Income Tax Appellate Tribunal - Delhi
Dcit, Circle- 25(1), New Delhi vs Tepe Consultants Pvt. Ltd., New Delhi on 17 May, 2023
THE INCOME TAX APPELLATE TRIBUNAL
DELHIBENCH 'G', NEW DELHI
Before Dr. B. R. R. Kumar, Accountant Member
Sh. Yogesh Kumar US, Judicial Member
ITA No. 4595/Del/2018 : Asstt. Years: 2010-11
DCIT, Vs. Tepe Consultants Pvt. Ltd,
Circle-25(1), C-20, Pamposh Enclave, Greater
New Delhi Kailash, New Delhi-110048
(APPELLANT) (RESPONDENT)
PAN No. AAACT2658N
Assessee by : Sh. Shailesh Gupta, CA
Revenue by : Sh. Rajesh K. Dhanesta, Sr. DR
Date of Hearing: 20.02.2023 Date of Pronouncement: 17.05.2023
ORDER
Per Dr. B. R. R. Kumar, Accountant Member:
This appeal has been filed by the Revenue against the order of ld. CIT(A)-33, New Delhi dated 21.02.2018.
2. The revenue has raised the following grounds of appeal:
"1. The impugned order of the CIT(A) is bad in law as well as on facts of the case.
2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs. 2,61,75,000/- made on account of unexplained cash credits u/s 68 of the IT Act by ignoring the fact that section 68 requires that the assessing officer must be satisfied with the explanation offered by the assessee which has to be genuine. The Ld. CIT(A) has erred in deleting the addition as the assessee has failed to discharge its primary onus of proving the creditworthiness and identity of the concerned party and also genuineness 2 ITA Nos. 4595/Del/2018 Tepe Consultants Pvt. Ltd.
of the transactions in terms of provisions of Section 68 of the IT Act, 1961."
3. "The Ld. CIT(A) has erred in appreciating the fact that neither the assessee could produce the parties nor did they attend the proceedings in response to summons issued u/s. 131 of the I.T. Act, 1961 requiring personal deposition."
Cash Credits u/s 68:
Facts taken from the order of the ld. CIT(A)
3. The assessee company filed the return of income for the A.Y. 2010-11 on 22.09.2010 declaring total income at Rs. NIL.
4. The assessee received share application money during the year under appeal, from six parties which is as under:
a) M/s. R.S. Capsules Pvt. Ltd. Rs.25,00,000
b) M/s Amrit Suppliers Pvt. Ltd. Rs.25,00,000
c) M/s Agni Transports Pvt. Ltd. Rs.40,00,000
d) M/s Maa Jagdamba Nirman Pvt. Ltd. Rs.35,00,000
e) M/s Melody Residency Pvt. Ltd. Rs.30,00,000
f) M/s Arnab Properties Pvt. Ltd. Rs.25,00,000
TOTAL Rs.1,80,00,000
5. The Directors of these companies are as under:
A rn ab P r op e rt i e s P v t . Lt d . Sh. P. P. Bose
A m ri t i S u p p l i er s P vt . Lt d . Sh. M. K. Singh
R . S . Cap su l e s P vt . Lt d . Sh. M. K. Singh
M el od y R e si d en c y P vt . Lt d . Sh. P. P. Bose S h . V . P. Mi t t al
Maa J ag d a m b a Ni rm an Pv t . Lt d . Sh. P. P. Bose S h . V i j ay K u m a r
A g g a r wal
A g n i T ra n s p o r t s P vt . L t d . Sh. P. P. Bose S h . G o p ai K u m a r
A g g a r wal
3 ITA Nos. 4595/Del/2018
Tepe Consultants Pvt. Ltd.
6. While treating the amount received u/s 68, the AO held as under:
"(1) In the case of M/s Agni Transport Pvt. Ltd., the ITR shows a returned income of Rs 76,130/- , the debit to Tepe Consultant Pvt.
Ltd. is precede d by a credit e ntries which of have came from Ahilya Trading & F inance Pvt. Ltd., Starshine Vinirnay Pvt. Ltd. and Alankrit retails whose own ide ntities and so urce o f funds are unascertained [details of cre dit e ntries gathere d from Unio n Bank] and as gathere d from instruments give n by bank, the signatories of scienara Finyest and Agni Transport are same and o f Jet Finvest, Ahilya. Trading are same and of Alankrit retails and. Starshine Vinimay are same the balance incre ase only before debit entry o therwise the balance in account is minimal.
(2) In the case of M/ s Melody Reside ncy Pvt. Ltd., the ITR shows a returned income of Rs.76,130/- the debit, to Tepe Consultant Pvt. Ltd. o f Rs.30,00,000/- which is preceded by credit entries which are unasce rtaine d. Every debit is prece ded by a credit e ntry othe rwise the balance is minimal and the source of these funds is not kno wn.
(3) In the case o f M /s Maa J agdamba Nirman Pvt. Ltd., the ITR shows a re turned income of Rs. N il, the de bit to M/s T epe Consultant Pvt. Ltd. o f Rs.30,00,000/- which is preceded by credit for same amount.
(4) In the case o f M/s ARNAB Prope rties Pvt. Ltd., the IT R shows a returned income of Rs.4,270/-, the debit to Te pe Consultant Pvt. Ltd. of Rs.25,00,000/- which is prece ded by credit o f Rs.30,00,000/-.
(5) In the case of M /s Ankrit Suppliers Pvt. Ltd., the ITR has a returned income of Rs.20,167/- , the debit to Te pe Consultant Pvt. Ltd. which is prece ded by cre dit o f Rs.30,00,000/- .
4 ITA Nos. 4595/Del/2018Tepe Consultants Pvt. Ltd.
3.5 It is wo rthwhile to mention that neither did the assessee produce these parties despite be ing related parties nor did the y respond to summons issued on 04- 03- 2012 requiring their atte ndance . Three of these parties - M/s Maa Jagdamba Nirman sent an AR, Aman Agarwal (Vakalatnam a on record) who fled the office afte r the questio ning of Sh. A noo p Tripathi whose of the CA/AR represe nting the case and no t a qualified CA/lawye r to be an AR and knew the parties is no way and disappeared from the scene with the third unknown so called AR in two/alongwith the AR of Tepe Consultants S h. Sahil Sharma. The notewo rthy issue in the submissions sent thro ugh so called AR's is that the entire fo rm of share applicatio n alo ngwith ackno wledgement with signature and stamp in ink have been pro vided by the applicants when it should actually have bee n in the possession of M/s Tepe Consultants Pvt. Ltd."
7. Further, the AO held that the assessee has received unsecured loans of Rs.81,75,000/- from Advani Pvt. Ltd. The ITR of the company has shown returned income of Rs.24,32,770/-. The loan giver and loan receiver companies both are of one person namely, Sh. Gyan Savroop Garg as evidenced by same signature on confirmation of accounts. The AO held that the loan has been received from unknown sources.
8. Aggrieved, the assessee filed appeal before the ld. CIT(A) who deleted the additions made by the Assessing Officer on account of share application and on account of loan.
9. During the hearings before the ITAT, the Revenue relied on the order of the Assessing Officer and the ld. AR relied on the order of the ld. CIT(A).
5 ITA Nos. 4595/Del/2018Tepe Consultants Pvt. Ltd.
10. We have gone through the order of the ld. CIT(A) and submission of the assessee before the ld. CIT(A) is as under:
"6. Submission of th e Appellant The Appellant has state d as under in its written submission date d 19.07.2016:
ISSUE S Your hono r as said abo ve also , in regard to the year unde r conside ratio n the Ld. Income Tax Officer has e rred adding a sum of Rs. 2,61,75,000/- as une xplained credit and adde d back to the income of the assessee by treating income from undisclosed sources as per provisio ns of section 68 o f the Income Tax Act, 1961 and furthe r penalty u/ s 271(1) (c) has been imposed and interest u/s 234A, 234B and 234C has been charged. The appe llant is disputing the said action of the I ncome Tax Office r.
PLEA During the acco unting period re levant fo r the ye ar under appeal the appe llant rece ive d share application money o f Rs. 1,80,00,000/- from six partie s, who are duly asse ssed to tax. The appellant file d all the rele vant de tails and A.O. issue d commission to DDIT, Ko lkata, who also verified the de tails and no thing adve rse was found, but the A. O. considere d the entire share applicatio n money receive d of Rs. 1,80,00,000/-as unexplained. In the subseque nt ye ar shares have been duly allo tte d to these partie s and the share capital o f the appe llant company has accordingly increased.
During the year unde r appe al, the appellant company had also receive d unsecure d loan of Rs. 81,75,000/- from M/s Advani Pvt. Ltd.6 ITA Nos. 4595/Del/2018
Tepe Consultants Pvt. Ltd.
The A.O. issue d letter to the cre ditor. The aforesaid creditor duly replied to the Ld. A .O. and submitted the PAN, copy of acknowledgement of income tax re turn file d for the AY 2010- 11, co py of audited balance sheet alo ng with bank statements from where the funds have been lent and the confirmation of account. The A .O., howeve r, considered the lo an as unexplained and made addition o f Rs. 81,75,000/-. I n subse quent ye ar the amount o f Rs. 81,75,000/- has been paid back by the appellant.
Ground No . 1 is against additio n o f Rs. 1,80,00,000/- as unexplaine d credit u/s 68 of IT Act, 1961. The share application of the appellant company increase d from Rs.15,00,000/- to Rs. 1,95,00,000/- during the accounting pe riod rele vant fo r the year under appe al. The appe llant file d on 24.02.2013 the following details in respect o f the abo ve share applicants fo r A .Y. 2010- 11:
a) Balance S heet
b) Copy of Income T ax Re turn.
c) Bank Account S tatement.
d) Share Application.
e) Account Confirmation S tatement in respect o f share application money.
The A.O. issue d notices u/s 131 of the Income Tax Act, 1961 to all the six share applicants, who reside in Kolkata. The no tice u/s 131 o f the Income Tax Act, 1961 date d 06.03.2013 was fo r submission/filing of required details personally o r thro ugh authorized represe ntative by 08.03.2013. The notice was rece ive d by the parties in Kolkata on 12.03.2013. As per the no tice the partie s we re require d to furnish the fo llo wing details:
1. ITR for the AY 2010-11
2. Bank Statement co pies fo r the FY 2009- 10 7 ITA Nos. 4595/Del/2018 Tepe Consultants Pvt. Ltd.
3. Share Application Form
4. Account Confirmation It was no t possible for them to appear in person in response to the summons, hence as per the ir request Mr. Gyan Swaroop Garg, one of the directo r's of the appellant co mpany travelled from Kolkata to Delhi on 13.03.2013 for filling re ply of above six parties against the summonses issue d, S hri Garg was coming to De lhi to file reply to notice u/s 133(6) issued by A .O. to M/s Advani Pvt. Ltd. for unsecured loan given to the appe llant.
