beneficiary (Page - 39,
miscellaneous income Para 7.10 - CIT(A)'s order)
nothing to do with Considering the
business objectives of companies are paper
assessee company, prima companies and appellant
facie appears that assessee has been providing
and as well as subscribers facility to route these
are well aware about transactions, the 2% of
nature of transactions total amount (comes to
(Para 3.9.1, Page 9/10 - Rs. 1.24 cr) is treated as
AO's order) undisclosed income of
That the credits of Rs 62 the appellant, not shown
crores are hit by Section 68 in return of income (Page
of the Act.(Para 3.10.9, 40, Para 7.11 - CIT(A)'s
Page 16 - AO's order). The order)
onus is on the assessee to Since details have duly
prove the ICG of the been provided with
transactions.(Para 3.10.8, respect to referred
Page 15 - AO's order). The companies, the additions
45
assessee has failed to are out of ambit of the
discharge its onus. (Para provisions of section 68
3.10.1, Page 12 - AO's of the Act. Addition to
order). the extent of Rs 1.24
The assessee has also failed crore is sustained and for
to bring directors of the the balance amount the
investor company (Para appellant gets a relief
3.10.2, Page 12 - AO's (Page 40, Para 7.11 -
order) CIT(A) order)
Merely filing some papers Therefore, the CIT(A) has
in support of transaction deleted addition of Rs. 62
cannot be termed as crores and made addition
genuine transaction.(Para of Rs. 1.24 crores @ 2
3.10.9. Page - 16 - AO's percent for routing these
order) transactions of having
been providing a fluid
Case laws relied upon by the A.O mechanism from one
• McDowell & Co Ltd. [1985] company to another.
154 ITR 148
• Workmen of Associated .CIT(A) has reiterated the
Rubber Industry Ltd V following judgments in his
Associated Rubber Industry order at Page 37 reproduced
[1986] 157 ITR 77 (SC) hereinafter:
• CIT V Sree Meenakshi Mills
Ltd 63 ITR 609 (SC) • CIT V Lovely Exports
• CIT V Durga Prasad More 82 299 ITR 268
ITR 540 (SC) • CIT V Kamdhenu
• Bombay Oil Industries Ltd V Alloys and Steel 206
DCIT [2000] 82 ITD 626 Taxmann 254
• CIT V Frostair (P) Ltd ITA No. • CIT V Nova Promoters
183 0f 2002 and 1638 of and Finlease Pvt Ltd
2006
• CIT V Youth Construction
(P) Ltd 44 taxmann 364
• CIT V Precision Finance Pvt
Ltd (1994)208 ITR405
• Nova Promoters &Finlease
(P) Ltd (High Court of Delhi)
• Mancherial cement V
Income Tax Officer ITA No.
115/Hyd/2012
• Nipun Builders and
Developers Pvt Ltd )Delhi
HC) ITA No. 120/2012
• Vaibhav Cotton Co Ltd
Indore V Assessee ITA No.
253/Ind/2010 Indore
Bench
6. Kasper 2012-13 Section 68 Assessee has not filed any Basic requirement to
Information Share confirmation from parties, justify the identity,
Technology capital/ but submitted a chart creditworthiness and
Pvt Ltd share showing increase in share genuineness (ICG) of the
- premium capital & share premium, transaction prima facie
Revenue's& Rs. 46 giving names & addresses of established.
Assessee's crores parties (Page 5 & 6, Para 3, Neither the appellant
Appeal sub para 3(A)(i) -of AO's company nor the investors
(Share order). are ultimate beneficiary of
Capital 8 In order to verify ICG of the transactions but there
cr and introducers of share capital/ is routing of funds from
premium premium, notices U/s Bhushan Steel Ltd. The
46
thereon 38 133(6), which remained un- funds received are given to
cr) complied, no confirmation other companies as soon
ever received not even till as they are received.
date of passing of order. Investor companies
(Para 3(A)(ii) - Page 6 - submitted their tax
AO's order). returns, provided
Assessee failed to bring the confirmations,
directors of the investor transactions done through
company along with books bank, assessment U/s
of accounts and 143(3) completed, no
confirmation to prove the major addition have been
identity of the made on share capital/
contributors. premium (investment)
No confirmations and count.
return/PAN of parties - Nothing mentioned in the
cross verification not assessment order
possible - onus is on the regarding any statement
assessee to prove the ICG - of any person, providing
assessee failed to discharge entry. No material brought
onus. - assessee's own on record to conclusively
money routed these prove the share capital
concerns (Para 4(A)(i) - originated from appellant
page 8 - AO's order). company returned in the
Evidence available form of share capital.
impeaching the credentials No mandate of the law to
of the "investor companies" look into the source of
and their "directors" (Para source for the year under
4(A)(i) - page 8 - AO's consideration. The
order). amendment of section 68
Amt received through w.e.f. 01.04.2013 cannot be
private placement - held, or interpreted, to be
contributors personally retrospective in nature
known to assessee - must Assessee cannot be
be aware of whereabouts - fastened with the liability
corporate veil needs to be u/s 68 unless a causal
connection between the
lifted - assessee converted
cash deposit in the bank
its unaccounted funds in
and the assessee is
the form of share capital established. (relying upn
from 4 concerns Lovely Exports and
Assessee failed to submit Kamdhenu Steel Para 7.4
documents related to Page 22 & 23 of CIT(A)'s
credits in the books - order)
assessee provided various Where the complete
addresses of alleged particulars of the share
contributors of share applications are furnished
application only to mislead to the AO and the AO has
dept. (Para 4(A)(vi) -AO's not conducted any
order) enquiry into the same or
Differentiated Lovely has no material in his
Exports (SC) on ground possession to show that
that it is not having binding those particulars are
effect under\ Article 141 of false, then no addition
the constitution of India - can be made in the hands
summary dismissal by SC of the company u/s 68.
without laying any law is (Para 7.4 Page 23 CIT(A)'s
not declaration of law. For order)
this relied upon S. The appellant company and
Shanmugavel Nadar. V its investor companies are
State of Tamil Nadu [2003] nothing but a creation of
263 ITR 658 (SC) paper companies to transfer
its funds from alleged
Case laws relied upon by the Bhushan Steel Ltd. to
47
A.O various companies, through
• Kale Khan Mohammad the appellant company and
Hanif V CIT (1963) 50 ITR 1 its investor companies.
(SC) The appellant company has
• CIT V Lachhman Das Oswal not given any cogent
(1980) 126 ITR 446 (P&H) reasoning for the fund
• CIT V Hero Cycles Ltd&Ors flow. Appellant company
(1997) 228 ITR 463 (SC) is only routing
• CIT V Stepwell Industries transactions of alleged
Limited &Ors (1997) 228 Bhushan Steel Ltd. and not
ITR 171 (SC) the ultimate beneficiary. It
• SumatiDayal V CIT (1976) has further passed on
113 ITR 522 (Del). funds to other companies.
• R Dalmia V CIT (1976) 113 (Para 7.3 & 7.8, page 23 &
ITR 522 (Delhi) 24)
CIT(A) deleted addition of
• CIT V Devi Prasad
Rs. 46 crores and made
Vishwanath Prasad (1968)
addition of Rs. 92 lakhs @
72 ITR 194 (SC)
2 percent as undisclosed
• Sreelekha Banerjee V CIT
income received by the
(1963) 49 ITR 112 (SC)
appellant for routing these
• Roshan Di Hatti V CIT
transactions of having
(1977) 107 ITR 938 (SC)
been providing a fluid
• CIT V Kerala Roadlines
mechanism from one
Corp. (1986) 162 ITR 669
company to another.
(Ker.)
Addition enhanced by Rs
• Active Traders Pvt Ltd 92 lakhs for routing
[1995] 214 ITR 583 (Cal.) transactions. (Para 7.9 &
• Sri Krishna V CIT 142 ITR 7.10, page 24)
618 [All]
• Rashibari Tobacco Case laws relied upon by the
Processors Ltd. V DCIT CIT(A)
[1997] 57 TTJ 120 (Ahd.)
• RidhiSidhi Commercial • CIT vs. Lovely Exports
Co. Ltd V ACIT [1998] 62
Pvt. Ltd. 299 ITR 268
TTJ 710 (Del.)
• CIT vs. Kamdhenu
• A GovindarajuluMudaliar
Steel and Alloys Ltd.
V CIT [1958] 34 ITR 807
(SC) 206 Taxman 254
• CIT V Korlay Trading Co. • CIT vs. Nova
Ltd. [1998] 230 ITR 820 Promoters and
(Cal.) Finlease (P) Ltd.
• CIT V Precision Finance (Delhi HC)
Ltd. (1994) 208 ITR 465
(cal.)
7. Kaspers 2013-14 Section 68 The assessee company has In a detailed discussion in
Information Share not discharged its onus to assessment order AO has
Technology capital/ prove genuineness and correctly held that amount
Pvt Ltd share creditworthiness of of Rs. 16 crores in
premium transactions.(Para 4.5.1, undisclosed income of the
Assessee's Rs. 16 Page 5 - AO's order). appellant. (Para 4, Page 32 -
Appeal crores The assessee company has CIT(A)'s order)
failed to produce the AO has discussed in detail
directors of the investor the reasons for addition of
company and to prove the Rs. 16 crores.(Para 4, Page
identity of the investor 32 - CIT(A)'s order)
company.(Para 4.6.1, Para The AO has discussed that
5- AO's order). the appellant has failed to
The assessee has not done establish ICG of the
any business activity during transaction. (Para 4, Page 32
the year under assessment - CIT(A)'s order).
48
and not received any The submissions filed by the
business income except appellant have been
dividend income Rs. 6.65 considered and not found to
lakhs and profit on sale of be tenable and the case
trade & non-trade laws cited by the appellant
investment of Rs 2.32 lakh are distinguishable in
and Rs 15 thousand facts.(Para 4, Page 32 -
respectively.(Para 2 Page 2, CIT(A)'s order)
AO's order). Reply U/s 133(6) not
Both the investors to received (Para 4.2.3.1, Page
whom 133(6) and 131 were 22).
issued, nobody attended Summons U/s 131 not
summons. (Para 4.3, page 4 attended (Para 4.2.3.1, Page
- AO's order). 22)
Both the parties have Company has not done any
partially replied (four out of business but has generated
seven ques), replies filed in income from dividend and
same pattern, from same sale of investment in the
post office, office in East instant year, previous
Delhi, reply came from R.K. assessment year and two
Puram, therefore subsequent years Ay 2013-
genuineness is doubtful 14, AY 2012-13, AY 2014-15
(Para 4.1 & 4.4.1, Page 4- and AY 2015-16
AO's order) No reason to interfere in the
The assessee has ignored order of the AO. CIT(A) has
the valuation criteria of relied upon the finding of
past performance for the AO that the assessee
valuation of the has failed to prove the ICG
company.(Para 4.6.3, Page of teh transactions.
5- AO's order).
It is common sense that Case laws relied upon by the
past performance should CIT(A)
be given suitable weight
age for valuation of • Navodaya Castle [56
company and its shares but taxmann.com 18 (SC)]
same has been totally • CIT V Sophia Finance Ltd
ignored in the instant case. 205 ITR 98 (Del.)
(Para 4.6.3, Page 5- AO's • N. R. Portfolio Pvt Ltd [87
order) DTR 162 (Del)]
The assessee has brought • Titan Securities Ltd. 357
nothing on record to justify ITR 184 (del)]
its bright future prospect to • Globus Securities and
increase profitability and Finance Pvt Ltd [224
ultimately increasing its Taxman 237 (Delhi)]
valuation.(Para 4.6.3, page
• Onassis Axles Private
5 - AO's order.
Limited [364 ITR 53
Difficult to digest why
(Delhi)]
investor invested in such a
• Focus Exports Pvt Ltd
company which has no
[111 DTR 0012 (Del)]
future for running any
• Rathi Finlease Ltd (215
profit (Para 4.6.3, Sbu-Para
CTR 429 MP)
(b), page 6 - AO's order)
• Korlay Trading Co. (232
Prima facie appears that
ITR 820 (Cal))
subscribers and assessee
company are well aware of • SumatiDayal (214 ITR 801
transactions (Para 4.6.3, (SC))
Sbu-Para (C), page 6 - AO's • Power Drugs Ltd (245 CTR
order) 623 (P&H))
The transaction entered • Azeem Investment Pvt Ltd
into by the assessee is sham (252 CTR 0217 (Del.))
transaction, the credit of • Major Metals Ltd (359 ITR
450 (Bom))
49
funds in the form of share • Independent Media Pvt
capital/ share premium Ltd (25 taxmann.com 276
being used for investing in (Delhi))
other companies at • Neelkanth Ispat Udyog
premium.(Para 4.6.4 Sub- Pvt Ltd (81 DTR 0214)
Point (3) Page 6/7 - AO's • Frostair Pvt Ltd [92 DTR
order). 393 (Del)]
Efforts made by assessee to • Rajani Hotels Ltd [79 DTR
change the color of 185 (Mad)]
transaction and not • MAF Acedemy Pvt Ltd
justified it case in spite of [361 ITR 02858 (Delhi)
opportunities(Para 4.6.4
Sub-Point (4) Page 6/7 - • Tarika Investment
AO's order). Properties Pvt Ltd [221
The case of the assessee for taxmann 0014 (Del)]
the AY 2012-13 is also
pending disposal in which
• Empire Buildtech Pvt Ltd
addition on same ground
[366 ITR 110 (Delhi)]
was made and the assessee
has failed to discharge its
onus because merely filing • Kundan Investment Ltd
some papers in support of (263 ITR 626 (Cal))
transaction cannot be
termed as genuine • Nova Promoters
transaction.(Para 4.7.8 Page &Finlease (P) Ltd (342 ITR
11 - AO's order) 169 (Del))
Case laws relied upon by the A.O • Ultra Modern Exports Pvt
• McDowell & Co Ltd. [1985] Ltd [220 taxman 165
154 ITR 148 (Delhi)]
• CIT V Durga Prasad More 82
ITR 540 (SC)
• Workmen of Associated
Rubber Industry Ltd V
Associated Rubber industry
Ltd [1986] 157 ITR 77 (SC)
• Bombay Oil Industries Ltd V
DCIT [2000] 82 ITD 626
• CIT V Sree Meenakshi Mills
Ltd 63 ITR 609
• CIT V Frostair (P) Ltd ITA No.
183 0f 2002 and 1638 of
2006
• CIT V Youth Construction (P)
Ltd 44 taxmann 364
• Bombay Oil Industries Ltd V
DCIT [2000] 82 ITD 626
• Mancherial cement V
Income Tax Officer ITA No.
115/Hyd/2012
• Nipun Builders and
Developers Pvt Ltd (Delhi
HC) ITA No. 120/2012
• Nova Promoters &Finlease
Ltd (P) Ltd [2012] 206
Taxman 207
• CIT V Precision Finance Pvt
Ltd (1994) 208 ITR 405
28. LandskyReal 2013-14 Section 68 Regarding share capital of Rs. 16 No reason to interfere with
Estate Pvt Share crores: the AO on the issues and AO
50
Ltd Capital - The assessee company has has already discussed in
Rs. 16 not discharged its onus to detail(Page -, 27, Para -
Assessee's crores prove genuineness and 4.2.3.6 - CIT(A)'s Order).
Appeal creditworthiness of
Advances transactions even after so AO has discussed that the
received - many opportunities (Page - appellant has failed to
Rs. 2.6 4, Para 4.11). discharge the onus cast
crores The assessee company has upon U/s 68 of the Act by
failed to produce the failing to prove the ICG of
directors of the investor the transactions(Page -, 27,
company prove the identity Para - 4.2.3.6 - CIT(A)'s
of the investor Order).
company(Page - 4, Para
4.10). The submissions filed by the
The assessee has not done appellant have been
any business activity during considered and are not
the year under assessment found tenable. The case
and in subsequent laws cited by the appellant
assessment years also. i.e, AY are distinguishable in
2014-15 & AY 2015-16(Page facts(Page -, 27, Para -
- 4, Para 4.12). 4.2.3.6 - CIT(A)'s Order).
The assessee has ignored the
valuation criteria of past CIT(A) distinguished Lovely
performance for valuation of Exports [216 CTR 195] and
the company(Page - 4, Para Gourdin Herbals India Ltd
4.12). ITA No. 665/2009 dated Sep
The registered office of the 17, 2009
investor companies
(Winfiled and Quadrel) are Case laws relied upon by the
located in Dilshad Garden CIT(A)
and West Vinod Nagar
(situated in east Delhi) but
• NR Portfolio Pvt Ltd [96
they have sent the part
DTR 0281 (Delhi)]
replies from RK Puram post
• CIT V Nova Promoters
office and pattern of both
&Finlease (P) Ltd [ITA No.
the replies are same. They
342 of 2011]
may have been sent by a
• GKN Driveshafts (India)
common person. Therefore,
genuineness is Ltd. V ITO (259 ITR 19) (SC)
doubtful.(Page 3, Para 4.4, • Navodaya Castle [56
4.5 - AO's Order). taxmann.com 18 (SC)]
The assessee has failed to (distinguishing Lovely
prove the ICG of the exports)
transaction(Page - 9, Para • CIT V Sophia Finance Ltd
5.4 - AO's Order). 205 ITR 98 (Del.) (F.B.)
The assessee has brought • Titan Securities Ltd [357
nothing on record to justify ITR 184 (Del)]
its bright future prospect to • MAF Academy Pvt Ltd [361
increase profitability and ITR 02858 (Delhi)]
ultimately increasing its • Tarika Properties
valuation(Page - 4, Para Investment Pvt Ltd [221
4.12). Taxman 0014 (Del) ]
Transaction between • Nova Promoters and
assessee company and its Finlease Pvt Ltd (2012) 342
investor is unusual in nature ITR 169 (Delhi)
and character. • Globus Securities and
The money that comes to the Finance PVt Ltd [224
bank account of entry Taxman 237 (Delhi) ]
operators seldom rests for a • Focus Exports Pvt Ltd [111
day and immediately finds its DTR 0012 (Del) ]
destination. The beneficiary • Rathi Finlease Ltd (215 CTR
51
who gets such money does 429 MP)
not give back any dividend or • Empire Buildtech Pvt Ltd
share of profit or interest to [366 ITR 110 (Delhi)]
entry operators. (para 416, • Onassis Axles Private
page 7) Limited [364 ITR 53 (Delhi)]
Merely filing some papers in • Kundan Investment Ltd
support of transaction cannot (263 ITR 626) (Cal)
be termed as genuine • Korlay Trading Co. Ltd (232
transaction. (Page - 8, Para ITR 820 (Cal))
4.21). • SumatiDayal (214 ITR 801
(SC))
Regarding advances of Rs 2.6 • Power Drugs Ltd. (245 CTR
crores received from Cantabile 623 P&H)
Minerals and Angel Cement: • Azeem Investment Pvt Ltd
The notices sent U/s 133(6) (252 CTR 0217 Del)
to the parties who advanced • Major Metals Ltd (359 ITR
money to the assessee 0450 (Bom))
during the year under • Independent Media Pvt Ltd
consideration returned (25 taxmann.com 276
unserved. (Delhi))
Although their reply has been
• Neelkanth Ispat Udyog Pvt
sent from RK Puram post
Ltd (81 DTR 0214)
office (registered address is
• Frostair Pvt Ltd [92 DTR
in chawri bazar) on same
393 (Del)]
pattern and at same time.
• Rajani Hotels Ltd [79 DTR
This has created doubt
185 (Mad)]
about their genuineness (
• Ultra Modern Exports [220
Page 9, Para 5 - AO's Order)
Taxman 165 (Delhi)]
Efforts made to serve
summons but no such
company exist at the given
address( Page 9, Para 5.1 -
AO's Order)
Assessee failed to prove ICG
of the transactions ( Page 9,
Para 5.4 - AO's Order)
Case laws relied upon by the A.O
• McDowell & Co Ltd. [1985]
154 ITR 148
• Workmen of Associated
Rubber Industry Ltd V
Associated Rubber Industry
[1986] 157 ITR 77 (SC)
• CIT V Durga Prasad More 82
ITR 540 (SC)
• Bombay Oil Industries Ltd V
DCIT [2000] 82 ITD 626
• CIT V Sri Meenakshi Mills Ltd
63 ITR 609
• CIT V Frostair (P) Ltd ITA No.
183 0f 2002 and 1638 of 2006
• CIT V Youth Construction (P)
Ltd 44 taxmann 364
• Bombay Oil Industries ltd V
DCIT [2000] 82 ITD 626
• CIT V Precision Finance Pvt Ltd
(1994) 208 ITR 405
• Bharati Pvt Ltd V CIT W.B.
• (1978) 111 ITR 991 (Cal.)
• Mancherial cement V Income
52
Tax Officer ITA No.
115/Hyd/2012
• Nipun Builders and Developers
Pvt Ltd )Delhi HC) ITA No.
120/2012
• CIT V Nova Promoters
&Finlease Pvt Ltd [2012] 206
Taxman 207
• Vaibhav Cotton Pvt Ltd, Indore
V Assessee ITA No.
253/Ind/2010
9. Sintex 2012-13 Section 68 Out of 10 parties to whom CIT(A) has made analysis
Consumer Share notice U/s 133(6) were of the net worth of the
Electronics capital/ issued, 7 returned unserved, investor companies,
Pvt Ltd share reply received from 2 and which is running in
premium one party did not reply. crores, enough to make
Revenue's (Page 5 - AO's order) investment but has made
Appeal Rs. 78.228 The returned income of M/s no comment in its order
crores Stance Consumer Electronics (Table at page 22 -
and Immense Minerals is Rs CIT(A)'s order)
413 and Rs. 4,43,811/- and AO has not brought any
their creditworthiness of adverse material to reject
investment is highly the explanations and
unlikely. Therefore, it is evidences submitted by
treated as assessee's own the appellant.
concealed income. (Page 6 -
AO's Order) It is not the case of Ld.