Mr. Gyan Garg visited the o ffice of A. O. to file the details o f M/s Advani Pvt. Ltd., which was acce pted by the office of the A.O. He also reque sted the office staff to accept the details of other six share applicants but the office did not accept the papers. The A. O. was not available in office fo r the whole day so he handed over the entire documents fo r filing befo re the A .O. to the autho rized representative of the appellant. T he A.O., ho weve r, did no t acce pt these documents and wante d to examine the AR's on the pape rs being filed. There after the A.O. issue d another notice u/ s 131 dated 14.03.2013 to the above six parties for submission o f the fo llo wing details:
1. Details of Bank Statement from where funds of share application has been transferred.
2. Explanation and documentary evide nce of transactio ns immediate ly prece ding the fund transfer.
The second notice u/s 131 was received by the abo ve six parties. The reply including all the documents was sent by them through registere d post and was duly rece ive d by the A.O. During the assessment procee ding it was brought to the attention of A.O. that notice u/s 131 canno t be issued to perso ns staying in Kolkata as it was beyond the distance of 500 km. A fter receipt o f 8 ITA Nos. 4595/Del/2018 Tepe Consultants Pvt. Ltd.
documents from the six partie s through post, A.O. issued Commission to DDIT (Inv.), Ko lkata to issue summ ons and reco rd statement on o ath and to ve rify identity, ge nuineness and creditwo rthiness of the Accordingly the DDIT , Kolkata issue d summons u/s 131 on 19/ 03/ 2013 for submitting the following:
1. Personal appearance for recording of statement in connection with M/s Te pe Consultant Pvt. Ltd. N ew De lhi.
2. Details of allotme nt o f share applicatio n Money to the abo ve named company during the F . Y . 2009- 10.
3. Regular Boo ks of Accounts (Audited Accounts) i.e . Balance Sheet, Bank Statement, Pro fit & Loss Accounts re flecting the above said transaction made to above named company during the F . Y. 2009- 10.
The auditors and accountants of the abo ve six share applicant's appe ared and submitte d all the informatio n befo re DDIT (Inv), Kolkata on 25.03.2013. The DDIT (Inv.), Kolkata duly verified these facts and sent his report to the A.O., and no thing adve rse was found. The DDIT (Inv.) sent the documents and asked the A .O. to draw her own conclusio n. However, the A .O. did no t acce pt the evidence s filed and made addition in the assessment by making the fo llo wing observations, which is give n hereunder:
"3.4 The AR reiterate d the stand that the companies from whom share applicatio n has been received in are relate d parties and friends of directors of M/s Tepe Consultants Pvt. Ltd. ye t time and again the AR has faile d to produce these parties and therefo re the assessee's onus to suitably e stablish identity, genuineness and creditwo rthiness has not bee n discharged. The documents submitte d by the ld AR revealed the following info rmation:9 ITA Nos. 4595/Del/2018
Tepe Consultants Pvt. Ltd.
(1) In the case of M /s Agni T ransport Pvt. Ltd., the IT R shows a returned income of Rs.76,130/-,the debit to Tepe consultant Pvt.
Ltd. is precede d by a credit e ntries which of have came from Ahilya Trading & Finance Pvt. Ltd., Starshine Vinimay Pvt. Ltd. and Alankrit retails whose own ide ntities and so urce o f funds are unascertained [details of cre dit entries gathere d from Union Bank and as gathere d from instruments give n by bank, the signatories of scionara Finvest and Agni Transpo rt are same and of Jet Finvest, Ahilya Trading are same and of Alankrit retails and S tarshine Vinimay are same the balance increases only befo re debit entry otherwise the balance in account is minimal.
(2) In the case of M/ s Melody Reside ncy Pvt. Ltd., the ITR shows a returned income of Rs. 76,130/- the debit to Tepe Consultant Pvt. Ltd., of RS . 30,00,000/- which is precede d by credit entries which are unasce rtaine d. Eve ry debit is prece ded by a credit entry otherwise the balance is minimal and the source of the se funds is not known.
(3) In the case o f M /s Maa J agdamba Nirman Pvt. Ltd., the ITR shows a returne d income of Rs. NI L, the de bit to T epe Consultant Pvt. Ltd. of Rs.30,00,000/-which is precede d by credit for same amount.
(4) In the case o f M/s ARNAB Prope rties Pvt. Ltd., the IT R shows a returned income of Rs.4,270/-, the debit to Te pe Consultant Pvt. Ltd. of Rs.25,00,000/- which is prece ded by credit o f Rs.30,00,000/-.
(5) In the case of M/s Ankrit S uppliers Pvt. Ltd., the ITR shows a returned income of Rs.20,167/- , the debit to Te pe Consultant Pvt. Ltd. which is prece ded by cre dit o f Rs. 30,00,000/-.
10 ITA Nos. 4595/Del/2018Tepe Consultants Pvt. Ltd.
3.5 It is wo rthwhile to mention that neither did the assessee produce these parties despite be ing related parties nor did the y respond to summons issued on 04.03.2012 re quiring the ir atte ndance . Three of these parties M/s Maa Jagdamba Nirman sent an AR, Aman Agarwal (Vakalatnam a on record) who fled the office afte r the questioning of Sh. Anoop T ripathi who se Vakalatnama is on record and who also refuse d to sign the orde r sheet as he was the deputes of the CA/AR represe nting the case and not a qualifie d CA/lawyer to be an AR and knew the parties is no way and disappe are d from the scene with the third unknown so called AR in tow alongwith the AR of Te pe co nsultants S h. Sahil S harma. T he notewo rthy issues in the submissio ns sent thro ugh so called AR's is that the entire form of share application alongwith acknowle dgement with signature and stamp in ink have been pro vide d by the applicants when it should actually have been in the po ssession of M/s Tepe Consultants Pvt. Ltd.
3.6 The applicants can only possess photocopies o f the same but not original forms. The applicatio ns forms are scanned below have no application numbe r and the ackno wledgment slip has no rece iving on it or receipt stamp on it.
3.7 The above is true for both M/s R.S Capsules Pvt Ltd and M/s Maa Jagdamba Nirman Pvt. Ltd and the applicatio n form sheet is no way appears to be three years o ld.
3.8 The non attendance of parties, non signing o f order sheets and submission o f documents which are not genuine have raised doubts to the authe nticity of transactions. To verify the same, summons were re-issued to the parties on 14.03.2013 directing them to appe ar on 2003-2013 alongwith documents mentio ned in the summons which were duly serve d on the parties [summons placed on 11 ITA Nos. 4595/Del/2018 Tepe Consultants Pvt. Ltd.
record] . The AR approached the o ffice that the parties would not appe ar.
3.9 As Calcutta was beyond 500 kms and the travel e ast will not be borne by them . At the o utset, I would like / to mention that it was assessee's respo nsibility to produce the parties. In order to do way with the difficulty of the assessee to trave l to Delhi which is more than 500 Kms fro m Delhi and to do way the burde n o f be aring trave l cost, Commission was issued to Sh. Nayanjoti Nath DDIT (Inv) Kolkatta on 19.03.2013 to issue summons and record statement on Oath and to verify identity, genuine ness and cre dit worthiness o f the parties. The issue of Cost of travel was also raised the parties and was take n care of by issue o f commission.
3.10 The reply o f DDI T (Inv) Dated 25.03.2013 received through fax. T he Party Summoned once again faile d to appear in Kolkatta before DDIT ( inv), the re quest stated that:
'Authorize d re pre sentative of the aforesaid conce rn appe are d and submitted the following do cuments: -
(i) Co py of share application of Tepe Consultants
(ii) Copy o f bank statement reflecting the transactio ns.
(iii) Statement sho wing the immediate source of fund of the above transactio n.
(iv) Copy o f IT ackno wledgement o f AY 2010- 11.
(v) Copy of Balance S heet for 31.03.2010 ending.
The DDIT gave an observation that share capital was received by M/s Tepe Consultants from vario us Kolkata base d companie s. F urther it is found that most of these companies have ve ry me rge income in financial year 2009-10. Thereafte r, the LD. A . O. many from her own conside ratio n base d on the materials gathere d by this directorate ."
12 ITA Nos. 4595/Del/2018Tepe Consultants Pvt. Ltd.
3.11 It also needs to be emphasize d that the shares have been issued at premium of Rs 2400/- which is much higher than the net worth of the company is loss making and whose business has close d down in the succe eding year.
3.12 Since the documents which have/been submitte d there have also been submitted be fore the undersigned, in view of the facts state d abo ve, as the assessee has failed to pro duce the parties, parties have failed to present the mselves on all o ccasions when summons were issued to them in Delhi, as well as Kolkata and submitted false documents (share applications form) and produced ARs who we re not ever authorized to do so as per vakalatnama, the AR of M/s Tepe Consultants was/given sho w cause vide order sheet entry dated 26/03/2013 :
"Shri Umesh Pandey AR appeared. He has been info rmed that the parties (share applicatio n have not appe ared to the summons issued by DDIT , Kolkata after the commissioning issued by DDIT Kolkata afte r the commission issue d by the unde rsigned. Therefore , he is to respond to the show cause as to why it should not be treate d as unexplaine d cre dit as ide ntity, genuineness and creditworthiness has not been established by 28/ 03/2013failing which order will be passe d on mate rials on re cord ".
5.13 The AR submitted a reply dated 28/ 03/ 2013 placed on record. The reply was co nsidere d and not fo und to be convincing .In view o f the discussio n in preceding paragraphs. I am of the view that these are no thing but accommodatio n e ntries and there fore une xplained credits in the account of the assessee. The refo re a sum of Rs.1,80,00,000/-.
The Ld. A. O. rej ected the explanation o f the appellant and made addition of Rs. 1,80,0,000/- . I t is submitted that the action of the Ld. A.O. was contrary to the legal principles laid do wn unde r the law.
13 ITA Nos. 4595/Del/2018Tepe Consultants Pvt. Ltd.
The appellant submitted all the re le vant material regarding the share application money receive d. The appellant received share application from six parties for issue of shares of Rs 1,80,00,000/- during the year unde r appeal. The share applicatio n money was receive d from six parties as under:-
a) M/s R.S. Capsules Pvt. Ltd. Rs. 25,00,000
b) M/s Amrit S upplie rs Pvt. Ltd. Rs. 25,00,000
c) M/s Agni T ranspo rt Pvt. Ltd. Rs. 40,00,000
d) M/s Maa Jagdamba Nirman Pvt. Ltd. Rs. 35,00,000
e) M/s Melody Residency Pvt. Ltd. Rs. 30,00,000
f) M/s Arnab Prope rties Pvt. Ltd. Rs. 35,00,000
TOTAL Rs.1,80,00,000
The Ld. A.O. issued first notices u/ s 131 on 06.03.2013 asking fo r details to be file d on 08.03.2013 to these parties at Kolkata. The notices we re rece ived o nly on 12.03.2013. The inform atio n was se nt thro ugh one S hri Garg but it was no t acce pte d - A . CV s office . I t may be mentione d here that Shri Garg came to file re ply in regard to notice u/s 133(6) issued to M/s Advani Pvt. Ltd, which had given to the I appellant company and papers relating to this lo an was accepte d by the office of the Ld. A.O.. The pape rs relating to the above six parties were, the refo re, given by Shri Garg to the AR o f the appe llant. The repre sentative from AR's office appeared befo re Ld. A.O. to file the papers of these six parties, but the Ld. A .O. refuse d to acce pt and wanted to e xamine these re presentatives, and these pape rs could no t be filed. Thereafter, the Ld. A .O. issue d another no tice u/ s 131 o n 14.03.2013. These partie s complie d with the notices by sending the fo llowing details by post:-
A) Balance Shee t
B) Copy o f I ncome T ax Return.
C) Bank Acco unt Statement.
14 ITA Nos. 4595/Del/2018
Tepe Consultants Pvt. Ltd.
D) Share A pplicatio n.
E) Account Confirmation Statement in respect o f share applicatio n
money
The Ld. A . O. insisted on productio n of the directors of these parties from Kolkata in Delhi. I t was bro ught to the notice o f the Ld. A . O. that since Ko lkata was more than 500 Kms. the personal appearance was no t feasible and the Ld. A.O. issued Commission to DDIT (Inv.) , Kolkata to issue summons and record statement on oath and to verify identity, ge nuineness and cre ditworthiness of the parties. The DDIT (Inv.), Kolkata issue d summons u/s 131 on 19/ 20.03.2013 and was duly complie d by the parties filing the details on 25.03.2013. The DDIT sent his repo rt to the Ld. A. O. and did not found anything adve rse and advised Ld. A. O. to draw own co nclusion. Eve n tho ugh nothing adverse was found by DDIT (Inv.) , Kolkata the Ld. A .O. did not accept it and went on make additio n by drawing adverse inve rse. The onus o f pro ving cash cre dit in the books is rebuttable . The assessee has to discharge the initial onus by pro ving the ide ntity o f the credito r by filing the Co nfirmatory Lette r and other re levant details. The presumption is re buttable and the Department is also require d to bring evide nce on re cord if it wants to reject the explanation of the assessee. I t is now settled law that the re are three basic re quirement in case o f a cash credit:
1. the identity of the credito r,
2. the cre ditwo rthiness of the creditor, and
3. the genuineness o f the transaction.
We would like to inform yo u that the assessee company has properly provide d the rele vant documents and it is to be noted that by providing all of them the assesse e company discharge d its o nus unde r section 68 of the I ncome Tea Act, 1961. The identity o f the share applicants, as all the share applicants are active companies 15 ITA Nos. 4595/Del/2018 Tepe Consultants Pvt. Ltd.
and the y all have records o n the M CA site that is a public domain, which any one can access the reco rds o f the company, genuineness of the transactions are also pro ved as ill the share applicants have give n share applicatio n money by bank only and the share applicants have cre dit worthiness to invest in the assessee company.
By producing the financial statements of the share applicants the assessee company had provide d the credit worthiness too of the share applicants.
Your honor, apart from Income Tax Provisio ns, assessee is also replying on the fo llowing judgments:
1. In case o f P. K . S ethi vs. CIT ( 2006) 286ITR 318 ( Gau.) It was held by the Hon'ble High Court that the identity of the creditor is prove d when a credito r is shown to be an Income tax assessee. When the amounts were shown as withdrawn from the accounts available and were paid by account paye e cheques, the transactio n is he ld to be ge nuine . In this case the genuineness o f transactio n was doubte d in case of five creditors whose acco unts were opene d within a short period. Since the re was no other mate rial brought on record by the Department it was he ld by the Hon'ble High Court that the transaction was ge nuine.
2. Principal Commissioner Of Income Tax, Udaipur Vs. M/ S. Shubh Mines Pvt. Ltd. Udaipur High Court dated 03.05.2016
1. This appeal is directed against order date d 9.10.14 of Income Tax A ppe llate T ribunal IT AT) , Jo dhpur Bench, Jodhpur, whereby an appe al prefe rre d by the Revenue against the order of Commissione r of Income Tax (A ppeals) [CIT(A)] , Jodhpur, date d 30.6.14, dele ting the additio n of Rs.75,00,000/- made by the Assessing Office r (AO) unde r Section 68 of the Income Tax Act, 1961 ( for short "the Act") , 16 ITA Nos. 4595/Del/2018 Tepe Consultants Pvt. Ltd.
vide assessment o rder dated 4.3.14 for the assessment year 2006- 07, has bee n dism issed.
2. The rele vant facts are that the assessee, a company, introduced share application mone y to the tune of Rs. 75,00,000/- including the sum of Rs.50,00,000/- receive d allegedly taken from the entry pro vide d namely, Mode rate Credit Co rpo ratio n Limited, Delhi, during the previous year rele vant to the assessment year. The AO observed that the assessee could no t substantiate necessity for obtaining the huge share applicatio n money only afte r fe w months of promoting the company. The AO o n the basis o f the statements of one Shri Aseem Kumar Gupta, concluded that the money deposite d in the bank acco unts of the assessee company is bogus entry. Accordingly, treating the money received as afo resaid as the money belonging to the assessee company, the same was added to the income of the asse ssee under Sectio n 68 of the Act.
3. Aggrieve d the reby, an appeal preferred by the asse ssee was allo wed by the CIT (A) vide order date d 30.6.14. The CIT (A) observe d that investment has been made thro ugh re gular banking channel and it has been refunded through regular banking channel when project o f the company was dropped. The CIT (A) found that the investment and refund of the share applicatio n money are verifiable from the bank accounts of the appellant company. The statements of Shri Aseem Kumar Gupta reco rde d behind the back of the company, we re not fo und reliable.
That apart, the CIT (A) found that there is no evidence whethe r direct or indirect to pro ve that any cash or unaccounted money had eithe r flown from the assessee co mpany to the share applicant company at the time of investment or from share Applicant Company to the assessee company at the time of refund. A ccordingly, the addition made was orde red to be de leted.
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4. Aggrie ved by the appe llate o rder, an appeal prefe rre d by the Revenue befo re the ITAT, stands dismissed by the o rder impugned. Hence, this appeal.
5. Learned co unsel for the Revenue co ntended that this is a case of bogus entry re corded as share capital money. Le arne d counse l submitted that relying upon the survey conducte d in third party's case and the statements of Shri Aseem Kumar Gupta, the addition made by the AO was abso lutely justified. Le arned counsel submitte d that the IT AT has erred in ignoring the fact that the assessee could not substantiate its necessity for o btaining huge share applicatio n money only afte r a few months of promoting the company.
6. We have considere d the submissions of the learned counsel and peruse d the material on reco rd.
7. A bare perusal o f the assessment order reve als that the AO has made the addition on suspicion which is base d on the statements of third party Shri Aseem Kumar Gupta, admittedly, recorded in the back of the assessee. It has co me on reco rd that the share application money of Rs.50,00,000/ - was received from Moderate Credit Corporation Ltd., a liste d company. It is not dispute d befo re this court that the investment made was receive d by account payee cheque and the same was re funde d by an account payee cheque when the company dropped its project. In the considered opinio n of this co urt, in abse nce of any cogent evide nce on reco rd establishing that the money shown to have received as share applicatio n money, was as a matte r of fact, unacco unte d money be longing to the assessee company, the finding arrived at by the AO, which is based on suspicion, has rightly been held not sustainable in the eyes of law. Suffice it to say that the finding arrive d at by the CIT (A), affirmed by the IT AT, which remains a finding offact, canno t be said to be capricio us o r perverse .
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8. In view o f the discussion abo ve, in our considered o pinion, no substantial que stion of law arises for consideration of this court in the prese nt appeal.
9. Accordingly, the appeal o f Department is dismissed.
3. Principal Commissioner of Income Tax-1 vs. Gree n Valley Plywood Limited ITA358/ 2016, New Delhi High Court dated 01.06.2016.
1. This Appe al is by the Revenue against the order dated 30th Octobe r, 2014 passed by the Income Tax Appellate Tribunal (ITAT) in ITA No. 4320/De l/ 2012 for Assessment Year (AY) 2003- 04.
2. The issue sought to be urged by the Revenue in the present Appeal is whether the IT AT was justified in upho lding the o rder o f the Commissioner of Income Tax ( Appeals) in deleting the addition made by the Asse ssing Officer (AO) of Rs.1,20,00,000/- to income disclosed in the return file d fo r AY in question on account of unexplaine d cre dit under Section 68 of the Income Tax Act, 1961 (Act).
3. Learned counsel for the Revenue does not dispute that in the present case despite the Assessee furnishing co nfirm atio n from the investor companie s, the ir acknowle dgment re turns, certificates o f incorporation, confirmatio n of paym ent of share application money etc, the AO did no t conduct any inquiry to verify the said do cuments. He only re lie d on the repo rt of inve stigation which in turn was based entirely on the statements of the alleged accom modatio n entry provide rs. Ho wever, Mr Zoheb Ho ssain, learne d Senior Standing counsel appe aring for the Revenue, seeks to rely on the decision of the Calcutta High Court in Hindustan Tea Trading Company v Commissioner o f Income Tax (2003) 263 ITR 289 (Cal) that in such 19 ITA Nos. 4595/Del/2018 Tepe Consultants Pvt. Ltd.
event the matter should be remanded to the CIT ( A) for a fre sh conside ratio n of the genuineness and cre ditworthiness of the creditors.
4. The Court is no t willing to acce pt the above submissio n for the reason that the A Y in question is o f 2003- 04 and at this stage to remand the matte r to enable the Re venue to rectify an obvious e rror would not be j ustified. No substantial questio n o f law arises.