Because the assessee could AO that any person has
not produce the principal given any statement or
officer(s) of the investor made any allegation
companies and notices sent against these companies
U/s 133(6) returned or no (Page 23 - CIT(A)'s order).
reply is received lead to a
conclusion that the said The reasons given by AO
transaction is not genuine are generic in nature and
and the assessee has not backed by any
introduced his own money concrete evidence. (Page
in the garb of share capital/ 23 - CIT(A)'s order)
share application.(Page 6 -
AO's order) No cash deposit in the
Notices issued to majority of bank accounts of investor
the parties returned companies for making
unserved except in case of investment in the
three parties of which reply appellant company (Page
was received from two 23 4- CIT(A)'s order).
parties only(Table at Page 5 -
AO's order). The appellant company
Out of the parties who has allotted shares for
replied to notice sent U/ s the application money
133(6) their received by it (Page 24 -
creditworthiness is highly CIT(A)'s order).
unlikely basis their returned
income of Rs 413/- and Rs.
Depositors have given
4,43,811/- and the amount
confirmation, provided
contributed by them was Rs.
their income tax returns
8,70,00,000 each (Page 6 -
entire amount received
AO's order).
through normal banking
The assessee neither has
channels (Page 23/24 -
brand value nor it has any
CIT(A)'s order).
past performance history
53
nor any future prospect not The appellant has
any such asset which would established the ICG of the
increase its profitability to transactions.(Page 27 -
attract such huge CIT(A)'s order).
premium.(Page 6 - AO's
order) Onus cast upon the
In view of above share appellant with regard
capital and share premium is duties enjoined by virtue
being added back as its own of cash credit stands
concealed income introduced fulfilled and discharged,
in the form of share capital cannot be said that
and share premium.(Page 6 - appellant failed to
AO's order) discharge
creditworthiness and
genuineness (Page 24 -
CIT(A)'s order).
No adverse inference is
warranted or sustainable
(Page 24 - CIT(A)'s order).
The shares issued as
bonus shares have not
brought any inflow of
income which is nothing
but the credit in the
books of accounts of the
company, therefore
when no sum has been
credited, addition cannot
be made U/s 68 of the
Act.(Page 28 - CIT(A)'s
order). The amount of
issue of bonus shares
does not represent any
fresh credit but only a
transfer entry
representing
capitalization of reserves
and surplus and is not hit
by section 68 of the
Act.(Page 28 - CIT(A)'s
order)
Case laws relied upon by the
CIT(A)
• CIT V Lovely Exports [2008]
216 CTR 195 (SC)
• CIT V Orrisa Corporatiosn
Pvt Ltd Pvt Ltd [(1986) 159
ITR 78 (SC)]
• CIT V Oasis Hospitalities P.
Ltd [(2011) 333 ITR
119(Delhi)]
• CIT V Paras Cotton Co
[(2007) 288 ITR 211 (Raj.)]
• CIT V Kamdhenu Steel &
Alloys Ltd & Others [(2012)
206 taxman 254 (Delhi)]
54
• CIT has made analysis of
the judgment in the case of
"Nova Promoters
&Finlease (P) Ltd (342 ITR
169 (Del))" and has
reached a conclusion that
appellant through various
documents submitted to
establish ICG, it would
constitute acceptable
proof or acceptable
explanation by the
assessed. (Page 26 -
CIT(A)'s order)
10. Starlight 2012-13 Section 68 The assessee failed to CIT(A) has made analysis
Consumer Share discharge its onus. In such a of the net worth of the
Electronics capital/ case the source and nature investor companies
Pvt Ltd. share of transaction need to be which is fair enough to
premium - proved beyond doubt.(Page make investment.
Revenue's Rs. 32.25 7 - AO's order) Although CIT(A) has not
appeal crores As the replies received so commented upon the
late after the assessee was same. (Page 31 Table -
Other apprised about the same, CIT(A) order)
liabilities - there is a possibility that AO has not brought any
Rs Rs. assessee itself has sent the adverse material to
30.18 replies in response to notice reject the explanations/
crores U/s 133(6), therefore it evidences filed by the
shows the IG as dubious. appellant.
Total (Page 4 - AO's order) It is not the case of AO
addition - Basis the inspectors report that any person has given
Rs. 62.43 there is no such company, any statement or made
crores no signboard, neighbor also allegation against these
revealed that they are not companies.
aware about any such The reasons given by AO
company. Incomplete replies are very generic and not
received that too only after backed by any concrete
assessee was apprised about evidence (Page - 31/43 -
non-compliance to notice U/s CIT(A)'s order)
133(6) (Pag4 - CIT(A)'s order) No cash deposit in the
No compliance to the bank accounts of investor
summons issued to the companies for making
director U/s 131 dated investment in the
February 26, 2015. assessee company (Page Assessee offered no 31/32 - CIT(A)'s order) explanation as to why the The appellant has investors chose to make furnished income tax investment in assessee's returns, BS, bank company when there is no statement of scope for making an exit out shareholders and share of investment. (Pafe 7 - AO's application money and order). Assessee company their source had been has neither shown satisfactorily explained remarkable performance nor (Page 46 - CIT(A)'s order) has any strong asset base, Entire amount received therefore transaction cannot through normal banking be held as genuine. (Page 7 - channels, confirmation AO's order). filed by parties, no proof Merely that the transaction of evidence to suggest 55 was conducted through that amount actually proper banking channel does emanated from assessee not substantiate the company, shares allotted genuineness of for application money transaction.(Page 6 - AO's received (Page 32/43 -
order) Cit(A) order)
Since the payments were Onus cast upon the
transferred to other appellant with regard
companies as and when they duties enjoined by virtue
were received, the of cash credit stands
creditworthiness of the fulfilled and discharged,
investor does not in any way cannot be said that
get established. The bank appellant failed to
accounts of all the investors discharge
are in same branch, no profit creditworthiness and
making apparatus, no genuineness (Page 32/44
business. - CIT(A)'s order)
It seems it is just an
accommodation entry just to No adverse inference is
evade tax. (page 5 - AO's warranted or sustainable
order). (Page 32/44 - CIT(A)'s
Amount has been received order). There is no denial
through private placement, at any stage of
which means contributors assessment proceedings
were personally known to by any of the subscriber
assessee. Since the existence of share capital of having
of the investors could not be deposited money in the
proved, there is no question appellant company (Page
of taking cognizance of the 43 - CIT(A)'s order)
such non-existent person, The appellant has
meaning thereby money established the ICG of
actually belonged to the transactions.(Page 47
assessee itself and - CIT(A)'s order)
fraudulently routed through CIT has made analysis of
bank account of investors. the judgment in the case
(Page 6 - AO's order) of "Nova Promoters
Regarding the other current &Finlease (P) Ltd (342 ITR
liabilities, the assessee has 169 (Del))" and has
failed to bring the directors reached a conclusion that
of the eight companies from appellant through various
whom money received documents submitted to
shown as other liability, to establish ICG, it would
explain the nature of the constitute acceptable
current liabilities. (Page 12 - proof or acceptable
AO' order) explanation by the
As it can be seen from the BS assessed. (Page XX -
and P&L account of the CIT(A)'s order)
assessee that these are not
trade liabilities.(Page 12 - Case laws relied upon by the
AO' order) CIT(A)
• MOD Creation Pvt Ltd V
Case laws relied upon by the A.O ITO [(2013) 354 ITR 282
Divine Leasing and Finance Ltd (Delhi)]
(Delhi HC) • CIT V Kamdhenu Steel &
• Mc Dowell & Co Ltd 154 ITR Alloys Ltd & Others
148 (SC) [(2012) 206 taxman 254
• Anand Woolen Mills Pvt Ltd V (Delhi)]
CIT 174 ITR 477 (Delhi) • CIT V Gangeshwari
• CIT V Sophia Finance Ltd Metals P. Ltd
(1994) 205 ITR 98 (Delhi) • ITO V Neelkanth Finbuild
• Nova Promoters &Finlease ITA No. 2821/Del/2009
56
(P) Ltd (342 ITR 169 (Del)) • ITO V NC Cables ITA No.
• CIT V Nipun Builders & 4122/Del/2009 (ITAT
Developers [2013] 350 ITR Delhi)
407 (Del) • CIT V Oasis Hospitalities
• CIT V N.R. Portfolio PVt Ltd P. Ltd [(2011) 333 ITR
(ITA No. 1018 & 1019 of 119 (Delhi)]
2011) • ITO V Rakam Money
• Mittal Belting and Machinery Matters P Ltd
Stors V CIT 253 ITR 341 2821/Del/2011
• CIT V Kariary Trading Co Ltd • ACIT V Kisco castings Pvt
(1998) 232 ITR 820 Ltd 34 taxmann.com 37
• SumatiDayal V CIT 214 ITR • CIT V Fair Fivest Ltd
801 [2014] 44 taxmann.com
• CIT V L. N. Dalmia 207 ITR 89 356 (Delhi)
• Sunil Sidhartha V CIT 156 ITR • CIT V Expo Globe India
507 Ltd [2014]
• CIT V Biju Patnaik 160 ITR (51Taxmann.com
674 (SC) 208)(Delhi HC)
• Shankar Industries V CIT 114 • CIT V Lovely Exports
ITR 689 (Cal) [2008] 216 CTR 195 (SC)
• Dhanlakshmi Steel Re-rolling
Mills V CIT 228 ITR 780 (AP) CIT(A) has differentiated the
• Malabar Agricultural Co Ltd V following judgments:
CIT 229 ITR 548 (Ker) • Nova Promoters
• CIT V Precision Finance P. Ltd &Finlease P Ltd,
208 ITR 465 (Cal) • Mc Dowell & Co
• KNC Chandrashekhar V ACIT • SumatiDayal
66 TTJ 355 (ITAT Bangalore) • LN Dalmia
• CIT V United Commercial and • Sunil Siddhartha Bhai V
Industrial Co. Pvt Ltd 187 ITR CiT
596 (Cal) • CIT Durga Prasad More
• CIT V Durga Prasad More • ITO V K Jayaraman
(1971) 82 ITR 540 (SC) • CIT V Divine Leasing
• ITO V K. Jayaraman (1987) Finance
168 ITR 757 (Mad.) • Anand Woolen Mills Pvt
• CIT V NeelkanthaIspat Udyog Ltd V CIT
• CIT V Sophia Finance Ltd
• CIT V Korlay Trading Co
• Mittal Belting and
Machinery Stores
• CIT V Biju Patnail
• Roshan Di Hatti V CIT
• Shankar Industies V CIT
• Malabar Agricultural Co
Ltd V CIT
• CIT V Precision Finance
Pvt Ltd
• CIT V United Commercial
& Industrial Co Ltd
• CIT V Nipun Builders
• CIT V NR Portfolio
11. Stylish 2012-13 Section 68 The assessee failed to The appellant has
Constructio Share discharge its onus. In such established the ICG of the
n Pvt Ltd capital/ a case the source and transactions.
share nature of transaction need The AO did not bring any
Revenue's premium - to be proved beyond finding on record to reject
Appeal Rs. 30 doubt.(Page 6/10 - AO's the explanations/
crores order) evidences submitted by
appellant Neither any
57
Other The replies to notice U/s person has given any
liabilities - 133(6) were received after statement nor made any
Rs 31.60 the fact they being un- allegation against the
crores complied for a period of appellant company. (Page
10-15 days after they were 33 - CIT(A)'s order).
Dissallowa issued, creates a doubt Reasons given by AO are
nce U/s about their genuineness. generic in nature and not
14A r.w. (Page 3 - AO's order). The backed by concrete
rule 8D - replies were received after evidence (Page 33 -
Rs. the fact of their non- CIT(A)'s order)
23,32,813 compliance was made Entire amount has been
[Rs. 5 lacs known to the AR.(Page 3 - through normal banking
sustained AO's order. There could be channels has not been
by the a possibility that assessee disputed, repudiated or
CIT(A)] himself has sent the challenged in any
replies, as the replies manner(Page 33 - CIT(A)'s
received that too only order). Parties involved
after assessee was have confirmed of having
informed about same. This made their deposits in the
shows IG as dubious (Page appellant company. (Page
3 - AO's order) 33 - CIT(A)'s order). No
evidence to prove that
Inspectors report reveal money actually emanated
that none of the from appellant company.
companies existed at Any conclusion can be
given address. It is a sustained only if backed by
residential society. (Pag3 - concrete evidence. (Page
AO's order). Identity could 33/34/43/44 - CIT(A)'s
not be proved since order)
investors did not exist at Appellant has allotted
the given address, shares for share
therefore it is assessee's application money
own money(Para (a), Page received by it (Page 34 -
4/5 - AO's order) CIT(A)'s order).
CIT(A) quoted that the Ld.
No explanation offered as AO has relied upon the
to why these companies judgment of Divine leasing
agreed to invest in but failed to bring forth on
assessees' company when record any positive
there is no scope for evidence that shareholders
making an exit out of the were either benamidars/
investment (Page 5 - AO's fictitious. (Page 40 -
order). The assessee CIT(A)'s order)
company neither has not The judgment of Stellar
shown any remarkable Investment clearly lays
performance nor has any down that the provision of
assets, therefore Section 68 would be
transaction cannot be applicable only when
genuine (Page 6 - AO's shares have been issued in
order) the name of non-existing
persons, which is not the
Assessee failed to bring situation in the instant
directors of the investors case (Page 40 - CIT(A)'s
(page 10 - AO's order). order)
The subscribers did not Documents submitted
have creditworthiness as establish that money
money in their bank came from depositor's
accounts seldom rests for account and nowhere
a day and finds its connected with appellant
destination, no profit company (Page 45 -
making apparatus, no CIT(A)'s order). No cash
58
business activity (Page 4 - deposits into bank
AO's order) accounts of the investors
for purchase of shares
Merely that the (Page 33 - CIT(A)'s order).
transaction was No circumstances to
conducted through proper suggest that transactions
banking channel does not are not genuine and that
substantiate the onus cast upon it has not
genuineness of been discharged. (Page 30
transaction. - CIT(A)'s order). CIT(A) has
made analysis of the
Since the payments were creditworthiness of
transferred to other investors. No comments
companies as and when made but figures showing
they were received, the handsome
creditworthiness of the creditworthiness (Page 33
investor does not in any - CIT(A)'s order)
way get established. The provisions of section
The assessee company has 68 would be applicable
not explained the nature only when shares have
of other liabilities. It is been issued in the name
seen that above liabilities of non-existing person
are not trade liabilities. which is not the situation
The facts in regard to in the instant case.
other liabilities are same No adverse inference
as that of share capital drawn by Ld. AO with
which has been discussed reference to funds
at length and in view of received by appellant
case laws discussed above company. (Page 33 -
(Page 12 - AO's order) CITR(A)'s order).
No denial by any of the
Regarding section 14A, the subscribers of the
assessee has not filed calculation appellant company's share
sheet for disallowance made capital that they did not
along with computation of invest their money into it.
income. In view of provisions of The AO has failed to bring
section 14A r.w.r. 8D any credible evidence on
disallowance is Rs. 25,56,473/-. record to neutralize the
Therefore balance is added to evidences filed by the
income of assessee. (Page 13 - appellant. Therefore,
AO's order) addition cannot be
sustained. (Page 47 -
Case laws relied upon by the A.O CIT(A) order). The
appellant has established
• CIT V Divine Divine the ICG of the transaction.
Leasing Finance Ltd
• CIT V McDowell & Co Regarding addition U/s 14A
154 ITR 148 The appellant company filed its
• M/s Anand Woolen return after making
disallowance U/s 14A on
Mills V CIT 174 ITR 477
(Delhi) account of expenses
attributable to earning exempt
• Nova Promoters
income. (Page 56 - CIT(A)'s
&Finlease (P) Ltd (342
order). CIT(A) basis the case
ITR 169 (Del))
laws restricted the
• CIT V Nipun Builders &
disallowance to the amount of
Developers [2013] 350
Rs 5,00,000 for the sake of
ITR 407 (Del)
substantive justice,as it cannot
• CIT V N.R. Portfolio PVt
exceed the amount of exempt
Ltd (ITA No. 1018 &
income which in the instant
1019 of 2011)
case is Rs. 9,94,717 and
• Mittal Belting and
59
Machinery Stores V CIT deleting the addition of Rs.
253 ITR 341 23,32,813 made by the AO.
• CIT V Kariary Trading Co
Ltd (1998) 232 ITR 820 Case laws relied upon by the
• SumatiDayal V CIT 214 CIT(A)
ITR 801 • MOD Creation Pvt Ltd V
• CIT V L. N. Dalmia 207 ITO [(2013) 354 ITR 282
ITR 89 (Delhi)]
• Sunil Sidharatha V CIT • CIT V Kamdhenu Steel &
156 ITR 507 (SC) Alloys Ltd & Others
• CIT V Biju Patnaik 160 [(2012) 206 taxman 254
ITR 674 (SC) (Delhi)]
• Roshan Di Hatti V CIT • CIT V Oasis Hospitalities P.
107 ITR 938 (SC) Ltd [(2011) 333 ITR
• Shankar Industries V 119(Delhi)]
CIT 114 ITR 689 (Cal.) • ITO V Rakam Money
• Dhanlakshmi Steel Re- Matters P Ltd
rolling Mills V CIT 228 2821/Del/2011
ITR 780 (AP) • ACIT V Kisco castings Pvt
• Malabar Agricultural Ltd 34 taxmann.com 37
Co. V CIT 229 ITR 548 • CIT V Fivest Ltd [2014] 44
(Ker) taxmann.com 356 (Delhi)
• CIT V Precision Finance • CIT V Gangeshwari Metals
Ltd 208 ITR 465 (cal) Pvt Ltd (2013)
• K. N. C. (30Taxmann.com328)
Chandrashekhar V ACIT • CIT V Lovely Exports
66 TTJ 355 (ITAT [2008] 216 CTR 195 (SC)
Bangalore) • ITO V Neelkanth Finbuild
• CIT V united Ltd. ITA No. 2821/ Del/
Commercial and 2009
Industrial Company Pvt. • ITO V NC Cables Ltd. ITA
Ltd. 187 ITR 596 (Cal.) No. 4122/Del/2009, ITAT
• CIT V Durga Prasad Delhi
More (1971) 82 ITR 540 • CIT V Expo Globe India Ltd
(SC) [2014] 51 taxmann.com
• ITO V K. Jayaraman 208 (Delhi HC)
(Mad.) (1987) 168 ITR
757 Differentiated Roshan Di Hatti,
Mittal Belting and Machinery
Stores, Sophia Finance Ltd,
McDowell & Co Ltd.Nova
Promoters, Azadi
BachaoAndolan(SC), Vodafone
iNternationa l Holdings BV V
Union of India(SC, SumatiDaya
V CIT, lCIT V ,LN Dalmia, Sunil
Sidhartha Bhai V CIT, CIT V
Durga Prasad More,ITO V K
Jayaraman (Page 36 to 43)
CIT(A) for deciding the ground
related to disallowance U/s 14A
has relied upon the case laws:
• CIT V Holcim India Pvt Ltd
[(2015) 57 taxmann.com
28 (Delhi)]
• CIT V Lakhani Marketing
[(2014) 49 taxmann.com
257 (P&H)]
• CIT V Shivam Motors Pvt
Ltd [(2015) 55
60
taxmann.com 262
(Allahabad)
12. Sukhna Real 2012-13 Section 68 The assessee failed to The appellant has
Estate Pvt discharge its onus. In such a established the ICG of the
Ltd Share case the source and nature transaction.
capital/ of transaction need to be
Revenue's share proved beyond doubt. (Page The AO did not bring any
Appeal premium - 7 - AO's order). finding on record which
Rs. Rs. would indicate the
80.634 Basis the inspector's report shareholders were either
crores none of the parties benamidar/
(investor) existed at the fictitious.(Page 29/39 -
given address (Page 2 - AO's CIT(A)'s order)
order)
Notice U/s 133(6) returned Not the case of AO that
undelivered with remarks any person has given any
"none existed"(Page 3 - AO's statement or made any
order) allegation against these
Verification of bank companies (Page 29 -
statement revealed that CIT(A) order).
companies received funds
back to back (Page 3 - AO's Reasons recorded by AO
order) are generic in nature and
After few days of local not backed by concrete
enquiry, confirmation of all evidences (Page 29 -
parties received through CIT(A)'s order).
speed post in the office of
AO.(Page 2 - AO's order) No cash deposits in the
bank accounts of investors
Summons U/s 131 remain (29/30 - CIT(A)'s order).
un-complied "(Page 3 - AO's
order) In the instant case, there
Assessee offered no are no circumstances even
explanation about as to why to suggest that
these investors agreed to transactions are not
invest when there is no genuine and that the onus
scope for making an exit out cast upon it has not been
of investment. (Page 5- AO's discharged. (Page 27 -
order) CIT(A)'s order).
Also not explained that why
shares were not allotted and Investor companies are
share application money assessed to Tax (Page 27 -
returned (page 5 - AO's CIT(A)'s order)
order)
The provisions of section
The entire approach of 68 would be applicable
assessee for shying away only when shares have
from filing requisite been issued in the name of
documents and the non-existing person which
necessary details strongly is not the situation in the
suggests that entries are instant case.
accommodation entries
((Page 5- AO's order)
No denial by any of the
Intent of assessee to avoid
subscribers of the
furnishing the details and
appellant company's share
then take spacious plea that
capital that they did not
addition made without
invest their money into it.
making direct enquiries from
persons who advanced
The AO did not bring any
money. (Page 6 - AO's
documentary evidence to
61
order). establish the live
link/nexus between the
Since the assessee was well material available with the
aware of the fact of bogus department and the
credits in its books, it has amount received by the
chosen not to subject itself appellant.
investigation/ enquiry
conducted by the Entire amount received
department. through normal banking
channels (Page 30 -
Merely that the transaction CIT(A)'s order).
was conducted through
proper banking channel does Parties involved have
not substantiate the confirmed of having
genuineness of transaction. deposited their money in
the appellant company
Since the payments were (Page 30 - CIT(A)'s order)
transferred to other
companies as and when they No iota of evidence to
were received, the prove that money
creditworthiness of the emanated from coffers of
investor does not in any way appellant company. Any
gets established. The conclusion can be
assessee has failed to sustained only if backed by
produce the directors of the concrete evidence (Page 30
investor companies. - CIT(A)'s order)
Case laws relied upon by the A.O Provisions of section 68
not applicable in case of
• CIT V Divine DivineLeasing bonus shares (Page 30 -
Finance Ltd CIT(A)'s order). The shares
• Nova Promoters &Finlease issued as bonus shares
(P) Ltd (342 ITR 169 (Del)) have not brought any
• CIT V Nipun Builders & income which is nothing
Developers [2013] 350 ITR but the credit in the books
407 (Del) of accounts of the
• CIT V N.R. Portfolio PVt Ltd company, therefore when
(ITA No. 1018 & 1019 of no sum has been credited,
2011) addition cannot be made
• Kale Khan Mohammad Hanif U/s 68 of the Act.The
V CIT [1963] 50 ITR 1 (SC) amount of issue of bonus
• CIT V Oasis Hospitalities 333 shares does not represent
ITR 119 (Delhi) 2011 any fresh credit but only a
• Roshan Di Hatti [1977] 107 transfer entry representing
ITR (SC) capitalization of reserves
and surplus and is not hit
• CIT V Kariary Trading Co Ltd
by section 68 of the Act.