5. The appeal is dismissed both on the grounds of the delay in filing as well as o n merits.
4. Commissioner I ncome Tax, Siliguri Vs Hotel Silver Cascade Pvt Ltd., Calcutta High Court Dated 08.06.2016.
The Court : The appe al is directe d against a judgm ent and order date d 24th February, 2009 passed by the Income Tax Appellate Tribunal "A " Bench, Ko lkata in IT A Nos. 799 to 802 (Kol) o f2008 pertaining to the assessment years 1999- 2000, 2000-01, 2001-02 and 2003- 04.
The Assessing Officer made additio ns under Sectio n 68 principally on two gro unds: (a) that the assessee could no t produce the share application fo rms submitted by som e of the applicants of share, and
(b) that the asse ssee was unable to pro duce those shareho lde rs before the Assessing Officer. On these two gro unds the Assessing Office r made additions unde r Sectio n 68 with respect to the money which the assessee received on account o f share applicatio n. The CIT(A) concurre d with vie ws of the Assessing Officer. In an appeal prefe rre d by the assessee, the learned Tribunal dele te d the additio ns for the fo llo wing amongst o ther re asons:
"Thus the AO has admitted that the assessee has e stablished the identity of the share applicants and also that the share applicants 20 ITA Nos. 4595/Del/2018 Tepe Consultants Pvt. Ltd.
are assesse d to income tax. Once the assessee has establishe d identity of share applicant and furnished the ir income tax file number the assessee has discharge d the burden of pro ving the share application money. While taking this vie w we also derive support from the decision of Hon'ble Ape x Court in the case o f CIT vs Orissa Corpo ration P. Ltd. (159 ITR 78) (SC). We, there fo re, respectfully following the above decisions o f the Hon'ble A pex Court in the case of Lo vely Export ( P) Ltd. & Orissa Corpo ration P. Ltd. (supra) ho ld that the A . O. was not justifie d in treating the share applicatio n money as unexplained cash cre dit u/ s. 68. The additio ns made by the AO fo r unexplaine d cash cre dit fo r the assessment year 1999- 2000, 2000- 01, 2001-02 and 2003- 04 are delete d." Mr. Dudhoria, learne d advocate appearing fo r the reve nue/appe llant, subm itte d that the share application forms were no t produced by the assessee and the learned Tribunal ignored that fact.
We are unable to accept this submission. The share application forms, it is in evidence, we re destroyed by fire. The point raised by the Assessing Officer is that the FIR lodged by the assessee does not contain any mention to the share application fo rms allege dly destro yed during the fire. We are unable to attach any importance to the omission pointed out by the Assessing Officer. It is not humanly possible for a person who has suffered an accident by fire to give particulars o f all the documents in the FIR, which were or may have been destroyed. Merely o n the basis o f this omission, it cannot be said that the assessee failed e ither to offer an explanation as regards the sum found credite d in its books o r that the explanation offe red by it was not satisfactory. No other po int was we are o f the opinion that this appe al does not involve any question of law and there fore , is dismissed.21 ITA Nos. 4595/Del/2018
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5. In case of M/s Jalan Timbers vs. CIT 223 ITR 11 ( Gau.), the Hon'ble High Co urt observed as unde r:-
"It is true that by pro ving the identity, the assessee canno t be said to have discharge d its o nus. In the instant case , the amounts we re shown in the income-tax re turn of the assessee. Besides, the creditors had also shown in the re turns abo ut the giving o f the loan to the assessee . S trangely, the I nco me-tax Office r while making the assessment in respect of the three creditors above named accepted the re turns. This itself will go to show that the amount rece ive d by the assessee was at least prima facie genuine . As the Income-tax Office r had acce pted the returns o f the three cre ditors it should go to mean that the amounts given by those creditors were also genuine. On going through the Tribunal's judgment, we find that the Tribunal o bserved thus: "Of course , confirmation letter was file d but in the instant case, the Income-tax Officer we nt further and verified the asse ssment re cords o f that cre ditor from which he found various facts as mentione d in the assessme nt order and as discussed by us above . Thus, in our opinio n, identity o f the credito r alone is not sufficient. I t has also to be shown that the creditor had the capacity to advance the loan and that the loan itself was genuine." The Tribunal, ho weve r, did not make any endeavour to give any cogent reason why the income-tax returns file d by the creditors and accepte d by the Income-tax Officer should be ignored. In our view, the assessee had at least pro ved its case. Acco rdingly, we answer the three questions in the negative , i.e ., against the Revenue and in favo ur of the asse ssee."
Thus where return of income is file d by the cre ditor o f the asse ssee and is accepte d by the Department the genuineness of the transactio n canno t be doubte d.
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6. In the case of Orchid industries Pvt. Ltd. Vs. DCIT, ITA No. 1867/ Mum/2012, Date of Prono unce ment: 7th Feb, 2014 ITAT Mumbai dele ted the addition made in respect o f Share Capital Subscriptio n rece ived by the Assessee Company from Kolkata based companies. IT AT has relied on the case of CIT vs. lovely Exports Pvt. Ltd. (supra) in which Hon' ble supreme court, has held that if the share replication money is received by the assessee company from alle ged bo gus shareholders whose names are given to the AO the n department is fre e to proceed to re open the ir individual assessment in accordance with law but it cannot be re garded as undisclose d income of the asse ssee company.
Facts of the case assessee are private limite d company engage d in the business of manufacturing of embroidery lace s. During the assessment proce edings, the AO no ted that in the balance sheet as on 31.03.2004, the assessee has re ceived share capital to the tune of Rs. 51,50,000/ - and Rs. 1,21,50,000/- as share premium . The assessee was asked by the AO to produce the complete name , full address o f the shareho lders, the amount rece ive d from them, Pan and income tax particulars of the share holde rs as well as mode o f share capital including premium. In response , the assessee filed the details vide letter dated 13.11.2006. From the details furnished by the assessee the AO noted that the majority of the shareho lde rs were form Kolkata. Acco rdingly, a letter dated 15.11.2006 was issued to the ADIT (Investigation Unit) Kolkata to conduct an e nquiry with regard to the identity of the credito rs, genuineness of the transactio ns and creditwo rthiness of the credito rs.
The ADIT (Inv.) Kolkata submitted enquiry repo rt, where in it has been stated that for verificatio n of the creditors, summons under section 131 were issued to the parties. Since there was no compliance of sum mons and the whe reabo uts o f the parties could no t 23 ITA Nos. 4595/Del/2018 Tepe Consultants Pvt. Ltd.
be located as far as five credito rs and, there fore , it was o bserved that the e xistence of the parties appears to be do ubtful. In case of two creditors the summons were duly served and in respo nse the response the representative of the creditors we re appeared be fore the ADIT (Investigation) , Kolkata, howeve r, it was o bserve d in the report the the se companies were o nly paper company and use d by the these companies we re only paper company and used by the assessee to bring its unaccounte d money back in the form of share capital. Based on the repo rt o f the ADIT (Investigatio n) Kolkata, the AO made an addition of Rs.95 lakhs as unexplaine d cash cre dit unde r section 68 of the act. This additio n was made in respect o f share application money with premium claimed to have been receive d from 7 parties, out o f total 13 parties.
Held:-
The assessee has receive d share capital and share premium from 13 parties, out of which 7 parties be long to Kolkata. The AO has decided to conduct an enquiry in respect o f the 7 parties be long to Kolkata by writing a le tte r date d 15.11.2006 to ADIT(Inv.) Kolkata.
The ADIT (Inv.) K olkata sent its re port vide letter dated 20.12.2006, which has bee n reproduced by the AO. The AO by relying upon the report of the A DIT (Inv.) Ko lkata has made additio n o f share capital and premium amount in respect of these seven parties under 68 of the act. We will analyze party wise report and basis o f disallowance as well as evide nces/material produced by the assesse e in support of its claim as unde r: -
M/s Century Commo Trade Pvt. Ltd.:
The summons under sectio n 131 was issue d but there was no response from the said party as per the repo rt of the ADIT (Inv.) 24 ITA Nos. 4595/Del/2018 Tepe Consultants Pvt. Ltd.
Kolkata. Even the Inspector was unable to locate the party. Accordingly, it was observed in the repo rt that the e xistence o f the party appears to be doubtful.
M/s Fedder Tie Up Pvt. Ltd.:
The report o f the ADIT (Inv.) Kolkata is identical in verbatim as in the case of M/s Century Como Trade Pvt. Ltd. accordingly, the existence of the party was do ubted. M/s Nahar Vinivo g Pvt. Ltd. M/s Sunshine S ales Pvt. Ltd. & M/S Sigma Supplie rs Pvt. Ltd.:
The report o f the ADIT (inv.) in respect of these thre e parties also similar to that o f two o the r as no ted above and the existence o f these parties were also doubted by the ADIT (Inv.) in its report.
It is pertine nt to note that though this re port is a goo d evidence with the AO to doubt the existence o f the parties, ho we ver, when the assessee has pro duced all the rele vant evidence and material, which is sufficient to pro ve the existe nce, identity, creditwo rthiness o f the Parties then it was the duty and burde n n the A O to dispro ve the evide nce produced by the assessee . We find from the record that in all these five parties, the assessee has pro duce d PAN, acknowledgement of income tax return filed by these parties, confirmation letter from these parties, where by it has been confirmed that the y have applied for shares o f the assessee company and the respective payments we re made towards share application. The assessee has also filed the bank account of these parties to show the availability of fund and the payment from the bank account. Apart fro m this, the assessee has also produced the book of accounts of the se parties to show the financial so undne ss of the parties and sufficient amount of reserve and surplus as well as capital of these companies. Thus, it is clear from the evidence produced by the assessee that the parties we re very much in 25 ITA Nos. 4595/Del/2018 Tepe Consultants Pvt. Ltd.
existence as the se parties we re assessed to income tax. T he assessee has pro duced respective pan and income tax return alo ng with other details. It is manifest fro m the evidence produced by the assessee that e xistence/identity and creditworthiness of the parties canno t be doubte d. Thus, it appears that the re port of the ADIT (Inv.) Kolkata in respect o f these five parties is contrary to the fact prove d by the assessee with tangible and mate rial evidence brought on record. Once the assessee has discharged its burden by pro ducing the rele vant evide nce, then the o nus is shifted o n the AO to dispro ve the evide nce produced by the assessee. In the case in hand, the AO has no t prove d that the evide nce produced by the assessee is eithe r bogus or false. The addition has bee n made by the A.O. only on the basis of do ubt re garding the e xiste nce of the parties, which in o ur view, absolutely contrary to the facts brought on record by the assessee and it goes uncontro verte d as the A O has not brought and contrary record or facts. Further, the assessee has also produced all the relevant e vidences and record of allotment of shares to these parties, such as the share application form, allo tment letter and the share certificate issued by the assessee to these parties. The similar allo tment made by the assessee to othe r six parties has been accepte d by the department and the questio n has be en raise d only against these 7 parties, which are from Kolkata.
Now, we turn to analyse the facts in respect of two othe r parties, namely, M/s Prime capital marke t Ltd. and M/s universal multimedia ltd. I n its repo rt, the A DIT (Inv.) Kolkata has mentione d that in response to no tice the re prese ntative o f these parties appeared. Copy o f bank statement, co py o f allotment of shares were produced before the ADIT , howe ver, the A DIT (Inv.) found from the bank statement that be fore issuing the cheques of the share application money, substantial amounts we re deposited in respective o f bank accounts through cheques and o nly on the basis o f the fact that the 26 ITA Nos. 4595/Del/2018 Tepe Consultants Pvt. Ltd.
substantial amounts we re deposited thro ugh che ques prior to issuing the share application money, the A DIT (Inv.) has observed that the assessee has utilized these parties to bring its unaccounte d money back in the fo rm of share capital in their books of accounts. It appe ars that the investigation report of the A DIT (Ins.) is inconclusive and it is only an infe rence has been made on the basis of the fact that a substantial amount has been deposited in respective bank account thro ugh cheque s before the share application money was paid to the assessee. The observatio n of the ADIT (Inv.), in o ur view, is purely based on an imaginatio n and assumption and not based on the correct and re al facts because there in no o ther enquiry conducte d by the A DIT (Inv.) Kolkata to find o ut as from where these cheque s were depo site d in the acco unts of these two parties. Merely because the cheques were deposited in the respective accounts would not lead to the conclusion that these cheques money was the assessee's own money routed through these parties until and unless it is found in the enquiry and substantiate d with the facts and material. This is but natural that whenever a large payment is to be made funds are to be arranged and, there fore if an amount through cheque is de posited in the bank account befo re making the payment o f share applicatio n money, in absence o f any fact, material or finding, it canno t be said that the said money is assessee's o wn mo ney.
We furthe r note that the assessee produced the balance sheet, pro fit and loss account, income tax return, PAN and confirmation from these parties, which clearly discharge the assessee from its onus to prove its claim. When the assessee has brought on record the relevant evidence including the balance sheet and profit & loss account and return of income of these parties, then in the absence ofpro ving co ntrary by the AO the se material evide nce cannot be brushed aside merely on the basis of suspicious. Even otherwise , 27 ITA Nos. 4595/Del/2018 Tepe Consultants Pvt. Ltd.
when the assessee has produced the share application form , allo tment letter share certificate as well as bank account the n the genuineness o f the transaction cannot be do ubte d in the assessee is even othe rwise cannot be do ubted in the absence o f any contrary finding. The evide nce pro duced by the assessee is even othe rwise canno t be doubte d whe n the re turn of income is already by the parties are on the record o f the department. Thus, we find that the disallo wance of the claim of the assessee and additio n made by the AO under section 68 is purely based on assumptio n, guess wo rk without substantiated by any evide nce or Mate rial This is not a case of bogus share holders as all these parties are the co mpany, which are in e xistence and subjecte d to income tax as the assessee has produced the rele vant evide nce. Therefore , when the assessee has produced all the rele vant evide nces, and if the department has doubted the so urce of the share applicatio n money, then it is free to take necessary action in respect of these partie s. The Ho n'ble supreme court in the case of CIT Vs. Lo vely exports Pvt. Ltd. (supra), has he ld that if the share application money is received by the assessee company from alle ged bogus shareholders whose names are given to the AO the n the department is free to proceed to reo pen their individual assessment is free to procee d to reope n their individual assessment in acco rdance with law but it cannot be regarded as undisclosed income of the assessee company. The re is nothing o n reco rd to show that these transactio ns of allotment of share is a sham transaction, then the department cannot treat the said share capital money as undisclo sed income o f the assessee.
In view of the abo ve discussio n as well as facts and circumstances o f the case, we are o f the conside red o pinion that the addition made by the AO under section 68 of the act is not justifie d and the same is hereby delete d.
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7. In case of M/s Monnet Ispat & Ene rgy Ltd. vs. Dy. CIT (2008) 171 T axmann 27 ( Delhi) It was found that the share application money was re ceived thro ugh banking channe l and that the asse ssee had produce d confirmatory lette rs. The cre ditor was assessed to tax and the PAN had been given in the ce rtificate filed. It was he ld by the Ho n'ble De lhi High Co urt that the assesse e had completely discharge d the identity o f the creditor, creditwo rthiness and genuinene ss of the transactio n. In case of CIT vs. Diamond Pro ducts Ltd. (2009) the Hon'ble Delhi High Court held that the LD. A.O. is not permitted to examine the source of source, once the assessee has established that the cre ditor is genuine and credito r's identity and genuinene ss has been established.
8. In case of CIT vs. Orissa Corporation P. Lt. 159 ITR 78 The Hon'ble Supre me Court laid down the extent o f burde n of proof in case o f a cash credit and the levy of penalty:
"In this case, the assessee had given the names and addresse s of the allege d creditors. It was in the knowle dge of the Revenue that the said cre ditors were income tax assessees. The ir inde x numbe rs were in the file of the Reve nue . The Revenue , apart from issuing notices under section 131 at the instance of the assessee, did not pursue the matte r furthe r. The Revenue did no t examine the so urce of income of the said alleged cre ditors to find o ut whe ther the y were creditwo rthy or were such who co uld advance the alle ged loans. There was no effo rt made to pursue the so called alle ged creditors. In those circumstances, the assessee could not do anything further. In the premises, if the Tribunal came to the co nclusion that the assessee has discharged the burde n that lay o n him , the n it could not be said that such a conclusion was unreasonable or perve rse or 29 ITA Nos. 4595/Del/2018 Tepe Consultants Pvt. Ltd.
based o n no evide nce. If the conclusion is base d on some evidence on which a co nclusion could be arrived at, no question of law as such arises.
It is common ground that the questio n on the penalty aspect depended on the quantum aspect."
The credito r has to be pro ved to have actually advanced the moneys to the assessee . However, once the credito r is shown to have advance d the money, the assesse e is not require d to prove the credits in the account o f the creditor. There is no liability o n an assessee to prove the source of source. In case of the appe llant it is found that the bank account o f these parties' cre dits by cheque , before payment to assessee is made. In case of Nemi Chand Kothari vs CIT ( 2003) 264 ITR 254, the Hon' ble Gauhati High Court e xamined the questio n of proving creditworthiness of sub-creditors. It was held by the Hon' ble Co urt that:-
(i) If sections 106 and 68 have to survive toge ther, the logical inte rpretatio n will be that while the assessee has to prove o nly his special kno wle dge , i.e., the source from whe re he has receive d the credit and o nce he discloses the so urce from which he has re ceive d the money, he must also establish that so far as his transaction with his cre ditor is concerned, the same genuine and his credito r had the creditwo rthiness to advance the loan, which the assessee had receive d. Whe n the assessee discharges the burde n so placed o n him, the onus, then, shifts to the Assessing Officer if the Assessing Office r wishes to assess the said lo an as the income of the assessee from undisclosed source, to prove either by dire ct evidence or indirect/circumstantial evidence that the money, which the assessee receive d from the credito r actually belonged to, and was o wned by, the assessee himself.30 ITA Nos. 4595/Del/2018
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(ii) If there is direct evide nce to show that the loan received by the assessee actually belo nged to the assessee , there will be no difficulty in assessing such amount as the income of the assessee from undisclose d source ; but if there is no direct evide nce in this regard, the n, the indirect or circumstantial evide nce has to be conclusive in nature and must, in such circumstances, une rringly point to the asse ssee as the person from whom the money had actually flown to the hands o f the sub-credito r and, then, routed thro ugh the hands of the sub-creditor to the hands o f the cre ditor. For this purpose , the circumstantial evidence has to be not only consistent with the hypothesis that the money be longe d to the assessee, but that this hypo thesis must also be inconsistent with the hypo thesis that no ne other than the assessee owne d the said mone y. If the conclusio n be that the money received, as loan, by the assessee may or may not belong to him or if the possibility exists that the money re ceived, as loan, by the assessee may no t be long to him, the n, in no ne of such two cases, the lo an amount can be conclusive ly treated as income from undisclose d source of the assessee inasmuch as for assessing the money as income of the assessee from undisclosed so urce , there must be clinching evide nce to show that the money actually be longe d to none but the assessee himself If no such clinching e vidence is available , the money may be treated as the income from disclose d source of the credito r or of the sub-cre ditor, as the case may be .
(ii) I f the inquiry unde r section 68 reveals that though the creditor had the cre ditwo rthiness, o n the day on which he had advance d the loan to the assessee, ye t the source of the cre ditor is not genuine , that is to say, tho ugh the transactio n be tween the assessee and the creditor is genuine, the transaction betwee n the cre dito r and the sub-cre ditor is no t ge nuine, then, in such a situation, it cannot be read as a coro llary nor can it le ad to the lone and only conclusion, in 31 ITA Nos. 4595/Del/2018 Tepe Consultants Pvt. Ltd.
the absence o f any othe r mate rial, that the mone y that has changed hands from the sub-credito r to the creditor was received by the sub- creditor from no ne othe r than the assessee himself.
9. In case of CIT vs. Oasis Hospitalitie s (P) Ltd, (2011) 238 CTR 402 ( Del. HC) The Hon'ble Delhi High Co urt co nsidere d the case of increase in share capital. It was held that tho ugh LD. A . O. was permitted to examine increase of share capital and ask the assessee to explain nature and source of cre dit, but the burden was discharged when the assessee produced PAN card and bank statement o f cre dito rs to sho w it had sufficient balance . It was observe d by the High Court as unde r:-
"In all these appe als, issue re lates to the addition made by the LD. A. O. unde r s. 68 of the IT Act (hereinafte r refe rred to as 'the Act') on account of unexplained share applicatio n money. Though the background o f the facts in which these additio ns were made in respect of differe nt assessees may not be identical, but the re is lo t of similarity. I n any case, since principle o f law which is to be applie d in all these cases is co mmon, by way of this singular judgment all these appeals can be decide d. Howeve r, in the process we would inte nd to dispose of these appeals by this common judgment. We wo uld proceed to discuss the positio n of law in first instance and the reafte r, on the application of that law, we shall answe r the question which arises in differe nt appeals.