(1998) 232 ITR 820
• SumatiDayal V CIT 214 ITR
801 Differentiated Roshan Di
Hatti, Mittal Belting and
• CIT V R. N. Dalmia 207 ITR 89
Machinery Stores, Sophia
Finance Ltd, McDowell &
Co Ltd
Case laws relied upon by the
CIT(A)
• MOD Creatiosn Pvt Ltd V
ITO [(2013) 354 ITR 282
(Delhi)]
• CIT V Kamdhenu Steel &
62
Alloys Ltd & Others [(2012)
206 taxman 254 (Delhi)]
• CIT V Oasis Hospitalities P.
Ltd [(2011) 333 ITR 119
(Delhi)]
• ITO V Rakam Money
Matters P Ltd
2821/Del/2011
• ACIT V Kisco castings Pvt
Ltd 34 taxmann.com 37
• CIT V Fivest Ltd [2014] 44
taxmann.com 356 (Delhi)
• CIT V Oasis Hospitalities
Pvt Ltd (333 ITR 119 Delhi)
• CIT V Lovely Exports [2008]
216 CTR 195 (SC)
13. Sukhna 2012-13 Section 68 As per inspector's report no CIT(A) has made analysis of
Steel Pvt Ltd company existed at such creditworthiness, for
Share address,no directors were making investment (Page
Revenue's capital/ found, premises don't 29/30, Table - CIT(A)'s
appeal share belong to investor order)
premium- company (Page 2, Table -
Rs. 26.168 AO's order) No adverse material
crores brought by AO to reject the
Verification of bank explanations and
statement revealed that evidences (Page 30 -
(includes investor companies CIT(A)'s order).
Rs. received funds back to back
16,80,000 arrangement. Neither any person has
on Creditworthiness could not given any statement nor
account of be found satisfactory with made an allegation against
issue of respect to huge amount of the company (Page 30 -
bonus funds arrangement (Page 2 CIT(A)'s order).
shares) - AO's order)
No cash deposits in the
Assessee failed to explain bank accounts of investors
why these companies (Page 30 - CIT(A)'s order).
agreed to invest in unlisted
companies when there is no Reasons given by AO are
scope for making an exit out generic and not backed by
of investment (Page 6 - any concrete evidence
AO's order) (Page 30 - CIT(A)'s order)
The assessee intentionally Entire amount received
avoided furnishing through banking channels,
documents to take a plea investors confirmed, no
that addition has made U/s evidence to prove funds
68 without making actually emanated from
inquiries. A clear period of coffers of appellant
two months allowed to company, no concrete
assessee to furnish evidence against appellant
documents. It suggested company (Page 30/31 -
that these are nothing but CIT(A)'s order)
accommodation entries
(Page 2 - AO's order). Section 68 not applicable
on bonus issue, it does not
Merely Pan and address represent fresh credit
were furnished, but no one (Page 31 - CIT(A)'s order).
was found at the address. The amount of issue of
Bank statement not
63
submitted properly bonus shares does not
showing available balance. represent any fresh credit
NO explanation submitted but only a transfer entry
by assessee to explain representing capitalization
future cash flow, basis of of reserves and surplus and
share premium calculation is not hit by section 68 of
and no. of shares to be the Act.(Page 42 - CIT(A)'s
issued (Page 8, Table - AO's order)
order)
The appellant has
The assessee has failed to established the ICG of the
produce the directors of transactions.(Page 41 -
the investor companies. CIT(A)'s order)
The assessee failed to Case laws relied upon by the
discharge its onus. In such a CIT(A)
case the source and nature
of transaction need to be • MOD Creation Pvt Ltd V
proved beyond doubt. ITO [(2013) 354 ITR 282
(Pagse - 7, AO's order). (Delhi)]
• CIT V Kamdhenu Steel &
Case laws relied upon by the A.O Alloys Ltd & Others [(2012)
206 taxman 254 (Delhi)]
• Nova Promoters &Finlease • CIT V Gangeshwari Metals
(P) Ltd (342 ITR 169 (Del)) Pvt Ltd (2013) 30
taxmann.com 328
• CIT V Nipun Builders & • CIT V Oasis Hospitalities P.
Developers [2013] 350 ITR Ltd [(2011) 333 ITR 119
407 (Del) (Delhi)]
• ITO V NC Cables Ltd. ITA
• CIT V N.R. Portfolio PVt Ltd No. 4122/Del/2209
(ITA No. 1018 & 1019 of • ITO V Rakam Money
2011) Matters P Ltd
2821/Del/2011
• Kale Khan Mohammad Hanif • ACIT V Kisco castings Pvt
V CIT [1963] 50 ITR 1 (SC) Ltd 34 taxmann.com 37
• CIT V Fair Finvest Ltd
• CIT V Oasis Hospitalities 333 [2014] 44 taxmann.com
ITR 119 (Delhi) 2011 356 (Delhi)
• CIT V Oasis Hospitalities
Pvt Ltd (333 ITR 119 Delhi)
• Roshan Di Hatti [1977] 107
ITR (SC) • CIT V Lovely Exports [2008]
216 CTR 195 (SC)
• CIT V Expo Globe India Ltd.
• CIT V Kariary Trading Co Ltd
[2014] 51 taxmann.com
(1998) 232 ITR 820
208 (Delhi)
• SumatiDayal V CIT 214 ITR Differentiated the following
801 judgments:
• CIT V Nova Promoters
• CIT V R. N. Dalmia 207 ITR 89 &Finlease (P) Ltd [(2012)
342 ITR 169 (Delhi)]
• Roshan Di Hatti V CIT
[(1977) 107 ITR 938 (SC)]
• CIT V Nipun Builders &
Developers [(2013) 350 ITR
407 (Del)]
14. Sunlight 2012-13 Share As per inspector's report Appellant has discharged
Tour & capital/ none of the parties existed onus u/s 68
64
Travels Pvt share at the given address. (Page No adverse inference
Ltd premium 2- AO's order). drawn by AO in case of
investor companies with
Revenue's Rs. Summons issued to parties reference to funds
Appeal 52.0168 u/s 131 remained received by appellant
crores uncomplied. company
AO has not brought on
Upon verification of bank record any adverse
(SC & statement of parties, it was material to reject the
premium found that the investor explanations and
RS. 40 companies had received evidences submitted by
crores and funds and transferred back the appellant.
bonus to back. Not the case of the AO
shares Rs. that any person has given
12,01,68,0 From the financial any statement or made
00) statements, allegations against the
creditworthiness of parties company.
could not be found There is no cash deposits
satisfactory wrt huge in the bank accounts of
amounts of funds made the parties from whom
avaliable to the assessee. share capital/ premium has
been received.
Despite being many Entire amount received
opportunities provided to through banking channels,
assessee, no compliance to depositors have confirmed
SCN issued. of having deposited
money in the company, no
evidence that funds
No explanation by the
received emanated from
assessee as to why these
coffers of the assessee.
parties which are related to
Assessee has allotted
the assessee agreed to
shares for the share
invest in assessee which is
application money
unlisted and thus there is
received.
no scope to exit out of the
With regard to bonus
investment.
shares the provisions of
section 68 are not
Person should have some
applicable since the
sign of identification other
amount in question does
than merely on paper.
not represent fresh credit
These signs could be place
in the books of account.
of work, staff members,
Assessee established ICG,
actual transaction,
addition wrt share capital
recognition in eye of public,
and share premium and
sign board etc. Actual
bonus issue deleted.
identity and business does
not get proved by these
CIT(A) has differentiated the
passive documents when
following case laws:
infact no actual or passive
A. CIT vs. Nova Promoters -
business is beingcarried on.
page 31
B. Roshan Di Hatti (SC) -pg 32
Assessee failed to produce C. CIT vs. Nipun Builders &
person to verify claim, Developers
failed to prove nature and
source of transaction. CIT(A) has relied upon the
following case laws:
The assessee failed to • M/s. MOD Creations
discharge its onus. In such a Pvt. Ltd. V ITO 354
case the source and nature ITR 282 (Del)
of transaction need to be • CIT Vs. Kamdhenu
proved beyond doubt. Steel & Alloys Ltd.
65
Case laws relied upon by the A.O (Del) 206 taxmann
254 (Del)
• Nipun Builders & • CIT Vs. Gangeshwari
Developers Metals Pvt. Ltd.
• Nova Promoters &Finlease (2013) 30
• Kamal Motors V CIT 131 taxman.com 328
taxman 155 (Raj) • CIT vs. Oasis
• CIT V Oasis Hospitalities 333 Hospitalities 333 ITR
ITR 119 (Delhi) 2011 119 (2011) Del
• CIT V Ruby Traders • ITO vs. Neelkanth
&exporters Ltd. (2004) 263 Finbuild Ltd.
ITR 300 (Cal.) • ITO vs. NC Cables Ltd.
• M/s Rajshree Synthetics (P) (Del ITAT)
Ltd V CIT (2003) 131 • ITO vs. Rakam Money
Taxmann 391 (Raj) Matters P. Ltd. (Del
CIT V Sophia Finance Ltd ItAT)
• ACIT vs. Kisco
Castings Pvt. Ltd.
(Chd)
• CIT vs. Fair Finvest
Pvt. Ltd. (Del HC)
• CIT Vs. Expo Globe
India Ltd. (Del HC)
CIT Vs. Lovely Exports (SC)
15. Superstar 2012-13 Section 68 Out of 8 companies, notice CIT(A) has made analysis of
Agency Pvt U/s 133(6) could not be the creditworthiness of
Ltd Share served on 6 companies due the investors and observed
capital/ to no such company at the that no adverse inference
Revenue's share given address, 2 companies has been drawn by Ld. AO
Appeal premium did not reply. (Page 4, table - with reference to funds
AO's order) received by appellant
Rs. 42.25 On an analysis of bank company. (Page 29 -
crores statements of investor CIT(A)'s order)
companies, it was seen that
investor companies have CIT(A) has observed that
(SC= 3.85 received funds and addition has been made by
cr transferred back to back. AO on ground that replies
Share Summons issued u/s 131 U/s 133(6) were
premium remained uncompiled. incomplete, no compliance
= 38.40 cr) The assessee failed to was made U/s 131 and the
discharge its onus. In such a inspector's report that no
case the source and nature such companies exist (Page
of transaction need to be 29 - CIT(A)'s order). AO did
proved beyond doubt.(Page not bring any adverse
8 - AO's order). material to reject the
explanations and
Since the assessee was well evidences submitted by
aware of the fact of bogus appellant (Page 29 -
credits in its books, it has CIT(A)'s order)
chosen not to subject itself
investigation/ enquiry Neither any person has
conducted by the given any statement nor
department.(Page 8 - AO's made any allegation
order) against these companies
(Page 29 - CIT(A)'s order)
The assessee offered no
explanation as to why these Reasons given by AO are
parties agreed to invest in very generic and not
an unlisted company when backed by any concrete
there is no scope for making evidence (Page 29 -
66
an exit out of CIT(A)'s order)
investment.(Page 6 - AO's
order) No cash deposit in the
bank account of investors
Not explained why share (Page 29 - CIT(A)'s
application money was order)Transaction took
returned to parties and place through normal
shares were not banking channel (Page 29
allotted.(Page 6 - AO's order) - CIT(A)'s order)
The intent of the assessee is Parties involved positively
to avoid furnishing details confirmed (Page 29 -
and then take plea that CIT(A)'s order)
addition has been made
without making inquiries No iota of evidence to
from person's who advanced prove that money actually
money .(Page 6 - AO's emanated from coffers of
order). appellant company (Page
29 - CIT(A)'s order).
A clear period of two Appellant allotted shares
months allowed to assessee for amount received (Page
to furnish details but it did 29 - CIT(A)'s order)
not submit (Page 6 - AO's
order). The assessee has The appellant has
failed to produce the established the ICG of the
directors of the investor transactions. (Page 40 -
companies. (Page 8 - AO's CIT(A) order).
order)
Case laws relied upon by the
Case laws relied upon by the A.O CIT(A) • Nova Promoters &Finlease • MOD Creations Pvt Ltd V (P) Ltd (342 ITR 169 (Del)) ITO [(2013) 354 ITR 282 (Delhi)] • CIT V Nipun Builders & CIT V Kamdhenu Steel & Developers [2013] 350 ITR Alloys Ltd & Others 407 (Del) [(2012) 206 taxman 254 (Delhi)] • Kale Khan Mohammad Hanif • CIT V Gangeshwari Metals V CIT [1963] 50 ITR 1 (SC) Pvt Ltd (2013) 30 taxmann.com 328 • CIT V Oasis Hospitalities 333 • ITO V NC Cable ITA ITR 119 (Delhi) 2011 No. 4122/Del/2009, ITAT Delhi Bench • Roshan Di Hatti [1977] 107 • ITO V Neelkanth Finbuild ITR (SC) Ltd ITA No. 2821/Del/2009 • CIT V Oasis Hospitalities P. Ltd [(2011) 333 ITR 119 (Delhi)] • ITO V Rakam Money Matters P Ltd 2821/Del/2011 • ACIT V Kisco castings Pvt Ltd 34 taxmann.com 37 • CIT V Fair Finvest Ltd [2014] 44 taxmann.com 356 (Delhi) • CIT V Oasis Hospitalities Pvt Ltd (333 ITR 119 67 Delhi) • CIT V Lovely Exports [2008] 216 CTR 195 (SC) Differentiated the following case laws:
• CIT V Nova Promoters &Finlease (P) Ltd [(2012) 342 ITR 169 (Delhi)] • Roshan Di Hatti • Nipun Builders & Developers
16. Supreme 2012-13 Section 68 In some cases the Placement confirmation received in Pvt Ltd Share response to notice U/s Addition made by AO on capital/ 133(6) along with bank ground that replies to Revenue's share statement shows that notice U/s 133(6) are Appeal premium assessee has received the incomplete, no compliance amount and back to back to summons U/s 131 and Rs. 72.43 transferred the amount to the investor's report that crores other parties (Page 3 - AO's companies did not exist at order) the address (Page 29 -
(includes AO's order).
bonus of As per the inspector's
12.43 cr) report no such party The AO did not bring any
existed at the given adverse material to reject
address (Page ¾, table- the explanations and
AO's order) evidences submitted by
the appellant (Page 29 -
Assessee offered no AO's order).
explanation as to why the
companies agreed to invest Neither any person has
in an unlisted company given any statement nor
when there is no scope for made any allegation
making an exit out of against these companies
investment (Page 7 - AO's (Page 29 - CIT(A)'s order)
order)
Reasons given by AO are
It has not explained why very generic and not
share application money backed by any concrete
was returned and shares evidence (Page 29 -
were not allotted (Page 7 - CIT(A)'s order).
AO's order)
No cash deposit in the
The approach of assessee bank account of investors
from shying away from (Page 29 - CIT(A)'s order)
filing necessary documents
suggest that these are Transaction took place
nothing but through normal banking
accommodation entries channel (Page 29 - CIT(A)'s
(Page 7 - AO's order) order). Parties involved
positively confirmed (Page
The entire intent is to avoid 29 - CIT(A)'s order)
furnishing details and then
take a plea that additions No iota of evidence to
made without conducting prove that money actually
inquiries from persons from emanated from coffers of
68
whom amount received appellant company (Page
(Page 7 - AO's order) 29 - CIT(A)'s
order).Appellant allotted
A clear period of two shares for amount received
months allowed to assessee (Page 29 - CIT(A)'s order)
but still it did not furnish
the details (Page 7 - AO's The appellant has
order). Assessee failed to established the ICG of the
produce the persons to transactions. (Page 40 -
verify the claim (Page 9 - CIT(A) order)
AO's order)
Source satisfactorily
The assessee failed to explained. The ratio of
discharge its onus. In such a judgments is squarely
case the source and nature applicable to the case of
of transaction need to be assessee (Page 39 - CIT(A)
proved beyond doubt.(Page order)
9 - AO's order).
Since the assessee was well The appellant has
aware of the fact of bogus established the ICG of the
credits in its books, it has transactions.(Page 39 -
chosen not to subject itself CIT(A) order).
investigation/ enquiry
conducted by the In case of bonus issue
department.(Page 9 - AO's provisions of section 68
order) are not applicable since
the amount in question
Case laws relied upon by the A.O does not represent a fresh
credit (Page 29 - CIT(A)'s
• Nova Promoters &Finlease order). The amount of
(P) Ltd (342 ITR 169 (Del)) issue of bonus shares does
not represent any fresh
• CIT V Nipun Builders credit but only a transfer
&Developers [2013] 350 ITR entry representing
407 (Del) capitalization of reserves
ans surplus and is not hit
• Kale Khan Mohammad by section 68 of the
Hanif V CIT [1963] 50 ITR 1 Act.(Page 40 - CIT(A)
(SC) order)
• CIT V Oasis Hospitalities 333 Case laws relied upon by the ITR 119 (Delhi) 2011 CIT(A) • MOD Creation Pvt Ltd V ITO [(2013) 354 ITR 282 • Roshan Di Hatti [1977] 107 (Delhi)] ITR (SC) • CIT V Kamdhenu Steel &Alloys Ltd & Others [(2012) 206 taxman 254 (Delhi) • CIT V Gangeshwari Metals Pvt Ltd (2013) 30 taxmann.com 328 • ITO V NC Cable ITA No. 4122/Del/2009, ITAT Delhi Bench • CIT V Oasis Hospitalities P. Ltd [(2011) 333 ITR 119 (Delhi)] • ITO V Rakam Money Matters P Ltd 2821/Del/2011 69 • ACIT V Kisco castings Pvt Ltd 34 taxmann.com 37 • CIT V Fair Fivest Ltd [2014] 44 taxmann.com 356 (Delhi) • CIT V Expo Globe India Ltd [2014] 51 taxmann.com 208 (Delhi) • ITO V Neelkanth Finbuild Ltd ITA No. 2821/Del/2009 • CIT V Lovely Exports [2008] 216 CTR 195 (SC) Differentiated the following case laws:
• Nova Promoters
&Finlease (P) Ltd (342 ITR
169 (Del))
• Roshan Di Hatti [1977]
107 ITR (SC)
• CIT V Nipun Builders &
Developers [2013] 350
ITR 407 (Del)
17. Sur Buildcon 2012-13 Section 68 Assessee failed to prove ICG That the appellant has
Pvt Ltd Share of transactions with the completely discharged its
capital investor companies.(Page 8 - onus cast upon it U/s 68
Revenue's and share AO's order) with necessary supporting
Appeal premium Notices sent U/s 133(6) documents.(Page 27 -
Rs. 98.494 returned undelivered with CIT(A)'s order).
crores remarks "none existed". The appellant has proved
Basis the inspectors report, the ICG of the
(includes all the five investors, no transactions. No reason to
17,09,40,0 company was found at the suggest that the
00/- on address, no directors were transactions are not
account of found, person staying there genuine.(Page 27 -
bonus denied saying that this CIT(A)'s order).
issue) address does not belongs to The investor companies
the investor in question. are assessed to tax and
(Table, page 4/5 - AO's orders have been passed
order) U/s 143(3) of the
Investor companies received Act.(Page 28 - Table -
funds back to back CIT(A)'s order)
arrangement (Page 4- AO's The AO did not bring any
order) adverse material on
Summons issued U/s 131 record to reject the
remain un-complied (Page 4- explanations submitted by
AO's order). the appellant.
Assessee has willfully Rather it's not the case of
desisted from furnishing any AO that any person has
details/ particulars/ given any statement or
documents/ to prove made any allegation
genuineness of the amount against these companies.
received from parties (Page (Page 32 - CIT(A)'s order).
5- AO's order). The reasons given by AO
Assessee offered no are generic in nature and
explanation about as to why no backed by any
these investors agreed to concrete evidence.(Page
invest when there is no 32 - CIT(A)'s order)
scope for making an exit out Various parties involved
70
of investment. (Page 6- AO's has positively confirmed/
order). affirmed the fact of having
It has not been explained deposited their money
why share application into appellant company
money was returned to (Page 33 - CIT(A)'s order).
these parties and shares not The entire amount has
allotted.(Page 6- AO's order) been received through
AO did not find merit in the normal banking channels
contention of the assessee which transaction has not
that the decision of share been disputed, repudiated
premium is the discretion of or challenged in any
the board of directors of the manner (Page 32 - CIT(A)'s
company. order).
That the investor did not No evidence to prove that
provide the complete bank funds received generated
statement enabling the AO from appellant company.
to verify source of source. Any conclusion can be
That the compliance made sustained only if backed by
by the investor companies is concrete evidence (Page
not found satisfactory. 33 - CIT(a)'s order)
Provisions of section 68
Case laws relied upon by the A.O are not applicable on
• Nova Promoters &Finlease bonus shares, as the no
(P) Ltd, Delhi high court amount is received in case
• Nipun Builders & Developers of bonus shares (Page 33 -
Pvt Ltd, ITA No. 120/2012 CIT(a)'s order)
• Kale Khan Mohammad Hanif Appellant company has
V CIT [1963] 50 ITR 1 (SC) allotted shares for the
• Roshan Di Hatti V CIT [1977] share capital and share
107 ITR (SC) application money
• CIT V Oasis Hospitalities Pvt received by it (Page 33 -
Ltd 333 ITR 119 (Delhi) CIT(A)'s order).