2. Sec. 68 of the Act deals with unexplained incom es and is couched in the fo llowing language:
"Sec. 68.--Cash credits.--Where any sum is found credited in the books of an asse ssee maintaine d fo r any pre vious year, and assessee 32 ITA Nos. 4595/Del/2018 Tepe Consultants Pvt. Ltd.
offe rs no explanation abo ut the nature and so urce thereof or the explanation o ffe re d by him is not, in the o pinio n of the LD. A .O., satisfactory, the sum so credited may be charged to income-tax as the income o f the assessee o f that previo us year."
3. As per the provisions of this sectio n, in case the assessee has not been able to give satisfacto ry explanation in respect of ce rtain expenditure or where any sum is found credite d in the books of accounts, the LD. A.O. can tre at the same as undisclo sed income and add to the income of the assessee . The assessee is re quired to give satisfactory e xplanation about the "nature and source" of such sum found credite d in the books o f accounts.
4. It is a com mon knowledge that inso far as the companies incorporated unde r the I ndian Companies Act are concerned, whethe r private limited or public limited co mpanies, the y raise the ir capital thro ugh shares, though the manner of raising the share capital in the private limite d companies on the one hand and public limited companies on the other hand, would be differe nt. I n the case o f private limite d co mpanies, no rmally, the shares are subscribe d by family members or perso ns kno wn/close to the pro moters. Public limite d companies, on the other hand, generally raise public issue inviting gene ral public at large fo r subscriptio n of these shares. Yet, it is also possible that in case o f public limited companies, the share capital is issued in a close circuit.
5. When the companies inco rpo rate d under the Companies Act raise the ir capital thro ugh shares, various perso ns would apply for shares and thus give share applicatio n money. These amounts receive d from such shareho lders would, naturally, be the sums credited in the books of account of the assessee . If the LD. A.O. doubts the genuineness of the investo rs, who had purporte dly subscribe d to the share capital, the LD. A.O. may ask the assessee 33 ITA Nos. 4595/Del/2018 Tepe Consultants Pvt. Ltd.
to explain the nature and source of those sums re ceived by the assessee on acco unt of share capital. It is in this scenario , the question arises about the genuine ness of transactions. The plain language of s. 68 of the Act suggests that when the assessee is to give satisfacto ry explanation, burden of proof is on the assessee to provide nature and source o f those receipts.
6. What kind of pro of is to be furnished by the assessee, is the question. It has come up fo r discussion in various judgments rende red by this Court, o the r Courts as we ll as the S upreme Co urt. The law was discussed by a Division Bench of this Co urt in the case of CIT vs. Divine Leasing & Finance Ltd. ( 2007) 207 CTR (De l) 38 :
(2008) 299 ITR 268 (De l) . Since the entire gamut of case law as on that date was visited in the said judgment, we may initiate our discussion by taking no te of this case. In this case, the Court highlighted the menace of conversio n of unaccounted money thro ugh the masque rade or such channe ls of investment in the share capital of a company and thus stressed upon the duty o f the Revenue to firmly curb the same. It was also o bserve d that, in the process, the innoce nt assessee should not be unnecessarily harassed. A delicate balance must be maintained. It was, thus, stressed:
"15. The re canno t be two opinions on the aspect that the pernicio us practice of conversio n of unaccounte d money through the masquerade or channe l o f investment in the share capital of a company must be firmly e xcoriate d by the Re venue . Equally, where the pre ponde rance of evidence indicates absence of ability and complexity of the assessee it should no t be harassed by the Revenue's insistence that it should prove the negative . In the case o f a public issue , the company conce rned cannot be e xpected to know every detail pertaining to the identity as we ll as financial worth of each of its subscribers. The company must, howeve r, maintain and 34 ITA Nos. 4595/Del/2018 Tepe Consultants Pvt. Ltd.
make available to the LD. A.O. for his perusal, all the info rmation contained in the statuto ry share application documents. In the case of private placement the legal regime would not be the same. A delicate balance must be maintained while walking the tightrope of ss. 68 and 69 of the IT Act. The burden o f proof can seldom be discharged to the hilt by the asse ssee; if the LD. A.O. harbours doubts o f the le gitimacy of any subscription he is em powere d, nay duty bound, to carry out thorough investigations. But if the LD. A.O. fails to unearth any wrong o r illegal dealings, he cannot obdurate ly adhe re to his suspicions and tre at the subscribed capital as the undisclose d incom e of the company."
7. Taking note o f the earlier judgment of Full Bench of this Co urt in the case o f CIT vs. So phia Finance Ltd. (1993) 113 CTR (Del)(FB) 472 : ( 1994) 205 ITR 98 (De l)(FB), the Co urt obse rve d that the Full Bench had enunciated that s. 68 re poses in the IT O or LD. A.O. the jurisdictio n to inquire from the asse ssee the nature and source o f the sum found credited in its books of accounts. If the explanation prefe rre d by the assessee is fo und not to be satisfactory, furthe r enquiries can be made by the IT O himself, both in regard to the nature and the source o f the sum credited by the assessee in its books of accounts, since the wording of s. 68 is very wide . The F ull Bench opined that if the shareho lde rs exist then, possibly, no further enquiry need be made. But if the ITO finds that the allege d share holde rs do not exist the n, in e ffect, it wo uld mean that there is no valid issuance of share capital. Shares canno t be issued in the names of no n-existing pe rsons. If the share holde rs are identifie d and it is established that they have invested money in the purchase of shares the n the amount rece ive d by the company would be regarded as a capital receipt but if the assessee offers no explanation at all or the explanation offered is no t satisfactory then, the provisions of s. 68 may be invoke d.
35 ITA Nos. 4595/Del/2018Tepe Consultants Pvt. Ltd.
8. The Court also re ferred to the earlier Division Bench judgment in the case of CIT vs. Do lphin Canpack Ltd (2006) 204 CTR (De l) 50:
(2006) 283 ITR 190 ( Del) and quo te d the following observatio n:
"...........cre dit entry re lates to the issue of share capital, the ITO is also e ntitle d to examine whethe r the alleged shareho lders do in fact exist or not. Such an inquiry was conducted by the LD. A .O. in the present case. I n the course o f the said inquiry, the assessee had disclosed to the LD. A.O. no t only the names and the particulars of the subscribe rs of the shares but also the ir bank accounts and the PAN issued by the IT Department. Super added to all this was the fact that the amo unt rece ive d by the company was all by way of cheques. This material in the opinion of the Tribunal, sufficient to discharge the o nus that lay the asse ssee."
The Court took note of many other judgments of differe nt High Courts and on the analysis of those judgments formulate d the following pro positions, which emerge d as unde r:
"18. In this analysis, a distillatio n of the precede nts yie lds the following propositions of law in the context of s. 68 of the IT Act. The assessee has to prima facie pro ve ( 1) the identity o f the creditor/subscribe r; (2) the genuine ness of the transaction, namely, whethe r it has been transmitted through banking or o the r indisputable channels; (3) the creditwo rthiness or financial strength of the credito r/subscriber; (4) if re levant details of the address or PAN identity of the cre ditor/subscriber are furnishe d to the Department along with copies o f the shareho lde rs registe r, share application forms, share transfe r registe r etc. it wo uld co nstitute acceptable proo f o r acceptable e xplanation by the asse ssee.36 ITA Nos. 4595/Del/2018
Tepe Consultants Pvt. Ltd.
(5) The Department would no t be justified in drawing an adverse infe rence only be cause the cre dito r/subscriber fails or neglects to respond to its no tices;
(6) the onus wo uld not stand discharge d if the creditor/subscribe r denies or repudiates the transactio n set up by the assessee nor should the LD. A. O. take such repudiation at face value and construe it, witho ut more , against the assessee; (7) the LD. A.O. is duty bound to investigate the cre ditworthiness of the creditor/subscribe r, the genuinene ss of the transaction and the veracity o f the re pudiation."
10. By this common judgment, the Division Bench decided these appe als o f which one appe al related to Lovely Exports ( P) Ltd. Against the said judgment, Spe cial Leave Petition was prefe rre d, which was dismissed by the Supreme Court vide orde rs dt. 11th J an., 2008 and is repo rted as CIT vs. Lo vely Exports (P) Ltd. (2008) 216 CTR (SC) 195. The Court while dismissing the SLP recorded some reasons as we ll albeit in brief, which are as unde r :
"2. Can the amount of share money be regarded as undisclose d income under s. 68 of IT Act, 1961? We find no merit in this Special Leave Petition for the simple reaso n that if the share applicatio n money is rece ive d by the assesse e company from alleged bogus share holde rs, whose names are given to the LD. A.O., the n the Department is free to proceed to reo pen their individual assessments in acco rdance with law. Hence , we find no infirmity with the impugne d j udgme nt."
11. It is clear from the above that the initial burden is upon the assessee to explain the nature and source o f the share applicatio n money rece ived by the assessee. I n order to discharge this burden, the assessee is re quired to prove:
37 ITA Nos. 4595/Del/2018Tepe Consultants Pvt. Ltd.
a) Identity of shareholder; b) Genuine ness o f transactio n; and c) Cre ditworthiness of share holders. 12. In case the investor/shareholder is an individual, some
documents will have to be file d or the said share holder will have to be pro duced before the LD. A .O. to pro ve his identity. If the creditor/subscribe r is a company, then the details in the fo rm of registere d address or PAN ide ntity, e tc. can be furnishe d.
13. Genuine ness of the transaction is to be demonstrate d by showing that the assessee had, in fact, rece ive d mone y from the said share holde r and it came from the coffe rs from that ve ry shareho lder.
The Division Bench held that when the money is received by che que and is transmitted through banking or other indisputable channels, genuineness of transaction wo uld be prove d. Other documents showing the genuineness of transaction could be the copies of the share holde rs register, share application fo rms, share transfer register, e tc.
14. As far as creditworthiness or financial strength of the credito r/ subscribe r is concerned, that can be proved by pro ducing the bank statements o f the creditors/subscribers sho wing that it had sufficient balance in its acco unts to enable it to subscribe to the share capital. This judgment further ho lds that once these documents are produced, the assessee would have satisfactorily discharge d the onus cast upon him. T hereafte r, it is fo r the LD. A. O. to scrutinize the same and in case he nurtures any doubt about the veracity o f these documents to probe the matter further. Howeve r, to discredit the documents produced by the assesse e on the aforesaid aspects, there has to be some cogent reaso ns and materials fo r the LD. A . O. and he cannot go into the realm of suspicion.