(2011) There was no cash deposit
into the bank accounts of
the companies from whom
share capital/ share
application money
received.(Page 32 -
CIT(A)'s order).
Differentiated the following
case laws:
• Nova Promoters
&Finlease (P) Ltd (342 ITR
169 (Del))
• Roshan Di Hatti [1977]
107 ITR (SC)
• CIT V Nipun Builders &
Developers [2013] 350
ITR 407 (Del)
Relied upon the following case
laws:
• MOD Creation Pvt Ltd V
ITO [(2013) 354 ITR 282
(Delhi)]
• CIT V Kamdhenu Steel
&Alloys Ltd & Others
[(2012) 206 taxman 254
(Delhi)
71
• CIT V Gangeshwari Metals
Pvt Ltd (2013) 30
taxmann.com 328
• ITO V NC Cable ITA No.
4122/Del/2009, ITAT Delhi
Bench
• CIT V Oasis Hospitalities P.
Ltd [(2011) 333 ITR 119
(Delhi)]
• ITO V Rakam Money
Matters P Ltd
2821/Del/2011
• ACIT V Kisco castings Pvt
Ltd 34 taxmann.com 37
• CIT V Fair Fivest Ltd [2014]
44 taxmann.com 356
(Delhi)
• CIT V Expo Globe India Ltd
[2014] 51 taxmann.com
208 (Delhi)
• ITO V Neelkanth Finbuild
Ltd ITA No. 2821/Del/2009
• CIT V Lovely Exports [2008]
216 CTR 195 (SC)
18. Globus Real 2013-14 Section 68 On perusal of reply filed by CIT(A) decided the appeal ex-
Infra Pvt Ltd Share the assessee it was noted parte
(Formerly applicatio that parties who have given
Sur Buildcon n Money - amount don't have much Notice for hearing dated
Pvt Ltd) Rs. 5.6 creditworthiness to advance April 11, 2017 served via
crores such huge share capital speed post dated March
Assessee's (Page- 2, Para - 2 - AO's 27, 2013. No compliance Appeal Unsecure Order) made by appellant, appeal d loans - decided on basis of facts Rs. 2.95 It is duty of the assessee on record. ( Page - 3, Para crores primarily to establish 4 -- CIT(A)'s Order) creditworthiness of persons The appellant was asked to who have given credit and establish source of source genuineness of transaction, of share capital and loans merely filing PAN, ITR, BS due to movement of funds dors not absolve assessee between different from its responsibility of companies and also due discharging onus (Page- 5, to insertion of proviso in Para - III - AO's Order). section 68 effective for year under consideration Investors/ lenders have (Page - 4, Para - 7 -
hardly any business to CIT(A)'s Order) generate income to extend Share applicant such huge amount (Page - companies and lender 11, Para (i) - AO's Order). companies have same Regarding the source of address in Delhi except source assessee's story that KBN Infra which has amount has travelled from Mumbai address (Page -
one company to another and 4, Para - 7 - CIT(A)'s
none of the company has its Order)
own source, rather acting as KBN Infra, NRA Iron & steel
a conduit and in process and Vistrat Real Estate
original source of money have common director
does not get explained, is namely Shailendra Singh
neither tenable under law of Bhadoria. (Page - 4, Para
probability nor acceptable - 7 - CIT(A)'s Order)
72
under judicial canons (Page - No reason why appellant
13 - Ao's order). could not produce
principal officers/
Introduction of amount in directors of companies
books of accounts do not when entire money came
qualify test of human from same group and
probability as it failed to appellant also belonged to
explain the source of same group (Page - 4,
investment and its purpose Para - 7 - CIT(A)'s Order).
of making the same (Page - The pattern of money
13 - AO's order) movement raises
suspicion of
There is a chain of accommodation entries
companies from which the (Page - 4, Para - 7 -
fund flows from one CIT(A)'s Order)
company to another without The Ld. CIT(A) also applied
establishing the actual the amendment made to
source of investment. It is a section 68 for the sum
clear case of tax avoidance credited as unsecured
under garb of tax planning loan also(Page - 4, Para -
(Page - 16/17 - AO's order) 7 - CIT(A)'s Order).
Despite bringing it to Case laws relied upon by the
knowledge of assessee that CIT(A):
summons have not been • Nakoda Fashion Pvt Ltd,
complied with and it is duty ITA No. 1716/AHD/2012,
of assessee to explain source ITAT Ahmedabad Bench
of source to authenticate [Relying Upon N. Tarika
claim and purpose of making Properties Investment
advances, assessee failed to (2014) 51 taxmann.com
discharge its onus to 387 (SC), Empire Biotech P
establish source of source Ltd 361 ITR 258 (Del)]
(Page - 13 - Ao's order). • Nova Promoters and
Summons issued U/s 131 Finlease Pvt Ltd 342 ITR
remained un-complied (Page 169 (Del. HC)
13 - AO's Order)
Investors have common
practice like paper
companies who raise loan
from companies who in turn
have no income generating
capacity or established
source (Page - 11, Para (i) -
AO's Order)The assessee
failed to prove the source of
source.
The assessee failed to
discharge its onus cast upon
it U/s 68 to prove
genuineness of transactions
and creditworthiness of
person who has given credit
to the assessee.
The amount introduced by
the assessee under the garb
of share capital and
unsecured loan is the
undisclosed income of the
assessee within the meaning
of section 68 (page 16 of the
73
A.O's order)
Case laws relied upon by the
A.O:
• Kale Khan Mohd. Hanif V
CIT (SC) 50 ITR 1,
• CIT V N. R. portfolio Pvt Ltd
206 (2014) ITA No.
204/2002
• CITR V Nipun Builders and
Developers (2013) 350 ITR
407 (Del.)
• Shankar Ghosh V ITO [1985]
23 TTJ (Cal.) 20,
• Roshan Di Hatti V CIT [1977]
107 ITR (SC)
• CIT V DurghaParsad More
(1971) 82 ITR 540 (SC)
• CIT V Durga Prasad More
(1971) 82 ITR 540 (SC)
• SumatiDayal V CIT (1995)
214 ITR 801 (SC)
• A Rajendran & Others V
ACIT (2006) 204 CTR (Mad)
9
• Hacienda Farms (P) Ltd V
CIT (2011) 239 CTR (Del)
212
• Major Metals Ltd V UOI and
Ors. (2012) 251 CTR (Bom)
385
• Pradeep Kumar Loyalka V
ITO (1997) 59 TTJ (Pat)(TM)
655
• ACIT V Sampat Raj Ranka
(2001) 73 TTJ (Jd) 642
• Mc Dowell Ltd. V CTO
(1985) 154 ITR 148 (SC)
• CIT V Youth Construction
Pvt Ltd 44 taxmann 364
• Wood Polymer Ltd. Bengal
Hotels Limited, 40 Company
Cases 597
• Campbell V Inland Revenue
Commissioners (1), Stamp J.
• CIT V Precision Finance Pvt
Ltd (1994) 208 ITR 405 (Cal)
• Bharati Pvt Ltd W.B. V CIT
WB (1978) 111 ITR 991
19 Track 2012-13 Section 68 Little compliance or no CIT(A) has made analysis
Casting Share compliance made to notices of Reserves & Surplus
India Pvt Capital & issued U/s 142(1) (Page1, position of all the
Ltd. Share Para 4- AOs' Order. Details investors. All have been
premium filed letter dated July 10, found to have adequate
Revenue's Rs. 31 2014 and July 25, 2014 and investment apart from
Appeal crores August 26, 2014 and Dec 15, appellant company and
2014 (Page - 2, Para - 4.4, having decent reserves
Section 4.5 - AO's Order) (Page 19-20, Para 5 to 5.2
69C Rs. To avoid to prove the
74
7.75 lakhs genuineness and the CIT(A)'s order)
U/s 69Con creditworthiness of investor
account of companies, assessee The amendment made
alleged intentionally avoiding U/s 68 for proving the
unexplain furnishing details on time source of source is not the
ed and producing directors of mandate of law for the
commissi investor companies by year under appeal. The
on seeking adjournments time amendment to section 68
expenses and again and not attending w.e.f., 01/04/2013 cannot
hearings (Page - 7, Para 5.12 be held or interpreted to
- AO'a order). be retrospective in nature
Assessee failed to bring (Page - 21, Para 7 -
difference in rate of shares CIT(A)'s order).
issued to four companies
(Page - 7, Para 6.2 - AO'a AO failed to disprove
order) identity, creditworthiness
The assessee failed to justify and genuineness of
reasons for major transaction (Page - 22,
development between the Para 8 - CIT(A)'s order).
rd th
night of 23 and 24 which
led to price increase from 10 AO has brought nothing
to 200 per share (Page - 7, on record to establish that
Para 6.2 - AO'a order). the applicant routed its
No prudent investor would own money in the form of
invest in such a company share application(Page -
without any income; except 22, Para 8 - CIT(A)'s order)
when both the parties are
hand in glove (Page - 7, Para The addition made
6.3 - AO's order) separately on account of
It is modus-operandi of entry commission payment of
operators to make few Rs. 7.75 lakh is also
transactions at high and few deleted. (Page - 22, Para 8
at low price(Page - 8, Para - CIT(A)'s order)
6.4.2 - AO's order).
Assessee has not brought
anything on record to
support that any dividend
has been declared by it
(Page - 9, Para 6.6 - AO's
order)
Perusal of bank statement of
investors reveal that they
are receiving huge amounts
from various other
companies and transferring
funds to other companies,
not doing business activity
((Page - 9, Para 6.7 - AO's
order).
One thing is common that
whole of the sale proceeds
are used for buying shares of
other companies and at the
end there is no income
earned even after
transaction of hundred of
crores (Page 9, Para 6.7 -
AO's order).
Bank statement show similar
pattern, receipts of huge
amount of money without
75
interest, no proportionate
expense booked, in turn
providing huge amounts to
various companies without
interest (Page 9, Para 6.7 -
AO's order)
The assessee failed to prove
the genuineness of
transactions and
creditworthiness of the
investor companies.(Page
10, Para 6.10 - AO's order).
Further accommodation
entries have been taken on
payment of certain amount
of money, estimated to 25
paisa per Rs. 100. On
accommodation entry od Rs.
31 crores, assessee paid Rs.
7.75 lakhs, since No details
and source of this payment
has been shown, held to be
paid out of undisclosed
sources (Page10, Para 7 -
AO's order)
16. In sums and substance the reasons given in the appeals where the respective ld. CIT (As) have deleted the additions u/s.68 are as under:
That the basic requirement to justify identity, creditworthiness and genuineness (ICG} of the transactions in the case of the Assessee ore prima facie established. Relevant documents were furnished by the Assessee The Assessee filed copies of confirmation, bonk statements, P&L A/c, Balance Sheet, Assessment Orders of the investors/lenders to establish source of funds in the hands of investor/lender companies.
That the A.O has not brought any adverse material to reject the explanations and evidences submitted by the Assessee except alleging the non-compliance of notices 76 issued 131 and 133(6) in case of certain investors.
That neither the Assessee nor the investor companies ore ultimate beneficiaries but there is routing of funds from Bhushan Steel Ltd. and/or Bhushan energy Ltd. (specifically held so in 3 cases vie. Jawahar Credit & Holdings Pvt. Ltd. (A.Y. 2012-13}, Jingle Bells Aluminium Pvt. Ltd. (A.Y. 2012-13) and Kasper Information Technology Pvt. Ltd. (A. Y. 2012-13) That nothing is mentioned in the assessment order regarding any statement of any person providing entry to the Assessee.
That there is no denial at any stage of assessment proceedings by any of the subscribers of share capital of having deposited money in the Assessee Company.
That replies to notices issued u/s 133(6} were received from several investor companies.
That no material has been brought on record by the A.O to conclusively prove that the share capital originated from Assessee Company.
The documents submitted conclusively establish that the money came from the investor's/depositor's account and nowhere connected with the Assessee Company.
That there is no cash deposit in the bank accounts of the parties from whom share capital/ loan is received.
That the entire amount was received through normal 77 banking channels.
That the depositors have also confirmed of having deposited money in the company which confirmations also reveal source of funds, particulars of bank accounts through which payments have been received and income tax particulars.
That the Assessee has allotted shares for share application monies received.
That there is no mandate of law to look into the source of source for the A. Ys prior to A. Y. 2013-14.
That the Assessee cannot be fastened with liability u/s 68 unless a causal connection between the cash deposit in the bank account of the investor (if any) and the Assessee is established.
That where complete particulars of the share applications are furnished to the A.O and the A.O has not conducted any enquiry into the same or has no material in his possession to show that those particulars are false, then no addition can be mode in the hands of the company.
That the Investor companies are having adequate reserves make investments.
That the source of funds by the investor companies in the Assessee in its share capital stands explained That the investor companies are all assessed to tax in their respective jurisdictions.78
That the judgment of Stellar is applicable only where shares are issued in the names of non-existing persons, which is not the situation in the instant case.
That without proof of having introduced untaxed money by promoters or dubious antecedents, adverse view cannot be taken.
That the provisions of Section 68 are not applicable for bonus shares since the amount in question does not represent any fresh credit but only a transfer entry representing capitalization of reserves and surplus and is not hit by Section 68.
17. Further ld. CIT (A) in three cases have confirmed the addition, which can be summarized in the following manner:
That the Assessee failed to establish the identity and creditworthiness of the investors/lenders and the genuineness of the transactions.
That few investors/lenders did not reply to notices u/s. 133(6) or attend summons u/s.131.
That few share applicants and lender companies have same address and common directors.
That there was no reason why the appellant could not produce principal officers/directors of companies when the entire money came from the same group and the appellant also belonged to the same group. The pattern of money movement raised suspicion of accommodation entries.79
Arguments on behalf of the Assessee
18. Before us, ld. counsel for the assessee submitted that the Assessing Officer without bringing on record any cogent material and evidence whatsoever has alleged that all the assessees herein availed accommodation entries wherein they have deduced their own unaccounted/undisclosed funds into their books of account in the garb of share capital and or loans and advances. Whereas the assessee's case all throughout has been that these are mere routing/movement of accounted funds of Bhushan Energy Ltd. (BEL) in the form of share capital and or loan and advances through web of group companies into the assessee companies and subsequently reintroduction of such funds into regular accounts of BEL. The concept of accommodation entries would be applicable where entries represent unaccounted money of the person in whose books of account money has been credited in the form of share capital/loan/advance etc. and the investor/loan company has acted only as conduit for routing the money back to the books of account of that person. In the instant case there is no involvement of any undisclosed fund or any fictitious/books entries in the entire transactions. There is no information or inquiry or any material that the assessee's company availed any accommodation entry through any entry operator or anyone whereby it has been found that assessee have routed their own unaccounted/undisclosed fund in their books of account.
8019. Apart from that, all the assessee's in the respective assessment proceedings have filed detailed documentary evidences effectively discharging the primary onus of discharging the requisite ingredient of Section 68, viz., identity and creditworthiness of the investor/lenders and the genuineness of the credits and therefore, the nature and source of the impugned credit stood fully explained on standalone basis in each of the cases of the respective assessees. The peculiar facts which is permeating in all these appeals which is different from many other cases is that one assessee company has served as investor/lender of funds into the subsequent assessee company in a chain that goes on and so forth. He submitted that in cases of most of these companies, assessment has been completed u/s.143(3) or u/s 147 by the Assessing Officer, which were also subject matter of appellate proceedings whereby most of the additions have been deleted or the appeals are pending either before ld. CIT(A) or Tribunal. Thus same additions have been made in the hands of the investor companies also leading to double addition. To demonstrate the same he has filed a detailed chart in each and every investor company. He submitted that all the assessee-company as well as the investors/lenders are part of group of companies belonging to the Bhushan Group and the family members of the directors. He pointed out that from the details filed in the paper books as well as before the authorities below, it can be seen that the same stream of funds permeating to the group companies in the form of share 81 capital/premium or loan and advances have been repeatedly treated as unaccounted/undisclosed fund of multiple companies assessed on individual basis which has resulted into multiple addition into same stream of funds in the hands of multiple assessee's including all the assessees herein. By way of an example, he has cited many such instances viz.,:-
In the case of Track Casting (India) Pvt Ltd. (at SI. No. 19 of Annexure 1), an addition of Rs. 31 crores has been u/s 68 made on account of funds received from various parties in the form of share capital, where the A.O. has treated such share capital as representing the unaccounted funds of M/s. Track Casting (India) Pvt. Ltd. for A.Y. 2012-13, Further, in the case of Sukhna Steel Pvt. Ltd. (A.Y. 2012-
13) (i.e., Assessee at SI. No. 13 in the said chart), out of total additions of Rs. 21.168 crores made u/s 68 in the said case, an addition of Rs. 19.60 crores has been made on account of funds received as share capital from Track Casting (India) Pvt. Ltd, treating the same as representing the unaccounted funds of Sukhna Steel Pvt. Ltd.
Thus, the sum of Rs. 31 crores has first been treated as undisclosed funds belonging to M/s. Track Casting (India) Pvt. Ltd. Thereafter, Rs. 19.60 crores sourced out of the said funds of Rs. 31 crores, when paid by Track Casting (India) Pvt. Ltd. to M/s. Sukhna Steel Pvt. ltd. has once again been treated as representing the unaccounted funds belonging to M/s. Sukhna Steel Pvt, Ltd.
82 Again, a sum of Rs. 10 crores out of the said funds of Rs. 31 crores, has been received by M/s. Track Casting (India) Pvt. Ltd. (at SI. No. 19) in the form of share capital from M/s. Jawahar Credit & Holdings Pvt Ltd. (at Si. No. 4). The said sum of Rs. 10 crores has been paid by Jawahar Credit Holding Pvt. Ltd. to M/s. Track Casting (India) Pvt. Ltd. out of the share capital of Rs. 73.50 crores received by the former company from various parties. The said share capital of Rs. 73.50 crores has also been added u/s 68 in the hands of Jawahar Credit & Holdings Pvt. Ltd. by treating the same as unaccounted funds belonging the M/s. Jawahar Credit & Holdings Pvt. Ltd. The chain continues in a similar fashion.
Thus, the same funds routed via M/s. Jawahar Credit & Holdings Pvt. Ltd. to M/s. Track Casting (India) Pvt. Ltd. and subsequently to M/s. Sukhna Steel Pvt. Ltd, have been treated as belonging to and representing the undisclosed funds of all the three group entities at the same point in time.
Again, Rs, 13.50 crores invested by M/s. Jawahar Credit & Holdings Pvt, Ltd. out of its share capital of Rs. 73.50 crores (w.r.t which additions u/s 68 have already been made in the hands of Jawahar Credit & Holdings Pvt. Ltd.) into M/s. Super Star Agency Pvt Ltd. (at SI. No. IS) has also been added u/s 68 in the hands of the latter company, once again treating the same as representing the undisclosed funds belonging to the latter.
83Thus there is a complete lack of parity and understanding by the Revenue with respect to actual ownership of the impugned funds because same stream of funds have been added in the hands of multiple assessees.
20. In addition to the documentary evidences furnished before the lower authorities, Ld. Counsel has also filed a complete fund flow in the form of flow chart depicting the complete movement of the fund in case of each of the assessee company from where the funds have started /generated to the ultimate destination of the fund. The fund flow statement has been duly supported by the relevant bank statement which was filed before the authorities below to demonstrate every link of the flow chart. From the said fund flow statement, he pointed out that the funds representing the impugned credits in the form of share capital/share premium or loan and advances do not belong to any of the shares herein and the ultimate source of the impugned fund lies in the regular books of account of Bhushan Energy Ltd. and ultimately all these funds have been routed back to the Bhushan Energy Ltd. Though he admitted that these fund flow statement is in the nature of additional evidence for which petition for under Rule 29 of ITAT Rules 1963 have been filed separately. He harped upon the fact that in all these cases there is no involvement of unaccounted fund or undisclosed income of the assessee companies in the entire chain of transaction and no material has been brought on record by the Assessing Officer to prove that share capital and 84 loan and advances have been originated from the unaccounted money of the assessee companies or any other group companies who have subscribed to the shares or made investment. In fact, if at all there is circular transaction, then it amongst these very companies who are connected with the Bhushan group and the entire amount are accounted for in the books of Bhushan Energy Ltd. They are not the ultimate beneficiaries. This fact is clearly visible and demonstrable from the balance sheet of the assessee companies which clearly demonstrate that the entire share capital/share premium received by the assessee from its own group companies have been invested/advanced to other group companies. On these facts it cannot be held that the credit appears in the books of account are unaccounted or undisclosed income of the assessee.
21. Ld. Counsel reiterated that fund flow statements (with accompanying bank statements) effectively and conclusively establish the following facts:
i. That the Impugned credits in the form of share capital/share premium and/or loans & advances (as may be applicable) appearing in the books of account of the Assessees herein have arisen on account of the actual movement of funds originating from the regular books of account of BEL into a maze of group companies (Including the Assessees herein) via regular banking channels.85
ii. There is no fake or bogus entry in the entire chain which has been used as a camouflage by any of the group companies (including the Assessees herein) to put through their own unaccounted funds.
iii. That there are no cash deposits in the entire chain and the credits are ultimately sourced out of the accounted funds of BEL;
iv. That the Assessees herein are placed at different levels of the chain wherein one group company serves as an investor/lender in the next group company in the chain that goes so on and so forth, v. That the Assessees have merely acted as conduit mechanism for investing funds of BEL into other group companies and the said funds have ultimately gone back to BEL.
vi. The same stream of accounted funds of BEL flowing through these Group Companies have been repeatedly treated as the unaccounted/undisclosed funds of multiple group companies (assessed on an individual basis) resulting in multiple additions of the same stream of accounted funds of BEL in the hands of several Assessees;
vii. That there is no influx of any unaccounted funds/income belonging to the Assessee companies in the chain as incorrectly alleged by the A.Os.
Therefore, the nature and source of the impugned credits 86 stand fully explained in the cases of all the Assessee- Companies herein ruling out the applicability of the rigors of section 68.
22. Ld. Counsel submitted that, it is pertinent to note here that the factum of routing of accounted funds of BSL (through its subsidiary company, BEL) via the Assessees herein has been categorically recognized by the Ld, CIT(A) in the cases of Jawahar Credit & Holding Pvt. Ltd. (A.Y. 2012-13), Jingle Bells Aluminium Pvt. Ltd. (A.Y. 2012-13) and Kasper Information Technology Pvt. Ltd, {A.Y. 2012-13). The Ld. CIT(A) (being the same officer who has disposed of the appeals in all the three cases) has deleted the addition made by the respective A.O(s) u/s 68 with the following common findings:
That the basic requirement to justify the identity, creditworthiness and genuineness of the impugned transactions has been prima facie established by the Assessee.
That neither the Assessee nor the investors are the ultimate beneficiary of the transactions but there is routing of funds from Bhushan Steel Ltd. (through its subsidiary company, BEL). The funds received are given to other companies as soon as they are received.
That accordingly, the additions made by the A.O are outside the ambit of section u/s 68 as the Assessee has merely provided facility to route the impugned transactions.87
23. Ld. Counsel further pointed out that several investor /lender company in the respective chain are also assessees to the appeals before this Tribunal and the fund flow statement in each case is verifiable from the bank statement already on record of the Department. Further, similar additions made u/s.68 in the case of several investor/lender companies who have invested in the case of present assessees are also pending for disposal at the first appellate stage. Thus in such a situation and facts it cannot be held that these are non existing entities and it is clear cut case of double whammy.
24. Even otherwise also if the common antecedent and origination and the ultimate destination of the impugned funds arising from the same entity, i.e., BEL which has been routed to all through group companies is kept aside, then on standalone basis each and every assessee had successfully discharge the primary onus of establishing the identity, creditworthiness and genuineness of the transaction. In support, the assessee before the authorities below has submitted all the documents explaining the nature and source of the share capital/share premium appearing in the books of account which has remain uncontroverted by the Assessing Officer. The same have been placed in the paper book also. The assessees have furnished following documents before the Assessing Officer and CIT(A):-
(i) Names, addresses and PAN details of the parties,
(ii) Confirmation of parties 88
(iii) Bank Statements
(iv) Income Tax Returns of the parties for the impugned A.Y.
(v) Assessment orders of the parties.
(vi) Audited Accounts of the parties of the year under consideration.
25. Thereafter, he relied upon catena of judgment and submitted that here in all these cases the requisite ingredient of Section 68 in cases of all the assessees stand discharged which are as under:
A. The identities of the investors/lenders are established from multiple facts and evidences on record viz.
i. The investors/subscribers are companies duly incorporated under the provisions of the Companies Act, 1956 having separate legal entities and the status of "Artificial Legal Persons". The statutory records available with the Registrar of Companies clearly point to the companies being in existence.
ii. The identity and existence of the companies are also substantiated by the following documents filed before the lower authorities.
(a) Confirmations received from the parties.
(b) Details of PAN - which conclusively prove that the said shareholder companies are all existing income-tax assessees.89
(c) Copies of ITR Acknowledgment of the parties for the relevant assessment years.
(d) Assessment Orders of the parties for the relevant assessment years.
B. As far as the genuineness of the transactions is concerned, the Assessees filed the bank statements of the investors/lender companies which prove conclusively that the Assessees had received the impugned funds from the said investors/lenders and it came from the coffers of the said parties. The impugned sums were received through authorized banking channels which prove the genuineness of the transactions. The investors/lenders have also duly confirmed the fact of their having deposited money in the Assessee Company in the form of share capital and corroborated their confirmations with copies of Income-tax Returns, bank statements etc. C. Further, the creditworthiness of the investors/lenders is dearly established from the fact that share capital/premium/loans etc. was received by the Assessee company by way of account payee cheques through normal banking channels and also from the copies of the bank statements of the investor/lender companies showing adequate availability of funds for the impugned investments. The balance sheets of the investors/lenders also show significant net worth fair enough to make the investments. The confirmations of the investors/lenders are also on record. Thus, where the funds have flown 90 through normal banking channels and have been duly disclosed in the regular books of account of both the parties and the transactions have been confirmed by the respective parties and not repudiated in any manner, the creditworthiness of the parties is proved beyond doubt
26. In all these cases, Assessing Officer has not conducted any such enquiries or has brought anything on record to even remotely suggest that the monies received by the Assessees in the form of the impugned credits recorded in their books of account represent the undisclosed or unaccounted funds/ income of the Assessees. Apart from alleging that notices issued by the Ld. A.O to few investors/lenders remained unserved or non-complied with and that the Assessees failed to produce directors of the investors/lenders companies and that some of the investor companies did not have their own profit making apparatus which cannot be sole reasons to sustain additions u/s 68. The Ld. A.Os have not brought anything on record to disprove/refute the genuineness of the evidences furnished by the Assessees herein. The Ld. A.Os have failed to prove that the impugned credits despite appearing in the names of other entities still represents income from suppressed/undisclosed sources of the Assessees herein before nailing the Assessees and fastening the Assessees with impugned liabilities u/s.68. The fund flow statements showing the ultimate source of funds (being the unaccounted funds of BEL) with respect to the transactions impugned in the case of each of the Assessees herein filed in 91 PB-20 further corroborate/strengthen the Assessees' averment that the impugned funds do not represent income from undisclosed source of any of the Assessees herein.
27. In most of the cases, the Assessing Officer has sought to justify the addition relying on the fact that notices u/s.133(6) sent to some of the parties have returned unserved and assessee has failed to produce the directors of the parties. In this regard Ld. Counsel submitted that in most of the cases the parties have directly responded to the Assessing Officer and furnish all the requisite information in response to notices u/s.133(6). Even otherwise also, there is no legal obligation on the assessee to produce director or other representative etc. before the Assessing Officer and this failure by itself could not justify addition where the assessee has produced extensive materials and evidences and also pointing out that regular assessment u/s.143(3)/147 have been made in the case of those funds. In support, he relied upon the following judgments:
i. Pr.CIT vs. Rakam Money Matter (P) Ltd. (2018) 94 CCH 333 (Del HC).
ii. The Hon'ble Bombay High Court in the case of CIT vs. M/s. Orchid Industries Pvt. Ltd. in ITA No. 1433 of 2014 iii. CIT vs. Jalan Hard Coke Ltd. reported in (95 taxmann.com 330) iv. CIT vs. Diving Leasing & Finance Ltd. (2007) 158 TAXMAN 440 (Del) v. Crystal Networks (P) Ltd. vs. CIT, 353 ITR 171 vi. ITO, Ward-12(4), Kolkata Vs. M/s. Saktideep Suppliers Pvt., ITA No.2444/kKol/2016 (ITAT Kolkata) 92
28. Thus, mere non production of directors and in some cases non service of notices u/s.133(6) cannot be adversely viewed, because in most of the cases all the lenders who have invested in the assessee company, assessments have been made in their hands and similar addition u/s.68 have been made individually in the hands of those investor/lender company whose cases are also pending for disposal either before this Tribunal or the first appellate authority. The details of such companies by way of an example were given as under:
Name of Names of Quantum of Year in Section Quantum of Nature of Addition Whether Pendency Assessee Investors/ addition made by which under addition in the in the case of addition was of appeal Lenders the A.O u/s 68 addition u/s which hands of Investors/ Investors/ Lenders confirmed/ in the w.r.t funds 68 was assessment Lenders deleted by case of received from the made in the was C.I.T(A) in the Investors/ investors/lenders hands of completed case of Lenders Investors/ in the case Investors/ Lenders of Lenders Investors/ Lenders Angel 1. A.Y. 2012-13:-
Cement Pvt.Ltd.
A) Share Capital
fully Paid Up
Sintex Rs. 1,00,00,000 A.Y.2012-13 143(3) 1)Rs. 78,22,80,000 Share Capital deleted ITAT
Consumer (Assessee
Electronics herein at
Pvt.Ltd. Sl. No. 9
of the
captioned
matters in
the index
supra)
A.Y.2012-13 147 1)Rs. 3,90,00,000 Advance Rececived NA C.I.T(A)
2) Rs. 3,90,000 Commission Expense
( 3.9 Cr @ 1%)
Venus Rs. 30,00,00,000 A.Y.2012-13 147 1) Rs. 10,00,00,000 Unexplained Credit NA C.I.T(A)
Recruiter
Pvt.Ltd.
2) Rs. 30,00,000 Commission
Expense( 10Cr @3%)
Supreme Rs. 15,00,00,000 A.Y.2012-13 143(3) Rs. 72,43,00,000 Share Capital deleted ITAT
Placement (Assessee
Services herein at
Pvt.Ltd. Sl. No. 16)
93
Janitor Rs. 15,00,00,000 A.Y.2012-13 147 Rs. 36,00,00,000 Share Capital NA C.I.T(A)
Infrastruct converted partly to
ure Pvt.Ltd. fully
B) Share Capital
Partly Paid Up:-
Sintex Rs. 2,00,00,000 A.Y.2012-13 143(3) RS. 78,22,80,000 Share Capital deleted ITAT
Consumer (Assessee
Electronics herein at
Pvt.Ltd. Sl. No. 9)
A.Y.2012-13 147 1)Rs. 3,90,00,000 Advance Rececived NA C.I.T(A)
2) Rs. 3,90,000 Commission Expense
( 3.9 Cr @ 1%)
Delight A.Y. 2012-13:-
Resorts
Pvt.Ltd.
Advance Received
Reinforce Rs. 5,50,00,000 A.Y.2012-13 147 Rs. 4,50,00,000 Current Liabilities - NA C.I.T(A)
Recruiter Unexplained credit
Pvt.Ltd. u/s 68
Marvelous Rs. (5,70,00,000) A.Y.2012-13 147 Rs. 2,58,86,811 Commission Income NA C.I.T(A)
Cement Pvt
Ltd
Jingle Bells A.Y. 2012-13:-
Aluminium
Pvt.Ltd.
Share Capital:-
Rose Rs 12,00,00,000 A.Y. 2012-13 147 Rs. 72,00,00,000 Share Capital NA C.I.T(A)
Capital
Services
Pvt.Ltd.
CLASSIC Rs. 12,00,00,000 A.Y. 2012-13 147 Rs. 1,04,00,000 Commission Income( NA C.I.T(A)
TRANPORT Rs 52 Cr @2% )
ATION
PRIVATE
LIMITED
PITTIE Rs. 12,00,00,000 A.Y. 2012-13 147 Rs. 20,00,00,000 Unexplained Money NA C.I.T(A)
STRIPS U/s 69A
PRIVATE
LIMITED
BSN Capital Rs. 12,00,00,000 A.Y. 2012-13 147 Rs. 72,50,00,000 Share Capital NA C.I.T(A)
Services
Pvt.Ltd.
Kasper 1. A.Y. 2012-13:-
Informatio
n
Technology
Pvt.Ltd.
A) Share Capital
fully Paid Up:-
Quadrel Rs. 1,00,00,000 A.Y. 2012-13 147 Rs. 73,70,07,363 Share Capital & NA C.I.T(A)
Infrastruct Unexplained Credit
ure Pvt.Ltd.
Boost Rs. 20,00,00,000 A.Y. 2012-13 147 RS. 4,04,000 Commission Income( NA C.I.T(A)
Minerals & debit & credit
Mining Rs8.08 Cr @ 0.5%)
Pvt.Ltd.
Houston Rs. 20,00,00,000 A.Y. 2012-13 147 RS. 92,00,000 Commission Income NA C.I.T(A)
Buildwell ( Share Capital Rs 46
Pvt.Ltd. Cr @ 2%)
94
B) Share Capital
Partly Paid Up:-
Quadrel Rs. 2,00,00,000 A.Y. 2012-13 147 Rs. 73,70,07,363 Share Capital & NA C.I.T(A)
Infrastruct Unexplained Credit
ure Pvt.Ltd.
Kasper 2. A.Y. 2013-14:-
Informatio
n
Technology
Pvt.Ltd.
A) Share Capital
converted into
Partly Paid Up to
Fully paid up
Landsky Rs. 8,00,00,000 A.Y. 2013-14 143(3) Rs. 18,60,00,000 Share Capital confirmed ITAT
Real Estate (Assessee
Pvt.Ltd. herein at
Sl. No. 8)
Sintex 1. A.Y. 2012-13:-
Consumer
Electronics
Pvt.Ltd.
A) Share Capital:-
Jingle Bells Rs. 4,55,70,000 A.Y.2012-13 143(3) Rs. 62,00,00,000 Share Capital Fresh ITAT
Aluminium (bonus) Addition on (Assessee
Pvt.Ltd. account of herein at
alleged Sl. No. 5)
commission
income
Angel Rs. 4,37,10,000 A.Y.2012-13 143(3) Rs. 120,70,00,000 Share Capital Deleted ITAT
Cement (bonus) (Assessee
Pvt.Ltd. herein at
Sl. No. 1)
Frozen Iron Rs. 9,00,00,000 A.Y.2012-13 147 Rs. 1,00,00,000 Alleged NA C.I.T(A)
& Steel Accomodations
Pvt.Ltd. Entries
Reinforce Rs. 9,00,00,000 A.Y.2012-13 147 Rs. 4,50,00,000 Current Liabilities - NA C.I.T(A)
Recruiter Unexplained credit
Pvt.Ltd. u/s 68
STARLIGHT 1. A.Y. 2012-13:-
CONSUME
R
ELECTRONI
C PRIVATE
LIMITED
A) Share Capital
Fully piad up
GLOBUS Rs. 15,00,00,000 A.Y. 2012-13 143(3) Rs. 98,49,40,000 Share capital Deleted ITAT
REALINFRA (Assessee
PVT LTD herein at
Sl. No. 17)
TREMEND Rs. 15,00,00,000 A.Y. 2012-13 147 Rs. 25,00,00,000 Share Capital NA C.I.T(A)
OUS
MINING &
MINERALS
PRIVATE
LIMITED
B) Share Capital
Partly Paid Up
SUPER Rs. 75,00,000 A.Y. 2012-13 143(3) Rs. 42,25,00,000 Share Capital Deleted ITAT
STAR (Assessee
AGENCY herein at
PRIVATE Sl. No. 15)
LIMITED
95
Stylish 1. A.Y. 2012-13:-
Constructi
on Pvt.Ltd.
B) Other Current
Liabilites
Marvelous Rs 5,70,00,000 A.Y.2012-13 147 Rs. 2,58,86,811 Commission Income NA C.I.T(A)
Cement
Pvt.Ltd.
Matchless Rs. 5,00,000 A.Y.2012-13 147 Rs. 4,63,00,000 Other current NA C.I.T(A)
Infrastruct liabilities
ure Pvt.Ltd.
Venus Rs. 6,00,00,000 A.Y.2012-13 147 1) Rs. 10,00,00,000 Unexplained Credit NA C.I.T(A)
Recruiter
Pvt.Ltd.
2) Rs. 30,00,000 Commission
Expense( 10Cr @3%)
Sukhna A.Y. 2012-13:-
Real Estate
Pvt.Ltd..
A) Share Capital:-
Delight Rs.8,68,80,000 A.Y.2012-13 143(3) 1. Rs. 10,00,00,000 Share Capital Deleted ITAT
Resorts (Bonus) (Assessee
2. RS. 66,56,47,519 Advance Received
Pvt.Ltd. herein at
3. RS. 5,22,890 Unverifiable Sl. No. 2)
Expenses
Sunlight Rs. 2,89,60,000 A.Y.2012-13 143(3) Rs. 52,01,68,000 Share Capital ITAT
Tour & (Bonus) (Assessee
Travel herein at
Pvt.Ltd. Sl. No. 14)
Navayuga Rs. 36,20,000 A.Y.2012-13 147 Rs. 15,00,00,000 Share Capital NA C.I.T(A)
Consultanc (Bonus)
y Pvt.Ltd
Angel Rs. 30,00,00,000 A.Y.2012-13 143(3) Rs. 52,01,68,000 Share Capital ITAT
Cement (Assessee
Pvt.Ltd. herein at
Sl. No. 1)
Sukhna A.Y. 2012-13:-
Steel Pvt
Ltd
A) Share Capital
TRACK Rs. 19,60,00,000 A.Y.2012-13 143(3) 1) Rs. 31,00,00,000 Share capital deleted ITAT
CASTING (Assessee
(INDIA) herein at
PRIVATE Sl. No. 19)
LIMITED
2) Rs.7,75,000 Commission deleted ITAT
TREMEND Rs. 40,00,000 A.Y. 2012-13 147 Rs. 25,00,00,000 Share Capital NA C.I.T(A)
OUS
MINING &
MINERALS
PRIVATE
LIMITED
JAWAHAR Rs.1,58,000 A.Y. 2012-13 143(3) Rs. 73,50,00,000 Share Capital Fresh ITAT
CREDIT & (BONUS) Addition on (Assessee
HOLDINGS account of herein at
PRIVATE alleged Sl. No. 4)
LIMITED commission
income
Sunlight A.Y. 2012-13:-
Tour &
Travel
Pvt.Ltd.
A) Share Capital:-
96
Sukhna Rs. 5,46,84,000 A.Y.2012-13 143(3) Rs. 80,63,40,000 Share Capital Deleted ITAT
Real Estate (bonus) (Assessee
Pvt.Ltd. herein at
Sl. No. 12)
Navayuga Rs. 5,46,84,000 A.Y.2012-13 147 Rs. 15,00,00,000 Share Capital NA C.I.T(A)
Consultanc (bonus)
y Pvt.Ltd
Delight Rs. 1,08,00,000 A.Y.2012-13 143(3) 1. Rs. 10,00,00,000 Share Capital Deleted ITAT
Resorts (bonus) (Assessee
2. RS. 66,56,47,519 Advance Received Pvt.Ltd. herein at
3. RS. 5,22,890 Unverifiable Sl. No. 2) Expenses Janitor Rs. 20,00,00,000 A.Y.2012-13 147 Rs. 36,00,00,000 Share Capital NA C.I.T(A) Infrastruct converted partly to ure Pvt.Ltd. fully SUPER A.Y. 2012-13:-
STAR AGENCY PRIVATE LIMITED A) Share Capital Fully paid up:
BNR Rs. 5,00,00,000 A.Y. 2012-13 153C r.w.s Rs. 1,00,00,000 Sale of share NA C.I.T(A) INFOTECH 153A PRIVATE LIMITED JAWAHAR Rs. 13,50,00,000 A.Y. 2012-13 143(3) Rs. 73,50,00,000 Share Capital Addition u/s ITAT CREDIT & 68 deleted - (Assessee HOLDINGS Fresh herein at PRIVATE Addition on Sl. No. 4) LIMITED account of alleged commission income SAVROLI Rs. 6,50,00,000 A.Y. 2012-13 147 Rs. 80,00,00,000 Share Capital NA C.I.T(A) FINVEST LIMITED B) Share Capital Partly Paid Up STARLIGHT (b) Rs. 75,00,000 A.Y. 2012-13 143(3) 1) Rs. 32,25,00,000 Share Capital Deleted ITAT CONSUME (Assessee R herein at ELECTRONI Sl. No. 10) C PRIVATE LIMITED 143(3) 2) Rs. 30,18,00,000 Current Liabilites Deleted ITAT Supreme 2. A.Y. 2012-13:-
Placement Services Pvt.Ltd.
A) Share Capital fully Paid Up:-
Stylish Rs. 4,82,19,600 A.Y. 2012-13 143(3) 1. Rs. 30,00,00,000 Share Capital: deleted ITAT Constructio (bonus) (Assessee n Pvt.Ltd. herein at
2. Rs. 31,60,00,000 Other Current Sl. No. 11) Liabilites 97 Globus Realinfra 2. A.Y. 2012-13:-
Pvt ltd ( Formerly Known As Sur A) Share Capital Buildcon fully Paid Up:-
Pvt Ltd) TREMEND Rs. 3,40,40,000 A.Y. 2012-13 147 Rs. 25,00,00,000 Share Capital NA C.I.T(A) OUS (bonus) MINING & MINERALS PRIVATE LIMITED JAWAHAR Rs. 25,00,00,000 A.Y. 2012-13 143(3) Rs. 73,50,00,000 Share Capital Addition u/s ITAT CREDIT & 68 deleted - (Assessee HOLDINGS Fresh herein at PRIVATE Addition on Sl. No. 4) LIMITED account of alleged commission income BNR Rs. 15,00,00,000 A.Y. 2012-13 153C r.w.s Rs. 1,00,00,000 Sale of share NA C.I.T(A) INFOTECH 153A PRIVATE LIMITED SUKHNA Rs. 2,00,00,000 A.Y. 2012-13 143(3) Rs. 26,16,80,000 Share Capital deleted ITAT STEEL (Assessee PRIVATE herein at LIMITED Sl. No. 13) B) Share Capital Partly Paid Up:-
TREMEND Rs. 35,00,000 A.Y. 2012-13 147 Rs. 25,00,00,000 Share Capital NA C.I.T(A) OUS MINING & MINERALS PRIVATE LIMITED TRACK 1. A.Y. 2012-13:-
CASTING INDIA PRIVATE LIMITED A) Share Capital:
JAWAHAR Rs. 10,00,00,000 A.Y. 2012-13 143(3) Rs. 73,50,00,000 Share Capital Addition u/s ITAT CREDIT & 68 deleted - (Assessee HOLDINGS Fresh herein at PRIVATE Addition on Sl. No. 4) LIMITED account of alleged commission income
29. Under these facts, the identity and existence as well as source of the credit and the creditworthiness stand fully discharged in cases of all the assessee-companies. The 98 Department cannot blow hot and cold for making similar additions in the hands of the investor/lender company u/s.68 on the same amount and then again treating it to be bogus credit entry or unaccounted money of the assessee company.