38 ITA Nos. 4595/Del/2018Tepe Consultants Pvt. Ltd.
15. At this stage , we would like to refer to the judgment o f the Bombay High Co urt in the case of CIT vs. Creative World Te lefilms Ltd. ( in IT Appeal No. 2182 o f 2009 decide d on 12th Oct., 2009) . The relevant portion of this orde r is reproduced be low:
"In the case in hand, it is not disputed that the assessee had give n the de tails o f name and address o f the shareho lder, their PAN/GIR number and had also given the cheque number, name of the bank. It was expected on the part of the LD. A.O. to make proper investigation and reach the shareho lders. The LD. A. O. did no thing except issuing summons which was ultimately returned back with an endorsement 'no t traceable' . In o ur conside red vie w, the LD. A.O. ought to have fo und o ut their de tails thro ugh PA N cards, bank account details or from their banke rs so as to reach the shareholders since all the re levant mate rial details and particulars were given by the assessee to the LD. A . O. In the above circumstances, the vie w taken by the T ribunal canno t be faulte d. No substantial question of law is invo lve d in the appeal. In the result, the appe al is dismissed in limine with no o rder as to costs."
In additio n to the abo ve decisions reliance is also place d o n the following decision of the Hon'ble Courts:-
1. CIT vs. Lo vely Exports P Ltd. 216 CTR 195 (SC) "If the share applicatio n money is re ceived by the asse ssee company from alle ged bogus shareho lde rs, whose names are given to the Assessing Office r, then the de partm ent is free to pro ceed to reopen their individual assessments in accordance with law but this amount of share money canno t be regarde d as undisclose d income under section 68 of the assessee company."
2. CIT vs. Value Capital Se rvices P Ltd. 221 CTR 511 (De l HC) 39 ITA Nos. 4595/Del/2018 Tepe Consultants Pvt. Ltd.
"If department wants to make addition on acco unt of share application money, burden is on department to sho w that even if applicant did not have means to make investment, investment made by assessee actually emanated fro m coffers o f asse ssee so as to enable it to be treated as undisclose d income o f assessee.
The assessee had receive d an amount o f Rs. 51 lakhs as share application money from 33 persons. The Assessing Office r re quire d the assessee to produce all these pe rsons. It appeared that some of them did appear. The Assessing Officer accepted the e xplanation and the statement given by the three of these persons but found that the response from the others was either not available or was inadequate. On this basis, the Assessing Office r adde d an amount of Rs. 46 lakhs pertaining to 30 o f the pe rsons to the income o f the assessee.
Held that it is quite obvious that is very difficult fo r the assessee to show the cre ditwo rthiness of strangers. If the revenue had any doubt with regard to their ability to make the investment, their returns might be reo pened by the department."
3. CIT vs. Ne w Age Infosys, MANU/ DE/2998/2010 "We must haste n to add that it is not our finding that share applicants in the present case are bogus. Ge nuineness of the applicants and transfe r of money from them has been clearly established. In case source of funds in the hands of applicants is doubted, which case reve nue is se eking to make at present, the n revenue has to proceed against the applicants in accordance with law. A dditio n in the hands o f the company under Se ction 68 o f the I.T. Act is no t justified at all. On facts and circumstances of the case, we see no error in the appro ach of the Id. CIT(A) in deleting the additio n disputed in the two grounds o f appeal by the re venue . These gro unds o f appe al are accordingly rejected."
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4. BhavS hati Steel v. CIT [ 2010] 320 ITR 619 ( Delhi HC) "We find that the CIT(A) had considered in detail the case of each o f the shareho lders and came to a co nclusion of fact that the ide ntity and creditworthine ss of the share ho lders and the genuineness o f the transactio ns stoo d established. Therefore , the finding returne d by the Tribunal to the contrary cannot be accepted as it is contrary to the record. In any event we also no te that the Suprem e Court in the case of CIT v. Lovely Expo rts ( P) Ltd. [ 2008] 216 CTR 195 conside red the question as to whether the share applicatio n money can be re garded as undisclose d income under Section 68 o f the Income Tax Act, 1961. The S upreme Court dismissing the SLP observe d that if the share mone y is received by the assessee company from alle ged bogus share holders whose names are given to the Assessing Officer, the n the De partment is free to procee d to assess them individually, in accordance with law. The Supreme Court did no t find any infirmity with the impugne d judgment o f the High Court which was a common order along with the de cision in CIT v. Divine Leasing & Finance Ltd. MANU/DE/9645/ 2006:
[2008] 299ITR268( Delhi). S ince the Commissioner o f Income Tax (A) has no t only fo und that the identity of e ach of the share holders stood established, but has also examined the fact that each of them were Income Tax assessees and had disclosed the share applicatio n money in the ir accounts which were duly re flected in their Income Tax return as well as in the ir balance sheets. I n these circumstances we see merit in what the learned Counsel for the appe llant has submitted and we feel that the Tribunal was unjustifie d in coming to the conclusion that the CIT(A) had not conside red the matter in the right perspective . Consequently, we decide the questio n in favour o f the assessee and set aside the o rder passed by the Tribunal."
5. Aquatech I nternatio nal vs. ITO 119 TTJ 340 (De l- A Bench) 41 ITA Nos. 4595/Del/2018 Tepe Consultants Pvt. Ltd.
"Where the asse ssee had receive d money on account of share application and the same was credited by the assessee in its share capital acco unt and it was treate d as unexplaine d cash credit by the Assessing Officer: Held that to discharge the burden, the assessee company had filed confirmation, PA N, copy o f balance sheets o f the share applicants before the Assessing Officer. The ple a on which the Assessing Officer had declined to accept the same was that these persons did no t appear in pe rson before the Assessing Officer and creditwo rthiness of these perso ns could not be proved. From the record, it was found that the assessee company had filed confirmation in re spect o f all the share applicants. All the documents produced by the assessee clearly established not o nly identify of the share applicants but also the source from which they had given the money to the asse ssee company, in the form of share capital. Thus, there was no merit in the action of authorities for adding the amount of share capital in the hands o f the assessee company by invoking provisio ns o f section 68."
It is submitte d that the appellant had file d all the evidences to discharge its liability to prove the identity, creditworthiness and genuineness o f the transactio ns with the six parties by submitting the following de tails befo re the Ld A. O. A) Balance Shee t B) Copy o f I ncome T ax Return.
C) Bank Acco unt Statement. D) Share A pplicatio n. E) Account Confirmation Statement in respect o f share applicatio n money.
The accounts o f these parties also show sufficient balance to issue account payee cheques to the appellant. The analysis of these accounts shows the fo llowing positio n:-
42 ITA Nos. 4595/Del/2018Tepe Consultants Pvt. Ltd.
1. M/s R.S Capsules Pvt. Ltd.
The share application money o f Rs. 25,00,000/- was debited in the accounts o n 28.08.2009. The amount was paid by Ch. No . 941813 date d 29.08.2009. It is seen that on 29.08.2009 the party had balance of Rs. 38,88,122/- be fore issuing the che que. The refo re party had sufficient balance in the accounts befo re issuing the cheque . T he party was duly allo tted 1000 shares on 30.12.2010.
2. M/s Amrit S upplie rs Pvt. Ltd.
The share application money o f Rs. 25,00,000/- was debited in the accounts on 29.08.2009. The amount was paid by Ch. No. 909528 date d 29.08.2009. It is seen that on 29.08.2009 the party had balance of Rs. 30,04,710/- be fore issuing the che que. The thus, sufficient balance in the accounts before issuing the cheque . The party allo tted 1000 share s on 30.12.2010.
3. M/s. A gni Transpo rt Pvt. Ltd.
The share application money o f Rs. 40,00,000/- was debited in the accounts on 11.09.2009. The amount was paid by Ch. No. 967781 date d 11.09.2009. It is seen that on 11.09.2009 the party had balance of Rs. 40,10,564/- befo re issuing the che que . The party had sufficient balance in the accounts before issuing the cheque . The party was duly allotted 1600 shares on 30.12.2010.
4. M/s Maa Jagdamba Nirman Pvt. Ltd.
The share application money o f Rs. 35,00,000/- was debited in the accounts on 14.09.2009. The amount was paid by RTGS date d 14.09.2009. It is seen that on 14.09.2009 the party had balance o f Rs. 35,07,841/- before making RTGS payment. T he party had, 43 ITA Nos. 4595/Del/2018 Tepe Consultants Pvt. Ltd.
there fore , sufficie nt balance in the accounts be fore making the payment. The party was duly allo tte d 1400 shares on 30.12.2010.
5. M/s Melody Residency Pvt. Ltd.
The share application money o f Rs. 30,00,000/- was debited in the accounts on 06.10.2009. The amount was paid by RTGS date d 06.10.2009. It is seen that on 06.10.2009 the party had balance o f Rs. 51,60,082/- before making RTGS payment. The re fore party had sufficient balance in the accounts before making the payment. The party was duly allotted 1200 shares on 30.12.2010.
6. M/s Arnab Prope rties Pvt. Ltd.
The share application money o f Rs. 25,00,000/- was debited in the accounts on 06.10.2009. The amount was paid by RTGS date d 06.10.2009. It is seen that on 06.10.2009 the party had balance o f Rs. 30,09,930/- before making RT GS payment. T he party had, thus, sufficient balance in the accounts before making the payment. The party was duly allotted 1000 shares on 30.12.2010.
The above details show that these parties had sufficient balance in their accounts to issue account payee cheques to the appellant. In the orde r passe d the Ld. A .O. has re ferre d to the no n-appe arance of directors of the above six companies. It is submitte d that the o nus on the appellant was to prove the identity, cre ditworthiness of the party and genuineness of these transactio ns. The o nus was duly discharged by the appellant. It was for the Ld. A .O. to examine the parties herse lf o r thro ugh issue of commission and take nece ssary actio n against tho se parties. Ld. A.O. should not have r adve rse view afte r the appellant had discharge d its onus to prove the share application mone y rece ived. F urther, the genuineness of the transactio n is further pro ved by the fact that these parties were duly 44 ITA Nos. 4595/Del/2018 Tepe Consultants Pvt. Ltd.
allo tte d 30.12.2010 in the subse que nt I ear. T he addition made may, there fore , be dele ted.