30. Apart from that, he submitted that the assessee- companies have furnished the bank statements of the investor/lender companies which prove beyond doubt that the investors/lenders had adequate funds for making the impugned investments/deposits in the assessee-companies. Further, the Assessee(s) have also filed the audited accounts of the investor/lender companies which clearly depict that such investors/lenders had sufficient net worth (i.e. share capital plus reserves & surplus) and/or borrowings to make the impugned investments/deposits in the Assessee(s) herein. As held by the Hon'ble Bombay High Court in the case of PCIT vs. Ami Industries (supra), cited supra, that it is not necessary that the investments/loan should be made by the investors/lenders out of their taxable income only. The same may be made out of borrowed funds. Therefore, the objections raised by the Ld. A.O.s that in the instant case that the bank statements of the investor/lender companies revealed that they had received huge amounts from other companies which were subsequently transferred to the Assessee(s) herein is of no aid to the Department, On the contrary, the same only goes to show the availability of adequate funds (whether out of borrowed funds or funds received in the form of share capital by the investors/lenders from other entities) in the 99 bank accounts of the investors/lenders to make the impugned investments/loans to the Assessee(s) herein. Since the Assessee(s) herein filed cogent documentary evidences duly discharging their onus of establishing the necessary ingredients of section 68 which remained unrefuted/ uncontroverted by the A.Q(s), and hence no liability u/s 68 could be legally fastened upon the Assessee(s) unless the A.O(s) brought on record tangible material/evidence to prove that the amounts, which had been received by the investors/lenders from their sub-investors/sub-lenders were actually received by such sub-investors/sub-lenders from the Assessee(s) herein and that the same represented unaccounted funds of the Assessee(s) herein from unexplained sources.
31. In so far as the cases of the assessee's pertaining to Assessment Year 2013-14, in order to prove the burden of identity and creditworthiness of the creditors and the genuineness of the transaction with reference to transaction between assessee and creditors, the same cannot be extended to include source of such creditor for the purpose of Section
68. After referring to the various judgments, the judicial principles summed up by him are as under:
(i) In order to establish the receipt of cash credit as required under section 68, the assesses must satisfy three important conditions, namely, (a) identity of the creditor/investor, (b) genuineness of the transaction, 100 and (c) financial capability of the person giving the cash credit to the assesses, i.e., the creditworthiness of the creditor/investor.
(ii) The burden of the assessees to prove the genuineness of the transactions as well as the creditworthiness of the creditor must remain confined to the transactions, which have taken place between the assessee and the creditor/investor.
(iii) The creditor's/investor's creditworthiness has to be judged, vis-a-vis, the transactions, which have taken place between the assessee and the creditor/investor, and it is not the business of the assessee to find out the source of money of his creditor/investor or of the genuineness of the transaction, which took place between the creditor/investor and sub-creditor and/or creditworthiness of the sub-creditors.
(iv) It is not the burden of the assessee to prove that the money advanced/invested by the creditor/investor is properly taxed.
(v) Once the assessee establishes that the assessee has received the impugned amount from the creditor/investor by way of cheques, the assessee must be taken to have proved that the creditors/investors had the creditworthiness to advance the loans/share capital. Thereafter, the burden shifts to the A.O. to prove the contrary.101
(vi) On failure on the part of the creditors/investors to show that their sub-creditors and creditworthiness to advance the said amounts to the assessee, these amounts as a corollary, cannot under the law, be treated as the assessee's income from the undisclosed sources, when there is neither direct nor circumstantial evidence on record that the said loan amounts/share capital actually belongs to, or are owned by, the assessee.
(vii) In order to fasten liability on the assessee, the A.0 is required to show that the amounts, which have come to the hands of the creditors/investors from the hands of the sub-creditors, are actually received by the sub-
creditors from the assessee.
32. Applying the above judicial principles to the cases at hand, the Assessees herein filed detailed documentary evidences in the form of duly signed confirmation of investors/lenders (parties), details of PAN, copies of ITR, duly establishing the identity of the parties and genuineness of the transactions. The Assessees also filed bank statements of the parties duly establishing the creditworthiness of the parties to invest in the share capital of or advance loans to the Assessee Companies. Thus, the Assessees effectively discharged the burden cast upon them u/s 68 of proving identity of the investors, the genuineness of the transactions and the creditworthiness of the parties with respect to the transactions that took place between the Assessees and the 102 investors. For the cases pertaining to the period prior to A.Y. 2013-14, it was not the Assessee's business to find out or prove the source of funds of the investors/lenders. Since the Assesses filed the bank statements of the parties conclusively proving that the impugned sums were received through normal banking channels from the bank accounts of the parties, the burden of proving the genuineness of the transactions between the Assessees and the parties and the creditworthiness of the parties to invest in the share capital of the Assessee Companies stood discharged. Once the Assessees established the identity of the parties, the genuineness of the transactions and the creditworthiness of the parties to invest in the share capital of or advance loans to the Assessee Companies, the burden shifted to the Revenue to prove the contrary. The Ld. A.O has failed to discharge the secondary onus of demolishing/disproving the genuineness of the documentary evidences filed by the Assessees. As held In the cases cited above, before fastening any liability upon the Assessees u/s 68, the A.Os were required to show by bringing on record tangible material that the amounts received as share capital/loans from the investors/lenders actually emanated from the coffers of the Assessees or represented the undisclosed income of the Assessees.
33. Though the proviso to Section 68 inserted by Finance Act, 2012 w.e.f. 01.04.2013 casting the additional onus on the assessee of proving the source of the source raising the 103 share subscription cannot be held to be retrospective which has been held by Hon'ble Bombay High Court in the case of CIT vs. M/s. Gagandeep Infrastructure Pvt. Ltd. (2017) 80 taxmann.com 272 (Bombay) wherein it was observed and held as under:
"...(e) We find that the proviso to Section 68 of the Act has been introduced by the finance Act 2012 with effect from 1st April, 2013. Thus, it would be effective only from the Assessment Year 2013-14 onwards and not for the subject Assessment Year. In fact, before the Tribunal, it was not even the case of the Revenue that Section 68 of the Act as in force during the subject years has to be read/understood as though the proviso added subsequently effective only from 1st April, 2013 was its normal meaning. The Parliament did not introduce to proviso to Section 68 of the Act with retrospective effect nor does the proviso so introduced states that it was introduced "for removal of doubts" or that it is "declaratory'1. Therefore it is not open to give it retrospective effect, by proceeding on the basis that the addition of the proviso to section 68 of the Act is immaterial and does not change the interpretation of Section 68 of the Act is immaterial and does not change the interpretation of Section 68 of the Act both before and after the adding of the proviso. In any view of the matter the three essential tests while confirming the pre-proviso Section 68 of the Act laid down by the Courts namely the 104 genuineness of the transaction, identity and the capacity of the investor have all been examined by the impugned order of the Tribunal and on facts it was found satisfied. Further it was a submission on behalf of the Revenue that such large amount of share premium gives rise to suspicion on the genuineness (identity) of the shareholders i.e. they are bogus. The Apex Court in Lovely exports (Pj Ltd.,(supra) in the context to the pre-amended Section 68 of the Act has held that where the Revenue urges that the amount of share application money has been received from bogus shareholders then It is for the Income Tax Officer to proceed by reopening the assessment of such shareholders and assessing them to tax in accordance with law. It does not entitle the Revenue to add the same to the assessee's income as unexplained cash credit.
(f) In the above circumstances and particularly in view of the Concurrent finding of fact arrived at by the Cl. T(A) and the Tribunal, the proposed question of law does not give rise to any substantial question of law."
34. Apart from that, assessee has successfully established the source of the source even for the cases pertaining to Assessment Year 2013-14 which is evident from the following documentary evidences.
105 Name of A.Y & Quantum of Names of the Investor/lender Documents furnished before PB the additions u/s 68 companies the lower authorities with Reference Assessee respect to the (ITAT) investors/lenders Delight A.Y. 2014-15: Resorts Pvt. Advance Received- Rs. Ltd. 37.70 crores: PB-3B (i) Rs. 3.70 crores (i) Bhisham Energy Ltd. (i) Confirmation/ ITR/ Bank Pgs. 1-14 statement/ Audited (ii) Rs. 34 crores (ii) Janitor Infrastructure Pvt. Accounts Pgs. 15-30 Ltd. (ii) Confirmation/ ITR/ Bank statement/ Audited Accounts/ Asst. Order Kasper A.Y. 2013-14 Information Share Capital - Rs. 16 PB-7B Technology crores Pvt. Ltd. (i) Rs. 8 crores (i) Landsky Real Estate Pvt. Ltd. (i) Confirmation/ ITR/ Bank Pgs. 1-24 statement/ Audited (ii) Rs. 8 crores (ii) Quadrel Infrastructure Pvt. Accounts/ Asst. Order 143(3) Pgs. 25-39 Ltd. (ii) Confirmation/ ITR/ Bank statement/ Audited Accounts/ Asst. Order 143(3) Landsky A.Y. 2013-14 Real Estates A. Share Capital - 16 PB-8B Pvt. Ltd. crores (i) Rs. 8 crores (i) Winfields Iron & Steel Pvt. (i) Confirmation/ ITR/ Bank Pgs. 1-15 Ltd. statement/ Audited (ii) Rs. 8 crores Accounts/ Asst. Order 143(3) Pgs. 16-29 (ii) Quadrel Infrastructure Pvt. (ii) Confirmation/ ITR/ Bank B. Current Liabilities - Ltd. statement/ Audited Other payables Accounts/ Asst. Order 143(3) (i) Rs. 1.30 crores Pgs. 30-43 (ii) Rs. 1.30 crores (i) Cantabile Minerals & (i) Confirmation/ ITR/ Bank Pgs. 44-58 Minings Pvt. Ltd. statement/ Audited (ii) Angel Cement Pvt. Ltd. Accounts (ii) Confirmation/ ITR/ Bank statement/ Audited Accounts Globus Real A.Y. 2013-14 Infra Pvt. A. Share Capital - 5.60 PB-18B Ltd. (earlier crores: known as (i) Rs. 1.20 crores (i) KBN Infrastructure Pvt. Ltd. (i) Confirmation/ ITR/ Bank Pgs. 1-21 Sur Buildcon statement/ Audited Pvt. Ltd.) (ii) Rs. 1.40 crores (ii) Tremendous Mining & Accounts/Asst. Order Pgs. 22-42 Minerals Pvt. Ltd. (ii) Confirmation/ ITR/ Bank (iii) Rs. 80 lacs (iii) NRA Iron & Steel Pvt. Ltd. statement/ Audited Pgs. 43-62 Accounts (iv) Rs. 1 crore (iv) Vistrat Real Estate Pvt. Ltd. (iii) Confirmation/ ITR/ Bank Pgs. 63-84 statement/ Audited (v) Rs. 1.20 crores (v) UNA Power Pvt. Ltd. Accounts Pgs. 85-102 (iv) Confirmation/ ITR/ Bank B. Unsecured Loan - Rs. statement/ Audited 2.955 crore Accounts (i) Rs. 1.165 crores (v) Confirmation/ ITR/ Bank (i) Vistrat Real Estate Pvt. Ltd. statement/ Audited Pgs. 63, 67- 106 Accounts/ Asst Order 79, 80-84, (ii) Rs. 80 lacs 103-105 (ii) Adamine Construction Pvt. Pgs. 106-124 (iii) Rs. 99 lacs Ltd. (i) Confirmation/ ITR/ Bank Pgs. 125-143 (iii) Super Star Agency Pvt. Ltd. statement/ Audited Accounts (ii) Confirmation/ ITR/ Bank statement/ Audited Accounts (iii) Confirmation/ ITR/ Bank statement/ Audited Accounts
35. Thus, he submitted that in all these cases no addition u/s.68 can be made on the following grounds:-
(i) The Assessees herein have furnished detailed documentary evidences duly discharging their onus of establishing the identity and creditworthiness of the investors and the genuineness of the transactions.
(ii) The Department has failed to bring on record any adverse material to reject/disprove the explanations and evidences submitted by the Assessees except harping upon the non-service of notices issued u/s 133(6) in few cases which as judicially opined is not sufficient reason in itself to invoke section 68.
(iii) The addresses of most of the investors/lenders had undergone a change resulting in the non-service of notice.
The A.O has failed to inquire into the said fact.
(iv) The subscribers to the share capital or lenders (as the case may be) are duly incorporated bodies and are assessed to tax. They do exist and the details of their 107 names, PAN and ITR acknowledgment, bank statements and assessment orders have been duly filed with the Ld. A.O.
(v) Several investor/lender companies are also Assessees herein which once again proves their identity and existence.
(vi) The investments made by the investors/lenders in the Assessee companies have been duly confirmed by the investors/lenders and their confirmations have been placed on record.
(vii) The subscribers to the share capitals did subscribe to the share capital of the Assessee-companies and shares were duly allotted to them in most of the cases.
(viii) There is no denial at any stage of the assessment proceedings by any of the investors/lenders of having deposited money in the Assessee-Companies.
(ix) The impugned amounts have been received through undisputed banking channels.
(x) There is no cash deposit in the bank account of the parties from whom the impugned amounts by way of share capital/ share premium/loans have been received.
(xi) The documents submitted by the Assessee(s) establish that the money came from the investor's/lender's account and is nowhere connected with the Assessee companies.
108(xii) There is no proof or evidence to suggest that the impugned sums actually emanated from the coffers of the Assessee companies or represented the undisclosed incomes of the Assessee companies.
(xiii) The A.Os have not brought on record or confronted the Assessees with any such money trail or calculation or derivation to show that the impugned share capital/ loans & advances (as the case may be) received by the Assessees represented the unaccounted money of the Assessees routed into their business in the form of share capital/loans & advances.
(xiv) The assessments of several investor/lender companies stand completed u/s 143(3) of the Act wherein the source of funds with the investor/lender companies and the investments made in the Assessee company(ies) have been accepted by the Department. Kindly see the details of assessments of the investor companies tabulated in Annexure 1 to this submission. The assessment orders of the investor companies were filed before the revenue authorities and form a part of the departmental records. Thus, in light of the judgment of the coordinate bench of the Hon'ble ITAT, Delhi in the case of Vidya Prakashan Mandir Pvt. Ltd. vs. PCIT (supra), it cannot be held that the nature and source of credit from the investor/subscribing companies are not proved.
(xv) In the cases of other investor/lender companies (kindly refer to the summary of the assessment details of 109 the investors/lenders in Annexure 1) wherein additions have been made in their hands u/s 68 in assessments framed u/s 143(3)/147 in their respective cases on account of share capital/loans received by such companies treating the same as belonging to and representing the undisclosed income of such companies, the same funds (or part thereof) when received by the Assessees herein as share capital/loans from such companies cannot be once again added in the hands of the Assessee companies u/s 68 by treating the same as belonging to and representing the undisclosed/unaccounted funds of the Assessee companies at the same point in time (as has happened in the instant case). Thus, there is no clarity in the stand of the Department w.r.t. the alleged ownership of the impugned funds.
(xvi) The reasons given by the A.Os in making the impugned additions are generic in nature and not backed by any concrete evidence.
36. On the issue of share premium, he submitted that it has been added by the Assessing Officer u/s.68 of the Hon'ble Delhi High Court in the case of Pr. CIT vs. A.R. Leasing Pvt. Ltd. in ITA No. 361/2017 Dated: 03.07.2017 wherein it was held that if the A.O. disregards the documents furnished by the assessee to discharge onus u/s. 68 and comes to the conclusion that transaction of receiving money as share capital was not a genuine one primarily because the premium charged by the Assessee was much higher than the prevalent 110 market trend, the action of the A.O was not tenable unless the A.O had brought on record some material to show that confirmation and other evidence placed by the Assessee was not genuine, he could not have simply discarded the documents produced by the Assessee. Since the provisions of sec 56(2)(viib) of the Act is introduced w.e.f from 01.04.2013 cannot be applied retrospectively. Reliance was placed on decision of Hon'ble Bombay High Court in the case of CIT Vs Green Infra Limited ITA No. 1162 of 2014 Dt: 16.01.2017 and CIT vs. M/s. Gagandeep Infrastructure Pvt. Ltd. (PB 95-98) MANU/MH/1274/2017 : (2017) 394 ITR 680 (Bom). Similarly, in the case of CIT vs. Anshika Consultants Pvt. Ltd. (2015) 93 CCH 16 (Del HC), the Hon'ble Jurisdictional High Court opined that the fact that the assessee company charged higher premium or not, should not have been subject matter of the enquiry--Instead, issue must involve amount invested by share applicants were from legitimate sources or not. Reference is further craved to the judgment of the Hon'ble Madhya Pradesh High Court in the case of Pr. CIT (1), Indore v. Chain House International (P) Ltd. [2018] 98 taxmann.com 47/ [2019] 408 ITR 561 (MP) wherein the Hon'ble High Court ruled that once the genuineness, creditworthiness and identity of investors are established, no addition could be made as cash credit on the ground that shares were issued at excess premium.
37. Regarding Revenue's ground challenging the deletion of the addition made by the Assessing Officer to the extent of 111 increase in share capital arising on account of issue of bonus shares. He submitted that it is involved in the following cases:-
Sl. Name of the A.Y Total Addition u/s 68 Confirmation Ground No. of the PB - page No. Assessee & nature Addition u/s on account of (C) or Deletion Department's reference of addition made 68 (share issue of bonus (D) by the C.I.T Appeal challenging (Balance by the Ld. A.O capital/share shares (A) of the the deletion of Sheet premium plus addition u/s 68 addition u/s 68 on showing bonus shares) on account of account of bonus bonus bonus issue issue issue)
1. Sukhna Real 2012-13 Estates Pvt. Ltd. PB-12A, Share Capital 80,63,40,000 20,63,40,000 D Revenue's Appeal page 11 (including bonus Ground No. 2 shares of Rs.
20,63,40,000) -
section 68
2. Sukhna Steel Pvt. 2012-13
Ltd. 26,16,80,000 16,80,00,000 D Revenue's Appeal PB-13A,
Share capital Ground No. 1 page 12
(including bonus
shares of 16.80
lacs)- section 68
3. Globus Realinfra 2012-13
Pvt. Ltd. (Sur D Revenue's Appeal PB-17A,
Buildcon) 98,49,40,000 17,09,40,000 Ground No. 1 page 12
Share Capital
(including bonus
shares of Rs.
17,09,40,000/-) -
sec 68
4. Sintex Consumer 2012-13
Electronics Pvt. Ltd. D The deletion of PB-9A,
Share Capital 78,22,80,000 18,22,80,000 addition u/s 68 to page 10
(including bonus the extent of bonus
shares of 18.228 issue has not been
crores) - section 68 contested by the
Department.
5. Sunlight Tours & 2012-13
Travel Pvt. Ltd.: The deletion of PB-14A,
52,01,68,000 12,01,68,000 D addition u/s 68 to page 11
Share Capital the extent of bonus
(including bonus issue has not been
shares of contested by the
12,01,68,000) - Department.
section 68
6. Supreme 2012-13
Placement Services The deletion of PB-16A,
Pvt. Ltd. 72,43,00,000 12,43,00,000 D addition u/s 68 to page 10
Share capital the extent of bonus
(including bonus issue has not been
shares of Rs. 12.43 contested by the
crores) - section 68 Department.
112
38. In all these cases, the ld. CIT(A) has held that Section 68 is not applicable on increase in share capital on account of issue of bonus shares. The amount representing bonus share does not represent group of any sum in the books of account of the assessee it merely denotes a transfer entry representing the capitalization on reserve and surplus and not any fresh credit in the books of the assessee and therefore it is not hit of Section 68. Regarding grounds challenged the fresh addition made by the ld. CIT(A) on account of alleged commission income @ 2% for providing facility to route transaction resulting of introduction of new source of income.
He submitted that this issue is raised in assessee's appeal in the following cases:-
(i) Jawahar Credit & Holding Pvt. Ltd. (A.Y. 2012-13) -ITA No. 5398/DEL/2019 - Assessee's Appeal.
(ii) Jingle Bells Aluminium Pvt. Ltd. (2012-13) - ITA No. 5397/DEL/2019 - Assessee's Appeal.
(iii) Kasper Information Technology (P) Ltd. (A.Y. 2012-
13) - ITA No. 357/Del/2019.
39. To challenge this, assessee has raised identical grounds in all these cases which reads as under:
1. That on the facts and in the circumstances of the case, the Ld. C.I.T.(A)-05, New Delhi while correctly deleting the addition of Rs. 73,50,00,000/- made by the Ld. A.O. u/s 68, erred in making fresh addition of Rs. 1,47,00,000/- to the 113 income of the Appellant Company on account of alleged charges received by the Appellant Company @ 2% for providing facility to route the impugned transaction of Rs.
73,50,00,000/- purely on the basis of surmises and conjectures although the same is not backed by any substantive or tangible evidence on record.
2. That the Ld. C.I.T.(A)-05, New Delhi acted beyond jurisdiction in enhancing income of the Appellant u/s 251(1)(a) of the Income-tax Act, 1961 (the 'Act') by introducing and assessing new source of income to the extent of Rs. 1,47,00,000/- beyond the record (i.e. the return of income and assessment order) and outside the subject matter of assessment appealed against.
3. That the Ld. C.I.T(A)-05, New Delhi erred in making fresh addition of Rs. 1,47,00,000/- and thus enhancing the income of the Appellant to the said extent without issuing a prior show cause notice as mandated u/s. 251(2) of the Act for providing a reasonable opportunity to the Appellant of showing cause against such enhancement, thus resulting in gross violation of principles of natural justice.
40. Ld Counsel submitted that, it is pertinent to note here that as against the common allegation made by the Ld. A.O(s) in the 19 cases herein that the Assessee-companies have availed accommodation entries in the garb of share capital and/or loans & advances, the Ld. C.I.T (A)(being the same officer who has disposed of the appeals in all the three cases) in the aforesaid three cases has opined that the Assessees have not availed any accommodation entries but have merely 114 provided facility to route the funds from Bhushan Steel Ltd. in lieu for an estimated commission income of 2%. Thus, the Ld. C.I.T(A) has implied a role reversal of the Assessees herein
- whereas the A.Os have alleged that the Assessees herein are the recipients of accommodation entries, the Ld. C.I.T(A) has treated them as entry providers/ jamakharchi companies', providing facility to route transactions in lieu of commission income. The orders of the Ld. C.I.T(A) in the said three cases to the extent the same assess fresh sources of income (being the alleged commission income @ 2% for providing facility to route funds) have been challenged by the Assessees above named in their respective appeals filed before this Hon'ble ITAT.
41. The relevant observations of the Ld. C.I.T (A) in these three cases are reproduced hereunder for the sake of ready reference:
Name of the A.Y Findings of the Ld. C.I.T (A) Assessee Jawahar Credit & 2012-13 "7.8 As stated earlier, there is no worth/reserves of the appellant Holding (P) Ltd. company nor any business carried out, the investor companies and other persons are also not carrying out any visible business activity, therefore, this is nothing but routing of its funds by the Bhushan Steel Ltd. and its related parties where neither the investors and other persons nor the appellant company are ultimate beneficiary. The funds received were given to the other companies, as soon as it is received and the assets in the balance sheet is shown in the form of investment in shares for the share application money and premium thereon received. The appellant has also not given any cogent reasoning for the fund flow shown by the A.O in his report. 7.9 Therefore, looking to the facts and circumstances of this case where basic requirement to justify the identity, creditworthiness and genuineness of transaction has been prima facie established but looking to the fact and analysis as narrated above, these transactions are found to be routing finances of M/s. Bhushan Steel Ltd. and other persons, through appellant company and it is just paper company where appellant is not the ultimate beneficiary because it has further passed on those funds to various companies as 115 shown in the flow chart.
7.10 In view of above, it is to be stated that as per the practice and also seen in various cases, the said person (in this case appellant) charges the amount to provide such entries which is generally 2% of the total transactions. Therefore, considering that the appellant has been providing the facility to route these financial transactions, the 2% of the total amount is treated as undisclosed income of the appellant, not shown in its return of income. This comes to Rs. 1,47,00,000/-.
7.11 Since the details have been duly provided with respect to the referred companies and the additions are out of the ambit of provisions of section 68 of the Act due to the reason that these investor companies are held to be just a paper company or conduit in the case of other investors for providing entries and routing the finances, therefore, the addition to the extent of Rs. 1,47,00,000/- is sustained for charges received in providing such entries, not disclosed by the appellant. For the balance amount, the appellant gets a relief."
Jingle Bells 2012-13 "7.9 As stated earlier, there is no worth/reserve of the appellant Aluminium Pvt. company nor any business carried out, the investor companies are Ltd. also not carrying out any visible business activity, therefore, this is nothing but routing of its funds by the Bhushan Steel Ltd. where neither the seven investor companies nor the appellant company are ultimate beneficiary. The funds received were given to other companies, as soon as it is received and the assets in the balance sheet is shown in the form of investment in shares for the share application money and premium thereon received. The appellant has also not given any cogent reasoning for the fund flow shown by the A.O in his report.
7.10 Therefore, looking to the facts and circumstances of this case where basic requirement to justify the identity, creditworthiness and genuineness of the transaction has been prima facie established but looking to the fact and analysis as narrated above, these transactions are found to be for routing finances of M/s. Bhushan Steel Ltd., through these companies and therefore these companies are just paper companies where appellant is not the ultimate beneficiary because it has further passed on those funds to five companies as shown in the flow chart.
7.11 In view of above, it is to be stated that as per the practice and also seen in various cases, the said person (in this case appellant) charges the amount to provide such entries which is generally 2% of the total transactions. Therefore, considering that the appellant has been providing the facility to route these financial transactions, the 2% of the total amount is treated as undisclosed income of the appellant, not shown in its return of income. This comes to Rs. 1,24,00,000/-.
7.12 Since the details have been duly provided with respect to the referred companies and the additions are out of the ambit of provisions of section 68 of the Act due to the reason that these investor companies are held to be just a paper company or conduit in the case of other investors for providing entries and routing the finances, therefore, the addition to the extent of Rs. 1,24,00,000/- is sustained for charges received in providing such entries, not disclosed by the appellant. For the balance amount, the appellant 116 gets a relief."
Kasper 2012-13 "7.8 As stated earlier, there is no worth/reserve of the appellant Information company nor any business carried out, the investor companies are Technology (P) also not carrying out any visible business activity, therefore, this is Ltd. nothing but routing of its funds by the Bhushan Steel Ltd. where neither the seven investor companies nor the appellant company are ultimate beneficiary. The funds received were given to other companies, as soon as it is received and the assets in the balance sheet is shown in the form of investment in shares for the share application money and premium thereon received, which is evident from the chart reproduced earlier. The appellant has also not given any cogent reasoning for the fund flow.
7.9 Therefore, looking to the facts and circumstances of this case where basic requirement to justify the identity, creditworthiness and genuineness of the transaction has been prima facie established but looking to the fact and analysis as narrated above, these transactions are found to be for routing finances of M/s. Bhushan Steel Ltd., through these companies and therefore these companies are just paper companies where appellant is not the ultimate beneficiary because it has further passed on those funds to five companies as shown in the chart above.
7.10 In view of above, it is to be stated that as per the market practice and also seen in various cases, the said person (in this case appellant) charges the amount to provide such entries which is generally 2% of the total transactions. Therefore, considering that the appellant has been providing the facility to route these financial transactions, the 2% of the total amount is treated as undisclosed income of the appellant, not shown in its return of income. This comes to Rs. 92,00,000/-.
7.11 Since the details have been duly provided with respect to the referred companies and the additions are out of the ambit of provisions of section 68 of the Act due to the reason that these investor companies are held to be just a paper company or conduit in the case of other investors for providing entries and routing the finances, therefore, the addition to the extent of Rs. 92,00,000/- is sustained for charges received in providing such entries, not disclosed by the appellant. For the balance amount, the appellant gets a relief."
42. Therefore, the Ld. C.I.T (A) in the above three cases has categorically admitted that the respective Assessees have prima facie established the necessary ingredients of section 68, viz., identity, creditworthiness and the genuineness of the impugned transactions and therefore the additions made by the A.Os are beyond the purview of section 68 of the Act. While observing as above and deleting the impugned 117 additions made by the respective A.Os u/s 68 of the Act, the Ld. C.I.T (A) has proceeded to introduce and assess a new source of income being the alleged undisclosed commission income of 2% allegedly earned by the respective Assessees for providing a fluid mechanism for the transfer of funds from one company to another. The alleged commission incomes as estimated by the Ld. C.I.T (A) in the aforesaid cases do not constitute the subject matter of assessments i.e. the same have neither been offered by the Assessees in their respective returns of income nor is there any whisper regarding the taxability of the alleged source of income in the assessment orders passed by the Ld. A.Os. Thus, the addition made by the Ld. C.I.T (A) by introducing new source of income in the form of alleged undisclosed commission income is beyond the power and authority of the Ld. C.I.T (A) as it neither arose from the assessment order nor was it raised at anytime during the assessment or appellate proceedings. Further, no show-cause notice was issued to the Assessees before fastening such fresh liability on the Assessee companies thus resulting in gross violation of principles of natural justice.
43. He further submitted that the ld. CIT(A) has no power to enhance the investment by assessee's new source of income out of subject matter of assessment appealed against and he cannot make addition in respect of new source of income neither disclosed by the assessee in his return nor considered by the Assessing Officer. In support, he relied upon the following judgments:-
118(i) CIT Vs. Shapoorji Pallonji, (1962) 44 ITR 891 (SC)
(ii) CIT Vs. Rai Bahadur Hardutroy Motilal Chamaria (1967) 66 ITR 443 (SC)
(iii) CIT Vs. Union Tyres (1999) 240 ITR 556 (Del)
(iv) CIT Vs. National Company Ltd. (1993) 199 ITR 445 (Cal)
(v) CIT Vs. Associated Garment Makers (1992) 197 ITR 350 (Raj)
(vi) Sterling Vs. ITO (1975) 99 ITR 236 (Kar)
(vii) Hari Mohan Sharma v. ACIT, Circle 63(1), New Delhi [2019] 110 taxmann.com 119 (Delhi-Trib).
44. Without prejudice, he submitted that even otherwise also, since all the Assessees herein are essentially group companies under common management and/or control, the question of charging any commission income for providing facility to route the funds of another group company does not arise. The impugned additions have been made by the Ld. C.I.T(A) solely on the basis of surmises, conjectures, suspicion and on the basis of what he deems to be a prevalent practice in the market and not on the strength of any tangible material or evidence on record. Thus, in light of the settled and trite position of Law, i.e., suspicion however strong can't take the place of proof, as has been laid down in the judgments of the Hon'ble Apex Court in Lalchand Bhagat Ambica Ram vs. CIT reported in (1959) 37 ITR 288 (SC), Umacharan Shaw reported in 37 ITR 271 and Omar Salay Mohamed Sait 119 reported in 37 ITR 151, he urged that the impugned additions on account of alleged commission income are unsustainable in the eyes of law and as such may kindly be deleted.
45. Lastly regarding Revenue's appeal challenging the restriction of addition of Rs.23,32,813/- made by the Assessing Officer u/s.14A read with Rule 8D to Rs.5 lac in the case of Stylish Construction Pvt. Ltd. for Assessment Year 2012-13 for which the following grounds of appeal has been raised by the Revenue:-
"5. On the facts and in the circumstances of the case and in law, the Ld. C.I.T(A) erred in restricting the addition to Rs. 5 lac from Rs. 23,32,813/- made by the A.O u/s 14A of the I.T. Act, 1961 read with Rule 8D of the I.T. Rules, 1961 in spite of the fact the decision on this issue is pending in Hon'ble Supreme Court in the case of Maxopp Investment Ltd. and in view of the facts that the financial expenses and administrative expenses debited in the P&L A/c are also relatable to the investments in shares purchased."
46. The facts in brief are that, M/s. Stylish Construction Pvt. Ltd. (hereinafter referred to as the 'Assessee' under para 5 and its sub-paras) filed its original return of income for A.Y. 2012-13 after making a suo-moto disallowance of Rs. 2,23,660/- u/s 14A of the Act on account of expenses attributable to exempt income. The aforesaid figure of Rs. 2,23,660/- was computed by the Assessee by aggregating the total indirect expenses debited in its Profit & Loss Account as under:-
120Legal & Professional Charges Rs. 4,790/-
E.D.P Charges Rs. 1,00,000/- Rates & Taxes [Rs. 5,36,706/- less Rs. 5,28,702/-(being Rs. 8,004/-
deferred revenue expenses added back in the computation of income)] Bank Charges Rs. 2,744/-
Director's Sitting Fees Rs. 10,000/-
Rent Rs. 78,000/- Audit Fees Rs. 16,854/- Printing & Stationery Rs. 300/- Local Conveyance Rs. 2,135/- Staff Welfare Rs. 833/- TOTAL Rs. 2,23,660/-
The Assessee is engaged in the business of supply of manpower which forms the pre-dominant part of its business activity. As would be evident from the Profit & Loss Account of the Assessee, the receipts from service charges on account of supply of manpower amounts to Rs. 3,63,28,155/- as against which the receipts from dividend (exempt u/s 10) amounts only to Rs. 9,94,717/- for A.Y. 2012-13. It was stated that, almost all the expenses incurred are directly relatable to the activity of providing manpower services and no part of the expenses is relatable, either directly or indirectly, to the earning of dividend income which as clearly evident from the financial statements of the Assessee- company constitutes a miniscule part of the total activity of the Assessee-company. However, to be on a safe side, the Assessee-company made a suo-moto disallowance of the total indirect expenses debited in its Profit & Loss Account for the impugned A.Y. 2012-13. It was stated that apart from the indirect expenses enlisted above, all the remaining expenses debited in the P&L A/c are directly 121 related to the business of supply of manpower and have no nexus whatsoever, either directly or indirectly to the earning of dividend income by the Assessee-company.
47. In the course of the assessment proceedings, the Assessee was required by the Ld. A.O to file details of the expenditure incurred for earning the exempt dividend income and also to explain as to why no disallowance was warranted u/s 14A of the Act. In response thereto, the Assessee submitted that it had made a suo-moto disallowance of Rs. 2,23,660/- u/s 14A of the Act in its return of income in connection with the dividend income of Rs. 9,94,717/- earned by it during A.Y. 2012-13. The Ld. A.O, however, in the assessment framed u/s 143(3) of the Act made an additional disallowance of Rs. 23,32,813/- u/s 14A of the Act r.w. rule 8D(2)(iii) of the Income-tax Rules, 1962 over and above Rs. 2,23,660/- already disallowed by the Assessee Company in its return of income. The said disallowance was computed by the A.O. by purportedly applying the method prescribed under Rule 8D in the manner so follows: -
Sl. Particulars Amount No. 1. The amount of expenditure directly relating to A Nil
income which does not form part of total income
2. Expenditure on interest B Nil
3. The average of value of investment income from C Rs. 51,12,94,581/-
which does not or shall not form part of the total income [(Rs. 81,70,49,580 + Rs. 20,55,39,582)/2]
4. The average of total assets appearing in the D Rs. 42,41,87,400/-
balance sheet of the Assessee [(Rs. 63,09,64,127 + Rs. 21,74,10,672)/2]
5. B X C/D Nil
6. ½% of the average of the value of investment, E Rs. 25,56,473/-
122income from which does not or shall not form part of the total income.
Total Rs. 25,56,473/-
48. On a perusal of the computation under Rule 8D given by the A.O, legal inference is that there are three limbs contained under Rule 8D, namely:-
(i) expenditure directly related to the earning of exempt income;
(ii) interest expenditure not directly attributable to any particular activity; and
(iii) amount equal to one-half per cent of the average value of investments, income from which does not form part of total income;
It was stated that no expenses were found by the A.O to have been incurred by the Assessee with respect to expenses referred to under the first two limbs. As regards the third limb dealing with proportionate disallowance w.r.t. other indirect expenses not directly attributable to any particular income or receipt, the Ld. A.O has made a further disallowance of Rs. 23,32,813/- (i.e Rs. 25,56,473/- less Rs. 2,23,660/- disallowed suo moto by the Assessee) u/s. 14A by purportedly applying the formula prescribed under Rule 8D(2)(iii) of the Act overlooking the fact that the Assessee had already made a suo moto disallowance of the entire indirect expenses (not directly connected with the activity of supply of manpower) in its computation of income. Further, defying any logic, the Ld. A.O presumed that the Assessee had incurred total expenses of Rs. 25,56,473/- to earn exempt dividend income of Rs.
1239,94,717/-. While holding as above, the Ld. A.O however, failed to record any satisfaction to the effect that having regard to the accounts of the Assessee, he was not satisfied with the correctness of the claim of the Assessee in respect of expenditure incurred in relation to exempt income.
49. On appeal before the first appellate authority, the Ld. C.I.T(A) restricted the additions made by the Ld. A.O to Rs. 5 lacs holding that the amount of disallowance u/s 14A cannot in any case exceed the exempt income, i.e., the dividend income of Rs. 9,94,717/- in the instant case. Therefore, for the sake of substantive justice, the Ld. C.I.T(A) found it reasonable and justified to restrict the disallowance u/s 14A r.w. Rule 8D to Rs. 5 lacs. The balance addition of Rs. 18,32,813/- was thus deleted by the Ld. C.I.T(A). The order of the Ld. C.I.T(A) to the aforesaid extent has been agitated in appeal by the Department before the Hon'ble ITAT.
50. Thus, Ld. Counsel submitted that without any satisfaction recorded by the Assessing Officer that the claim made by the assessee is not correct, he could not have proceeded to invoke the provisions of Rule 8D.
51. Regarding Revenue's appeal challenging alleged admission of additional evidence by the C.I.T(A) without giving opportunity to the A.O in violation of Rule 46A of the Income- Tax Rules,1962 in the cases of Angel Cement Pvt. Ltd. (A.Y. 2012-13), Delight Resorts Pvt. Ltd. (A.Y. 2012-13) and Stylish 124 Construction Pvt. Ltd. (A.Y. 2012-13), which has been urged by the Department in the following cases:
Name of the A.Y. & ITA No. Ground of Appeal urged Assessee Angel 2012-13, ITA Ground No. 2:
Cement Pvt. No. That the Ld. C.I.T(A) erred in Ltd. 4691/Del/2016 admitting additional evidence under Rule 46A without giving opportunity to the A.O. Delight 2012-13, ITA Ground No. 3 Resorts Pvt. No. That the Ld. C.I.T(A) erred in Ltd. 5974/Del/2017 accepting the evidences filed during the appellate proceedings without obtaining comments of the A.O in remand proceedings, thereby violating Rule 46A of the IT Rules, 1962 Stylish 2012-13, ITA Ground No 4 Construction No. That the Ld. C.I.T(A) erred in Pvt. Ltd. 5744/Del/2016 accepting additional evidence under Rule 46A without giving any opportunity to the A.O in respect of evidences of shareholders assessment proceedings & supporting documents.
52. In regard to the above, it has been submitted before us that no additional evidences were submitted by the aforesaid Assessee(s) in course of the appellate proceedings before the Ld. C.I.T (A). The impugned evidences referred to by the Ld. A.O(s) as additional evidences in the Departmental Appeals in the aforesaid cases are the Assessment Orders passed by the Income-tax Department in the cases of the investors/lenders. Since these orders were passed by the Income-tax Department, they constitute part of the Records of the Income-tax Department and cannot be construed as additional evidences. Therefore, the contention of the 125 Department that additional evidences were filed by the aforesaid Assessee(s) in course of the appellate proceedings before the Ld. C.I.T(A)(s) is devoid of any merit and as such, the Departmental appeal in this respect deserves to be dismissed.
Arguments on behalf of the Revenue:
53. On the other hand, ld. CIT-DR after referring to the various observation of the Assessing Officer submitted that, in sums and substance, the onus was completely upon the assessee to prove the identity and creditworthiness of the investors/creditors and the genuineness of the transaction. Though the assessee has done all the paper work but in several cases there were same addresses of the investors and in some case notices remained uncomplied with and assessee has failed to produce the directors of the investor companies. One of the most important ingredients to discharge the onus was to prove the creditworthiness of the investor company, which here in this case Assessing Officer has amply demonstrated that investor companies had hardly carried out any business operation and in their income tax returns, the income shown was negligible and none of these had that kind of book value so as to justify such a higher share premium. These companies were nothing but dummy and paper companies and conduit to give accommodation entry. The perusal of the bank statement revealed that they are receiving funds from various other companies and transferring the fund 126 to other companies and they were acting like a conduit which normal happens in accommodation entries.
54. In so far as the contention of the ld. counsel that there has been rotation of funds from Bhushan Energy Ltd. to other group companies in the form of loan and advances given to the various companies who in turn have subscribed shares and paid share premium and the same money again has been routed back to Bhushan Energy Ltd., can only be proved from fund flow statement which was not there before the Assessing Officer. The additional evidences which have been filed in the form of cash flow fund and the correlation with their respective bank statements etc., should be remanded back to the Assessing Officer for proper verification and examination in order to establish the credibility of this theory of fund flowing from one group to other and the source of these fund is coming from Bhushan Energy Ltd. which has been claimed to be already accounted for. Thus, she submitted that in all fitness matter should be remanded back to the file of the Assessing Officer.
DECISION
55. We have heard the rival submissions and also perused the relevant findings given in the impugned orders as well as extensive materials referred to before us at the time of hearing. We had already discussed in the foregoing paragraphs the issues involved in all the appeals filed by the Department as well as by the assessee, and we have found 127 that in all the appeals the similar facts are permeating and issues involved are interlinked and inextricably interconnected. The major issue pertains to addition u/s.68 in the form of share capital/share premium and loan and advances; and in assessees' appeal, addition have been made on account of alleged undisclosed commission income which has been added by the ld. CIT(A) exercising his power of enhancement u/s.251(1)(a). The grounds in all the appeals have already been summarized above in the foregoing tables and since same material facts and issue are permeating through; therefore, we are giving our consolidated decision which would apply mutatis mutandis in all the appeals where similar issues are involved.
56. The common grounds taken by the Assessing Officer almost in all the appeals for making the addition u/s.68 in the hands of various assessee's which may be broadly culled out from the assessment orders can be summarized in the following manner:
That the Assessee introduced its unaccounted/undisclosed funds in its books of account in the form of share capital and/or loan & advances.
That the onus is on the Assesses to prove the identity and creditworthiness of the investors/creditors and the genuineness of the transactions.
That in several cases, the summons addressed to investors remained uncomplied with. The notices issued u/s. 133(6) remained uncomplied with or unserved with remarks 'does 128 not exist', 'left', 'address not found'.
That the Assessee failed to produce directors of investor companies.
That the amounts were received through private placements. Since the contributors were personally known to the Assessee, the Assessee must be aware of the whereabouts. The corporate veil needs to be lifted.
That the Assessee failed to submit documents related to credits in the books.
That simply furnishing PAN or Assessment particulars/address was not enough.
That there was insufficient balance in bank accounts; that cheques issued to Assessee were cleared by way of receipt of transfer entry from another associate concern.
That the creditworthiness of investors was not established due to the reason that all the investor companies have nominal/meager income. That most of the Investor companies have no profit-making apparatus, no business activity.
That insofar as the advances and loans were concerned, no interest was paid, the purpose of advance was missing, huge fund transactions implied dummy transactions.
That the anus u/s. 68 cannot be said to be discharged merely because the transaction is done through banking channels or account payee instruments.
That in case of certain Assessees, speed post was booked from Delhi but the registered office of the investors was in 129 Punjab & Chandigarh. It shows that the assessee itself filed replies to notices sent u/s 133(6).
That the registered offices of investor companies in some cases are located in different cities but are having their bank accounts operated from Delhi just to facilitate the Assessee.
That the subscriber companies did not have creditworthiness as money seldom rests for o day in their accounts, finds its destination immediately;
That Assessee Company, in most cases, has no business profit, negative CPS, major miscellaneous income nothing to do with business objectives of Assessee Company, no brand value, no past performance history, no future prospect-so as to attract such high premium.
Thai the Assessee offered no explanation as to why the companies agreed to invest in unlisted company where there was no scope for making an exit out of investments.
That the investor and Assessee Company are nothing but a creation of paper companies.