Ground No . 2 is in re gard to additio n of Rs. 81,75,000/- as unexplaine d investment being loan taken from one M /s Advani Pvt. Ltd. The Ld. A .O. issue d notice u/ s 133( 6) on 04.03.2013 to four parties including M/s Advani Pvt. Ltd. All the parties responde d to the communicatio n and filed all ne cessary documents calle d fo r. I n case of M/s Advani Pvt. Ltd, S hri Gyan Swaroop Garg, directo r, appe ared and file d details. The details were filed in the office as the Ld. A .O. was no t present.
During the relevant ye ar the appe llant received unsecured lo an o f Rs 81,75,000/- from M/s Advani Pvt. Ltd. The appellant submitte d before the Ld. A .O. the Confirmatio n Letter, Balance sheet and ITR of M/s Advani Pvt. Ltd for the AY 2010-11. In response to notice u/s 133(6) of T he Income Tax Act, 1961 the party also filed reply, vide lette r date d 07.03.2013, which has been duly acknowledge d by the department. The documents submitted be fore the Ld. A.O. were:-
1) PAN Numbe r.
2) Copy of acknowle dgement of Incom e Tax Return filed for the AY 2010-11.
3) Copy o f audite d Balance Sheet along with bank statements from where the funds have been lent.
4) Copy of confirmation of Lo an Account.
The company has give n loan through an account payee cheque and also the company was having sufficient profit and pro per bank balance at the tim e of lending Ld. A .O. did not acce pt the evide nces filed and made addition in the asse ssment by making the follo wing observations, which is give n hereunder:-
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"3.14 T he assesses has sho wn unsecured lo ans of Rs 81,75,000/- from Advani Pvt. Ltd. The ITR of the company has a re turned income of Rs 24,32,770/- . The lo an giver and loan rece iver companies bo th are of Sh. Gyan Swaroo p Garg as evide nced by sam e signature on confirmation o f accounts. The bank statement also shows transaction {submission date d 07- 03- 2013} which have come from unkno wn sources.
3.15 Therefo re I am of the opinio n that the abo ve mentio ned cre dit is unexplaine d as identity, genuineness and creditwo rthiness are no t creditwo rthiness are not asce rtaine d and the refo re the said amount is added as une xplained credit u/s 68 to the taxable income of the assesses."
It is submitted that the Ld. A. O. did no t find any de ficiency in the details file d and has rejected the de tails mere ly on the ground that one of the directo r was common. The loan taken has not bee n found as unexplaine d by the Ld. A .O. T he Ld. A .O. has accepted that M/s Advani Pvt. Ltd had filed return showing income of Rs. 24,32,770/- The copy of acco unt file d befo re the Ld. A.O. also shows that the amount of Rs. 81,75,000/- was given by the party as per de tail below :-
Date Balance be fo re Ch. No . Amount ( in Rs.)
Issue of cheque (in
Rs.)
14.09.09 10,05,441 576445 1,50,000
03.11.09 27,44,567 896595 15,00,000
06.11.09 15,60,326 896597 15,00,000
11.11.09 25,53,529 896600 25,00,000
12.11.09 25,53,529 896601 25,25,000
TOTAL 81,75,000
The appellant had file d the do cuments to pro ve the ide ntity,
creditwo rthiness and ge nuineness o f the transactio n and discharged the onus to pro ve the credit. The Ld. A.O. has not found any 46 ITA Nos. 4595/Del/2018 Tepe Consultants Pvt. Ltd.
omission or deficiency. It is furthe r submitted that the amounts had been paid back by the appe llant to M/s Advani Private Limited in the F. Y . 2009-10 as under:
Date Particulars Vch Type Vch.No. Debit Credit 28.04.2009 ICICI BANK LTD. Receipt 67 10,45,000 14.09.2009 ICICI BANK LTD. Payment 378 1,50,000 12.10.2009 ICICI BANK LTD. Receipt 378 3,50,000 03.11.2009 ICICI BANK LTD. Payment 510 15,00,000 06.11.2009 ICICI BANK LTD. Payment 522 15,00,000 11.11.2009 ICICI BANK LTD. Payment 533 25,00,000 12.11.2009 ICICI BANK LTD. Payment 541 25,25,000 05.12.2009 ICICI BANK LTD. Receipt 485 47,00,000 81,75,000 60,95,000 Closing Balance 20,80,000 81,75,000 81,75,000
11. Heard the arguments of both the parties and perused the material available on record.
12. Based on the above submission the ld. CIT(A) held that during the assessment proceedings three parties sent their authorized representatives. The Assessing Officer observed that the ARs carried entire forms of share application alongwith acknowledgement with signature and stamp, whereas the same should have been in the possession of Assessee Company. The Assessing Officer observed that the forms did not have application number and the acknowledgement slips did not have stamp on it. Then the Assessing Officer observed that the forms did not look three years old. The ld. CIT(A) observed that The Assessing Officer issued commissions to the DDIT, Investigation, Kolkata for examining the share applicants, who submitted his report to the Assessing Officer. In the report, the DDIT, Investigation stated that authorized representatives of the concerns appeared before him and submitted the following documents:47 ITA Nos. 4595/Del/2018
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i) Copy of share application of Tepe Consultants.
ii) Copy of bank statement reflecting the transactions.
iii) Statement showing the immediate source of fund of above transaction.
iv) Copy of IT acknowledgement of AY 2010-11. v) Copy of balance sheet for 31.03.2010 ending.
13. We also find that, the DDIT, Investigation did not comment on the authenticity of the above documents and did not give a report that the documents are either bogus or not valid and left the matter to be decided by the Assessing Officer. It was added by the AO that most of the companies have very meager returned income in FY 2009-10. The Assessing Officer stated that the Assessee failed to produce the parties before him or the parties failed to appear before him or in Kolkata. On these observations, the Assessing Officer added Rs. 1,80,00,000/-.
The Assessing Officer issued commission u/s 131 to the DDIT, Investigation, Kolkata as the share applicants reside in Kolkata. The summons u/s 131 were for submission / filing of required details personally or through authorized representatives. The notices were received by the parties in Kolkata. As per the notices, the parties were required to furnish the following details:
a) ITR for AY 2010-11
b) Bank Statement copies for FY 2009-10
c) Share Application Form
d) Account Confirmation
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Besides above, the Assessing Officer with respect to the
unsecured loans of Rs.81,75,000/- from Advani Pvt. Ltd.
observed that the creditor showed returned income of
Rs.24,32,770/-. The Assessee Company and M/s Advani Pvt. Ltd. both are the companies of Sh. Gyan Swaroop Garg, as evidenced by same signature on confirmation of accounts. The Assessing Officer remarked that the source of the funds from which Advani Pvt. Ltd. was not explained. Therefore, he added further Rs.81,75,000/-. The Assessee also received unsecured loans amounting to Rs.81,75,000/- from M/s Advani Pvt. Ltd. The aforesaid creditor duly replied the letter issued from the Assessing Officer. Besides details of PAN, copy of acknowledgement of ITR for AY 2010-11, copy of audited balance sheet, copy of bank statement alongwith the confirmation of the account were filed. The company filed the following details in respect of share applicants:-
a. Balance Sheet b. Copy of Income Tax Return c. Bank Account Statement d. Share Application e) Account Confirmation Statement in respect of share application money. 14. Mr. Gyan Swaroop Garg, one of the directors of the
Appellant company travelled from Kolkata to Delhi to submit the reply from above six parties. He appeared before the Assessing Officer in response to notice u/s 133(6) of the Act issued to M/s Advani Pvt. Ltd. He filed the details of M/s Advani Pvt. Ltd. and requested the office staff to accept the details of other six 49 ITA Nos. 4595/Del/2018 Tepe Consultants Pvt. Ltd.
share applicants. But the office did not accept the submission. This fact was elaborated by the ld. CIT(A) in his order.
15. Further, in response to a summons received u/s 131 for the second time, all six parties sent replies and documents through registered post, which were duly received by the Assessing Officer. The Ld. Assessing Officer was also informed that he could not issue a summons u/s 131 as Kolkata is beyond the distance of 500 km. Then Assessing Officer issued commission to the officer in Kolkata. The auditors and accountants of the above six share applicants appeared before the DDIT, Investigation, Kolkata and submitted the documents called for. The DDIT, Investigation, Kolkata verified these facts and sent his report to the Assessing Officer with no adverse comments.
16. Thus, the Assessee has discharged the initial onus by proving the identity of the creditor, which was complied with by filing the confirmatory letter and other relevant details. The Assessee Company discharged its onus by providing the details and documents in respect of the creditworthiness of the creditors and genuineness of the transactions. All the share applicants are active companies and all of them have records on MCA site. The financial statements of the share applicants were produced to prove the creditworthiness.
17. The ld. CIT(A) held that so far as six share applicants are concerned, the DDIT, Investigation, Kolkata informed that necessary details and documents were filed by the parties in response to a summons issued to them. The DDIT, 50 ITA Nos. 4595/Del/2018 Tepe Consultants Pvt. Ltd.
Investigation, Kolkata has not commented adversely in his report sent to the Assessing Officer. The share applicants submitted the proof regarding their identity, copy of Income Tax Returns, copy of bank statements alongwith the confirmation of accounts. On these facts and in the circumstances, the Assessing Officer could not dismiss the explanation offered by the Assessee Company with respect to identity and creditworthiness of the creditors and genuineness of transactions unless he had some material in his possession to rebut the explanation offered by the Assessee.
18. As far as, unsecured loan of Rs.81,75,000/- from Advani Pvt. Ltd. is concerned, the Appellant had submitted all the relevant details. The director of the lender company Sh. Gyan Swaroop Garg appeared before the Assessing Officer in response to the notice issued. The Assessing Officer has made a vague comment that the sources of funds of M/s Advani Pvt. Ltd. are unknown. But the Assessing Officer has not pointed out any suspected transaction before advancing the money to the Assessee Company.
19. In view of these facts which have been considered in detail and on perusal of the material on record, allegations of the revenue, replies of the assessee and the shareholders, enquiries conducted by the DDIT (Inv.), we decline to interfere with the reasoned order of the ld. CIT(A). The appeal of the Revenue is hereby dismissed.
51 ITA Nos. 4595/Del/2018Tepe Consultants Pvt. Ltd.
20. In the result, the appeal of the Revenue is dismissed. Order Pronounced in the Open Court on 17/05/2023.
Sd/- Sd/-
(Yogesh Kumar US) (Dr. B. R. R. Kumar)
Judicial Member Accountant Member
Dated: 17/05/2023
*Subodh Kumar, Sr. PS*
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT
ASSISTANT REGISTRAR