That the person should have some sign of identification other than merely on paper These signs could be place of work, staff members, actual transaction, recognition in eye of public, sign board, etc. Actual identity and business does not get proved by these passive documents when in fact no actual or passive business is being carried on.
That the Assessee has not brought anything on record to support that any dividend has been declared by it, That a perusal of the bank statements of the investor 130 companies reveal that they are receiving huge amounts from various other companies and transferring funds to other companies.
57. In so far as the finding of the ld. CIT (A) while deleting the addition u/s.68 are also by and large and similar which can be broadly be summarized as under:
That the basic requirement to justify identity, creditworthiness and genuineness of the transactions in the case of the Assessee are prima facie established. Relevant documents were furnished by the Assessee. The Assessee filed copies of confirmation, bank statements, P&L A/c, Balance Sheet, Assessment Orders of the investors/lenders to establish source of funds in the hands of investor/lender companies. That the A.O has not brought any adverse material to reject the explanations and evidences submitted by the Assessee except alleging the non-compliance of notices issued 131 and 133(6) in case of certain investors.
That neither the Assessee nor the investor companies are ultimate beneficiaries but there is routing of funds from Bhushan Steel Ltd. and/or Bhushan Energy Ltd. [specifically held so in 3 cases viz. Jawahar Credit & Holdings Pvt. Ltd. (A.Y. 2012-13), Jingle Bells Aluminium Pvt. Ltd. (A.Y. 2012-13) and Kasper Information Technology Pvt. Ltd. (A.Y. 2012-13)] That nothing is mentioned in the assessment order regarding any statement of any person providing entry to the Assessee. That there is no denial at any stage of assessment proceedings by any of the subscribers of share capital of having deposited money in the Assessee company.131
That replies to notices issued u/s 133(6) were received from several investor companies.
That no material has been brought on record by the A.O to conclusively prove that the share capital originated from Assessee Company.
The documents submitted conclusively establish that the money came from the investor's/depositor's account and nowhere connected with the Assessee Company. That there is no cash deposit in the bank accounts of the parties from whom share capital/ loan is received. That the entire amount was received through normal banking channels.
That the depositors have also confirmed of having deposited money in the company which confirmations also reveal source of funds, particulars of bank accounts through which payments have been received and income tax particulars. That the Assessee has allotted shares for share application monies received.
That there is no mandate of law to look into the source of source for the A.Ys prior to A.Y. 2013-14. That the Assessee cannot be fastened with liability u/s 68 unless a causal connection between the cash deposit in the bank account of the investor (if any) and the Assessee is established.
That where complete particulars of the share applications are furnished to the A.O and the A.O has not conducted any enquiry into the same or has no material in his possession to show that those particulars are false, then no addition can be made in the hands of the company.132
That the Investor companies are having adequate reserves to make investments.
That the source of funds by the investor companies in the Assessee in its share capital stands explained. That the investor companies are all assessed to tax in their respective jurisdictions.
That the judgment of Stellar is applicable only where shares are issued in the names of non-existing persons, which is not the situation in the instant case.
That without proof of having introduced untaxed money by promoters or dubious antecedents, adverse view cannot be taken.
That the provisions of section 68 are not applicable for bonus shares since the amount in question does not represent any fresh credit but only a transfer entry representing capitalization of reserves and surplus and is not hit by section 68. That the Assessee failed to establish the identity & creditworthiness of the investors/lenders and the genuineness of the transactions.
That few investors/lenders did not reply to notices u/s 133(6) or attend summons u/s 131.
That few share applicants and lender companies have same address and common directors.
That there was no reason why the appellant could not produce principal officers/directors of companies when the entire money came from the same group and the appellant also belonged to the same group. The pattern of money movement raised suspicion of accommodation entries, page 4, para 7 of C.I.T(A)'s order in the case of Globus Realinfra Pvt. Ltd. (A.Y. 2013-14).133
58. Since the additions have been made by invoking the deeming provision of Section 68, the same for sake of ready reference is reproduced as under:
"68. Cash credits.--Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year."
Subsequently, the treatment of share capital amount under section 68 of the Act was amended by Finance Act, 2012, w.e.f. 1-4-2013 to insert the following:
"Provided that where the assessee is a company (not being a company in which the public are substantially interested), and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee-company shall be deemed to be not satisfactory, unless
a) the person, being a resident in whose name such credit is recorded in the books of such company also offers an explanation about the nature and source of such sum so credited; and
b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory:
Provided further that nothing contained in the first proviso shall apply if the person, in whose name the sum referred to therein is recorded, is a venture capital fund or a venture capital company referred to in clause (23FB) of section 10."134
59. Now proviso to Section 68 cast an additional onus on the assessee company for proving the source of the source of share capital/share premium which has been effective from 01.04.2013 and memorandum explaining the Finance Bill, 2012 while introducing the proviso was with an object to curve out the pernicious practice of conversion of unaccounted money through masquerade of investments in the share capital of a company especially in the cases of closely held companies. In fact, the very purpose of introduction of Section 68 in the Income-tax Act, 1961 was to bring to tax bogus credits recorded in the regular books of account maintained by the assessee for any previous year in order to camouflage black money as white money (mostly introduced into the regular books of account in the form of capital receipts such as share capital, loans, advances etc. or in the form of bogus income chargeable to tax at a lower rates) without having to pay taxes thereon or paying taxes at a lower rate. Section 68, thus has no applicability where there is no involvement of any unaccounted or undisclosed funds of the assessee which have been introduced into the books of the assessee by way of cash credit. It does not apply to cash credits which appear merely on account of rotation or movement of accounted or disclosed funds between group entities as has happened in the instant case. For section 68 to apply, the receipts should essentially be of income nature. As per trite law, section 68 cannot be made applicable to capital receipts.
13560. Thus, what is to be examined is whether, the onus to prove the identity and creditworthiness of the creditors and genuineness of the transaction stands established or not, firstly, with regard to the documentary evidences filed to substantiate the explanation; and secondly, whether Assessing Officer has brought anything on record to rebut the explanation and evidences filed by the assessee or here is any prior information that all the transaction is colourable.
61. The ld. CIT-DR relying upon the order of the Assessing Officer had contended that the assessees herein has availed accommodation entries wherein they have introduced the unaccounted/undisclosed fund into their books of account in the garb of share capital and or loan and advances. However, there is not an iota of material by way of any inquiry or information from Investigation Wing that, firstly, above named assessee companies have been found to be beneficiary of accommodation entry in any search or survey in the case of entry operator; and secondly, any inquiry has been made in the case of the assessee companies wherein it has been found that these companies have taken any accommodation entry by rotating their unaccounted money or income. Though there is a rotation/movement of money from one company to another through web of group companies of Bhushan Energy Ltd. and the entities owned by common shareholder, which is a subsidiary flagship Company, Bhushan Steel Ltd. now merged with Tata Steels Ltd. The fund have flown from Bhushan Energy Ltd. through maze of group companies 136 whereby the funds which has been accounted in the books of Bhushan Energy Ltd. have been routed through group companies and finally have been rerouted back into the books of the Bhushan Energy Ltd. The entire chain and link involves actual movement of accounted fund of BEL in the form of share capital and or loan advances into the assessee- company herein and subsequent reintroduction of such funds into regular account of BEL to augment its capital base.
61. However, independent of that, we will first examine as to whether at the threshold, the assessees were able to discharge their primary onus cast upon them for discharging their burden of proving the nature and source of credit, i.e., identity and creditworthiness of the lender/subscriber companies and genuineness of the transaction. As discussed above the primary documents by the lender/subscriber companies have been filed which included confirmation, their bank statement, their income return, balance sheet and profit and loss account, most importantly, assessment orders passed in Lender/ Subscriber Companies for the same assessment years, that is, A.Y. 2012-13 & 2013-14 passed u/s.143(3)/147 and catena of other details. All these details have neither been controverted nor have been rebutted by the Assessing Officer. By and large identities cannot be disputed. What has been disputed is the creditworthiness and this is because, they do not have much revenue from operations and were showing marginal income. However, nowhere the Assessing Officer has disputed the funds available in their 137 balances sheets, duly accounted for and the source from such funds have come. All the Subscribers/ Lenders are corporate entities having separate legal identity who are regularly assessed to tax and complying with all statutory requirements. One very important fact here in this case are that in all the cases Subscribers/ Lenders Companies for the relevant assessment year scrutiny assessments have been done u/s 143(3) or the cases have been reopened u/s.147 and thereafter assessments have been completed wherein in some cases exactly on the same amount additions have been made. Thus, in many instances there are double additions on the same amount. Ergo in view of these facts and evidences, the identity of the investors' stands established.
62. In so far as genuineness of the transaction is concerned, the funds have been received through banking channels and bank statement of all the investors/lenders company have been filed which prove conclusively that the assessee companies had received the funds from the said investors, who in turn have received money from the same group companies; and they have not only corroborated this fact in their confirmation along with copies of income tax return but also from their audited balance sheets filed alongwith their Income Tax Returns.
63. Again, in so far as the creditworthiness is concerned, these companies have made investments through banking channels duly reflected in the bank statement and have also filed balance sheets and detailed explanation thereafter showing their availability of funds for making the investments. The case of the Department before us has been that these companies had very meager income 138 however the Revenue from the operations did not justify such an investment. First of all, what is required to be seen is whether the lender/investor companies had sufficient funds available with them in the books/ balance sheets and it is not necessary that loan or advances or shares are subscribed, should be out of taxable income only. Either it could be from borrowed funds or from the investments standing in their balance sheet. If the Assessing Officer doubted the source of the fund of the investor companies, then Assessing Officer was required to at least conduct prima facie inquiry from these investors to rebut the assessee's explanation about the source of the funds in the hands of the investor companies. Hon'ble Delhi High Court in the case of CIT vs. Vrindavan Farms (P) Ltd., ITA No. 71, 72, 84/2015, vide judgment and order dated 12.08.2015, wherein one of the ground raised by the revenue was that creditworthiness is not proved, because lender companies had shown low income in their Income Tax Return. The Court found that the entire details of share applicants were made available to the Assessing Officer, including PAN, confirmations, bank statements, their balance sheets and profit & loss accounts and certificates of incorporation, etc. Assessing Officer had not undertaken any inquiry or investigation of the veracity of above documents. Hence Tribunal has rightly held that without doubting the document, the Assessing Officer cannot make the addition only on presumption that low return of income is sufficient to doubt the creditworthiness of the share holders. The Assessee by producing the above documents has discharged its initial onus of showing the genuineness and creditworthiness of the share holders. Same ratio will apply here also. Further, even for the sake of repetition, one very peculiar fact as incorporated above is that, in most of the 139 cases of the investor company's assessments have been made u/s.143(3) or u/s 147, wherein either their source of fund have been accepted or certain additions have been made based on scrutiny examination. It is not a case where there is any cogent finding in those cases that it is unaccounted money of the assessee companies which has been routed through them or it is their unaccounted money which has been invested in the assessee company. In absence of any such finding or material, no adverse inference can be drawn in the case of the assessee companies. Thus, the identity and the creditworthiness of the investor/subscriber company stands fully established and so also the genuineness of the transaction.
64. Now coming to the arguments raised on behalf of the Revenue that in some of the case notices u/s 133(6) has not been served or responded and directors of the lender companies were not produced. First of all, it was only in few cases that notices were not responded to and in majority of cases they were duly responded. But be that as may be, where notices have not been served or not responded to, then also in the present cases their identity cannot be disputed, because in all the cases assessments have been done under scrutiny proceedings u/ss. 143(3) or 147; and in most of the cases appeals are also pending. Hence this factor, itself will not vitiate the case of the assessees. Similarly, even if directors were not produced, then there is no legal obligation on the assessee to produced the directors as held in many cases as relied upon by the Ld. Counsel in foregoing para
27. Apart from that, once assessments have been made on substantive basis in each and every case, then mere non production of directors loses its significance when all the statutory 140 records and sources of funds have been duly explained, on which no adverse material has been brought to rebut the same by the Assessing Officer. Thus, in our opinion this factor on the facts of the present case is not so detrimental.
65. One key contention and fact which has been harped upon by the ld. counsel and also discussed by us at several places herein in the foregoing paragraphs is that, all the funds have been routed through Bhushan Energy Ltd. by way of advances and loans given to the maze of its group companies who have invested or given loan within the same group companies which again has been reinvested in the Bhushan Energy Ltd. Ld. counsel before us has demonstrated by filing fund flow statement in the case of all the companies along with their bank statement and balance sheets. In so far as bank statement and balance sheets are concerned they have already been filed before the Assessing Officer and ld. CIT (A) and this specific plea was also raised before the Ld. CIT (A)s, except for the fact that now before us, he has tried to demonstrate the flow of money from Bhushan Energy Ltd. to the group companies and that all these funds have come from the accounted funds duly recorded in the books of the Bhushan Energy Ltd. and the books of the lender companies. Since the fund flow chart to explain the source of the funds and rotation of funds amongst the group companies is one of the vital factors which impinge upon the case of the assessee companies, therefore, these are made part of this order and are annexure to this order running into 38 pages, which contains the addition made by the Assessing Officer from the figures given in the balance sheet; and flow of funds from one company to other. All the entries are verifiable from the bank statements placed before us.
14166. In support of the fund flow statements, balance sheets and the bank statement of all these companies have been filed separately before us and has been demonstrated with one to one correlation of the entries therein. The theory of fund flow statement was also raised before the ld. CIT (A) for which remand report was also called for which has been dealt and incorporated in the appellate order by the ld. CIT (A) also especially in the case of M/s. Jawahar Credit and Holding Pvt. Ltd. vs. ITO, Ward-13(3), New Delhi for Assessment Year 2012-13 in ITA No.5398/Del/2019. Thus, it is not a new plea which has been raised by the assessee counsel before us for the first time, albeit now it has been presented in detail manner in case of each and every assessee company which is evident from the annexures hereto of this order. Therefore, these fund flow statements duly supported by bank statement of other lender companies which are already part of record, even if it is reckoned as additional evidence, but they do not require Revenue-examination by the Assessing Officer which has been pleaded by the ld. CIT DR before us.
67. Thus, it is quite evident that in various chains of links and the flow of the funds, nowhere there are any unaccounted funds of any of the lender companies or if any of the assessee companies which can be said to have been introduced either by the assessee company or by the lender company. The source of the source has been proved at all levels, right from origin of the funds to the final destination stands substantiated and neither there is unaccounted money nor there is any outside entry operator to route the unaccounted funds for making such investments. Although looking to the peculiarity of the facts and circumstances of the case where these companies can be reckoned as conduit entities 142 for rotation of money, but nowhere can it be said that any of the entities have routed their own unaccounted money. This is the precise reason that in most of the cases Ld. CIT Appeals have deleted the addition; and in 3 cases, he has held that they must have received some commission for such rotation of funds, albeit such observation may not have legal and factual legs to stand.
68. Thus, in view of our discussion and finding of fact, we do not find any reason or justification for sustaining such an addition of share capital or share premium under the deeming provision of Section 68. We are in tandem with the arguments raised by the ld. counsel and the explanation given by him in view of supporting documents as dealt and incorporated above and are accepted. In the result additions as made by the Assessing Officer on this score are directed to be deleted.
69. Now coming to the issue of fresh addition made by the ld. CIT (A) by making enhancement on account of alleged commission income in three cases. Though as discussed above, the ld. CIT (A) has deleted the addition made u/s.68 on the ground that no unaccounted funds have come in the bank account of the assessee companies, nevertheless, has held that assessee company might not have not availed any accommodation entry but has merely provided facility to route the fund of Bhushan Steel Ltd. in view of some of alleged commission @ 2%. This finding is purely based on guesswork and surmises. In nutshell, ld. CIT (A) has treated the accommodation entry, i.e., jamakharchi providing facility to route transaction in view of some commission income. The relevant findings of the ld. CIT (A) in all the three cases have already been incorporated above. First of all, it is neither the case of the Assessing Officer nor has been discussed in any of the assessment 143 orders. What ld. CIT (A) is trying to do is, introducing a new source of income and that to be based on some hypothetical presumption. No show cause notice has been issued to the assessee. Ld. CIT (A) before fastening such presumptive addition in the hands of the assessee company. This is in gross violation of the provisions of the Act but also the principles of natural justice. The Act provides that before enhancing any income Ld. CIT (A) is required to give opportunity to the assessee. These additions have neither been disclosed in the return of income nor have been considered by the Assessing Officer in the assessment order and therefore, making such addition of new source of income is beyond the scope of enhancement by the ld. CIT (A). Hon'ble Jurisdictional High in the case of CIT vs. Union Tyres, (1999) 240 ITR 556 (Del) has observed and held as under:
"The first appellate authority is invested with very wide powers under s. 251(1)(a) and once an assessment order is brought before the authority, his competence is not restricted to examining only those aspects of the assessment about which the assessee makes a grievance and ranges over the whole assessment to correct the A.O not only with regard to a matter raised by the assessee in appeal but also with regard to any other matter which has been considered by the A.O and determined in the course of assessment. However, there is a solitary but significant limitation to the power of revision, viz. that it is not open to the AAC to introduce in the assessment a new source of income and the assessment has to be confined to those items of income which were the subject-matter of original assessment. Applying the above well settled principles of law to the facts of the instant case, the Tribunal was justified in holding that in calling for a remand report on the four points the AAC had exceeded his jurisdiction. While computing the total business income of the 144 assessee, the A.O had estimated the sales at an enhanced figure and had applied a higher rate of gross profit. Thus, the only matter dealt with by the A.O in the assessment order was the estimation of profits and gain of the business of the assessee. None of the four points raised in remand report had any bearing on the question of estimation of either the sales or the gross profit rate. It is evident that the AAC had his doubts about the capacity of the assessee to raise finances for the purchase of goods and show a huge turnover in the very first year of his business. In other words, the enquiry ordered by the AAC was to satisfy himself about the source of investment by the assessee. It is axiomatic that failure to prove the sources of investment will result in addition in the hands of the assessee under a different provision of law and will not have much relevance in the estimation of sales and gross profit rate adopted by the A.O. Any addition on account of unexplained investment would constitute a new source of income which was not the subject-matter of assessment before the A.O and, therefore, it was not open to the first appellate authority to direct the A.O to conduct enquiry on the said four points".--CIT vs. Shapoorji Pallonji Mistry (1962) 44 ITR 891 (SC) : TC 7R.576 and CIT vs. Rai Bahadur Hardutroy Motilal Chamaria (1967) 66 ITR 443 (SC) : TC 7R.590 applied. [paras 11 & 12]"
70. From the various judgments relied upon by the ld. counsel on this point, the proposition which can be culled out are as under:
(i) That the C.I.T.(A) has no jurisdiction to travel beyond the subject matter of the assessment or beyond the record, i.e. the return of income and the assessment order; and his power of enhancement relates only to that income which has been subjected to the process of assessment.145
(ii) That the process of assessment includes not only taxing an income but also holding that a particular income is not taxable.
(iii) That, therefore, the C.I.T.(A) can tax the income which the A.O had, expressly or by clear implication, considered and held to be not taxable - irrespective of the question whether the income falls under a head with regard to which an appeal has or has not been preferred. However, the C.I.T.(A) cannot tax an item of income, the taxability of which had not been considered at all by the A.O.
71. Thus, such an addition made by the ld. CIT (A) is definitely beyond the scope of jurisdiction conferred upon the ld. CIT(A) on u/s.251 by introducing new source of income and that without giving any reasonable cause against enhancement.
72. Even otherwise also, since all the assessees are essentially group companies and the common management under one control, the question of any hypothetical charge of any commission income for providing facility to route the funds of any group company does not arise. The entire addition is based on surmises and presumption, because, the ld. CIT (A)'s reasoning is based practice prevalent in the market sans any tangible material or inquiry or evidence on record. Thus, the addition made on basis of estimation of 2% of commission income in the case of these three assessees, i.e., Jawahar Credit and Holdings Pvt. Ltd., Jingle Bells Alluminium Pvt. Ltd. and Kasper Information Technology Pvt. Ltd. is directed to be deleted.
73. Coming to the Revenue's Appeal, challenging the restriction of addition of Rs.23,32,813/- in the case of M/s. Stylish Construction Pvt. Ltd. for Assessment Year 2012-13 by invoking 146 the provision of Section 14A read with Rule 8D to Rs.5 lacs. As stated above, the assessee company had made suo-moto disallowance of Rs.2,23,660/- which can be said to be expenses attributable for earning of exempt income. This was computed by the assessee by aggregating the total direct expenses debited in its profit and loss account as per the figures given in the earlier part of the order. The dividend income received by the assessee is only Rs.9,94,717/- and therefore such an attribution for providing man power services, etc. can be said to be reasonable basis. The Assessing Officer without recording any subjective satisfaction having regard to the accounts of the assessee or the nature of expenses debited has mechanically applied Rule 8D which is not the mandate of the law in view of Section 14A(2). Thus, there was no reason for making any addition over and above the suo moto disallowance made by the assessee. However, the ld. CIT (A) has found it reasonable to restrict the disallowance u/s.14A to Rs.5 lacs, which in our opinion is fully justified and therefore, we hold that the balance addition of Rs.18,32,813/- has rightly been deleted by the ld. CIT(A).
74. In the case of Angel Cement Pvt. Ltd for Assessment Year 2012-13; in the case of Delight Resorts Pvt. Ltd. for Assessment Year 2012-13; and Stylish Construction Pvt. Ltd. for Assessment Year 2012-13, the Department has challenged the alleged admission of additional evidence by the ld. CIT (A) without giving opportunity to the Assessing Officer in violation of Rule 46A. First of all, it has been clarified that no additional evidences were submitted except for assessment orders passed by the Income Tax Department which is part of the income tax records cannot be construed as additional evidences and therefore such ground is 147 devoid of any merits and same is dismissed.
75. In the result, the appeals of the Revenue are dismissed and the appeals of the assessee are allowed.
76. This order contains Annexure running into 38 pages which is part of the order as discussed above in para 65.
Above decision was announced on conclusion of Virtual Hearing in the presence of both the parties on 18th March, 2021.
Sd/- Sd/- [PRASHANT MAHARISHI] [AMIT SHUKLA] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 18th March, 2021 PKK: