Income Tax Appellate Tribunal - Mumbai
Dcit Cc 7(4), Mumbai vs Poddar Renaissance Reality Pvt Ltd (Now ... on 20 December, 2024
IN THE INCOME-TAX APPELLATE TRIBUNAL"C" BENCH, MUMBAI BEFORE SHRI OM PRAKASH KANT, ACCOUNTANT MEMBER & SHRI SANDEEP SINGH KARHAIL, JUDICIAL MEMBER ITA No. 2045/MUM/2019 (A.Y. 2012-13) DCIT, CC-7(4), Mumbai v/s. Poddar Renaissance Reality Room No. 659, Aaykar बनाम Pvt. Ltd. (Now known as Bhavan, M.K. Road, Imperial Renaissance Mumbai-400020 Renaissance Reality Pvt.
Ltd.) 501/601, Aqua Marine, Carter Road, Mumbai-400050030 थायी ले खा सं ./जीआइआर सं ./PAN/GIR No: AAGCP2657R Appellant/अपीलाथ .. Respondent/ ितवादी Assessee by : Mr. Rishabh Mehta Revenue by : Mr. R. A. Dhyani Date of Hearing 15.10.2024 Date of Pronouncement 20.12.2024 आदे श / O R D E R PER OM PRAKASH KANT [A.M.] :-
This appeal by the Revenue is directed against the order dated 31.01.2019 of the Learned Commissioner of Income-tax (Appeals), Mumbai-49 [hereinafter referred to as "CIT(A)"] for Assessment Year [A.Y.] 2012-13, raising following grounds :
"1. "On the fact and circumstances of the case, the Learned CIT(A) has erred in deleting the addition of Rs. 5,15,00,000/- made by the AO on account of unexplained investment u/s. 69 of the I.T. Act, 1961 without appreciating the Page |2 ITA No. 2045/Mum/2024 A.Y. 2012-13 Poddar Renaissance Reality pvt. Ltd. (Now Known as Imperial Renaissance Reniasance Reality Pvt. Ltd.
fact that the assessee fail failed ed to explain the unaccounted cash investment made by him during assessment and remand proceedings."
2. "On the fact and circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of Rs. 11,71,32,000/ 11,71,32,000/- made by the AO on account of unexplained ined cash credit u/s. 68 of the I.T. Act, 1961 without appreciating the fact that the assessee failed to prove the genuineness of transactions during assessment and remand proceedings."
3. "On the fact and circumstances of the case, the Learned CIT(A) has erred in deleting the addition of Rs. 11,71,32,000/ 11,71,32,000/- made by the AO on account of unexplained cash credit u/s. 68 of the I.T. Act, 1961 without appreciating the fact that the Hon'ble Supreme Court in the case Sumati Dayal Vs CIT (1995) 214 ITR 801(SC) has held genuineness could validity be tested on the ground or principle of preponderance of human possibilities which form a valid ground or parameter for determining the genuineness."
2. Briefly stated facts of the case are that the assessee filed return of income come on 27.09.2012 declaring total income at Rs. nil nil. Subsequently, a statutory notices under the Income Tax Act, 1961 [he [hereinafter reinafter referred as "Act"] were issued and complied with with, and thereafter assessment u/s 143(3) 143(3 of the Act was completed on 13 13.03.2015, wherein addition of Rs. 5,15,00,000/-
5,15,00,000/ for unexplained plained investment and commission paid for purchase of the flats along with addition of Rs. 11,71,32,000/ 11,71,32,000/- for bogus share premium were made.
3. On further appeal, the Ld. CIT(A) deleted the above additi additions.
4. Aggrieved with order of Ld. CIT(A), the Revenue evenue is in appeal before the Tribunal by way of raising grounds as reproduced above.
5. The assessee filed a paper book containing pages 1 to 300. As far as ground No. 1 of the appeal concerning the addition of Rs. 5,15,00,000/ ,15,00,000/- on account of unexplained investment u/s 69 of the Act which has been deleted by the Ld. CIT(A) is concerned, the Ld. Departmental Representative [DR] relied on the findings of the of the AO AO, whereas the Ld. Counsel for the Page |3 ITA No. 2045/Mum/2024 A.Y. 2012-13 Poddar Renaissance Reality pvt. Ltd.
(Now Known as Imperial Renaissance Reniasance Reality Pvt. Ltd.
assessee relied lied on the findings of the Ld. CIT(A). The brief facts qua the issue in dispute are that in n the search proceedings at the premises of sh Manish Garg ( i.e. executive director of M/s Loha Ispat Ltd ) documents relating to unaccounted payment for commission in cash for purchase of the two flats, namely, flat No. 501 and 601 at Tamarisk CHS Ltd., Carter ter Road, Bandra (W), Mumbai were seized. The said document revealed a debit note for commission of Rs. 15,00,000/- calculated at the rate of 1% on actual purchase price of those two flats, which are purchased in the name of the assessee. Accordingly, the search team inferred the tota totall purchase cost of two flats at Rs.
15,00,00,000/-.. In the course of search statement of Shri Rajesh Poddar, i.e. the managing director of M/s. Loha Ispaat Ltd., was recorded u/s 132(4) of the Act on 22.02.2012, , wherein h he admitted that those two flats were w purchased by sh Aayush Rajesh Poddar in the name of assessee company for a consideration of Rs. 15 crores , out of which Rs. 10 crores was paid in cheque and balance Rs. 5 crores was paid in cash by M/s Loha Ispat Ltd in FY 2010 2010-
11. He explained that sa said id cash of Rs. 5.00 crores was paid put of the cash generated out of non-genuine genuine purchases by M/s Loha Ispat Ltd from M/s Vikram Coils pvt. Ltd. He stated that said generation of cash was already offered as undisclosed income in the hands of M/s Loha Iso Isopat ltd.
Considering the seized document and statement of mr Rajesh poddar, the AO in the case of the M/s. Loha Ispaat Ltd. made addition of Rs. 5.15 crore as Page |4 ITA No. 2045/Mum/2024 A.Y. 2012-13 Poddar Renaissance Reality pvt. Ltd.
(Now Known as Imperial Renaissance Reniasance Reality Pvt. Ltd.
unexplained investment and undisclosed income on substantive basis. The same addition has been made on protective basis in the hand s of the assessee as those flats were purchased in the name of the assessee entity. The Ld. CIT(A) deleted the addition made on the protective basis in the hands of the assessee on the ground that the evidences found during ring the course of serach indicated that undisclosed income was of M/s Loha Ispat Ltd and not any iota of evidence that cash was paid by the assessee company , the AO can't proceed to make addition in the hands of the assessee company on protective bab babis that too when addition on substantive basis was already been made in the hands of the M/s. Loha Ispaat and which has been upheld by the Ld. First appellate author in that case also. The relevant findings of the Ld. CIT(A) is reproduced as under:
"5.3 I have carefully considered the submission of the Id. Counsel and the assessment order. On going through the assessment order, it is observed that from the premises of Shri Manish Garg (executive director and one of the shareholders in M/s. Lohalspaat Ltd.)) at 402, City Jewel, Plot no. 81, Koparkhairane, Navi Mumbai, the document relating to unaccounted payments for commission in cash for purchase of 2 flats no, 501 and 601 at Tamarisk CHS Ltd., Carter Road, Bandra (W), Mumbai were seized as page no. 91 of Annexure A-11 to Panchnama. The said finding revealed that it is a debit note and contains the amount of commission of Rs.
15,00,000/- calculated @ 1% on the actual purchase price of these two flats. Accordingly, from the said commission amount and rate, it was worked out that the total value of the flats so purchased was at Rs. 15,00,00,000/ 15,00,00,000/- In the course of 15,00,00,000/-.
search, the said finding was put before Shri Rajesh Poddar, the managing director of M/s. Loha Ispaat Ltd. and his statement was recorded u/s. 132(4) on 22.02.2012. His statement is reproduced by the AO in the impugned order and it is noted that he has admitted that these two flats were purchased by Aayush Rajesh Poddar in the name of the assessee company at a consideration of Rs. 15 crores out of whic which Rs. 10 crores were paid in cheque by the assessee company and balance Rs. 5 crores were paid in cash by M/s. Loha Ispaat Ltd. in F.Y. 2011 2011-12 12 being generated out of non-
non genuine purchases from M/s. Vikram Coils Pvt. Ltd. He accordingly offered the said undisclosed disclosed income of Rs. 5 crores of M/s. Loha Ispaat Ltd./ Considering the said findings of the search and statement recorded, the AO of M/s. Loha Ispaat Ltd.
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made the addition of Rs. 5 crores and the commission of Rs. 15 lacs thereon as undisclosed income in the hands of M/s. Loha Ispaat Ltd. This fact is not in dispute The Id. Counsel before me urged that the since the substantive addition has already been made in the right hands, there was no need on part of the AO to make the addition in the hands of ththee assessee company even on protective basis. I have carefully examined the facts and the issue involved here. There is no doubt that the payment in cash was made by M/s. Loha Ispaat Ltd.. Further, the income of Rs. 5.15 crores is already assessed in hands of M/s. Loha Ispaat Ltd. The issue before me is whether the protective addition is sustainable or not. It is a trite law that the findings of the search and the statements recorded during the search are to be read as a whole and that the incriminating mate material rial found in the course of search have a substantial evidentiary value in eyes of law. Gainful reference in this regard can be drawn from the following cases.
ACIT vs. Hotel Harbour View [2009][184 taxman 42] (Cochin) All the events leading to the insta instant nt case happened before the date of search on 6-8- 2003. The materials and details relating to the aborted sale transactions were collected in the course of search. It was on the basis of those materials and particulars that the Assessing Officer had proce proceeded to make the assessment under section 153A. Therefore, it was a case without any dispute arising as a consequence of the search conducted by the department. Therefore, it was very necessary on the part of the revenue to make out a case on the basis of the searched materials so that it could argue that the assessee was liable for capital gains tax. By the time of search, it was clear that the agreement to sell was not reached to its logical conclusion; the agreement was rescinded and part of the money re received from the vendee was returned; the subject property was let out to another third party; and the whole transaction was aborted. In view of that, the Assessing Officer should not have read the events in a piecemeal manner and stopped on 3131-3-1999 instead ad of reading it in a logical and a continuous manner from the beginning to the end. If he would have read the episode as a whole, he would know that there was no actual transfer of any capital asset from the assessee to MAPL. In order to make a case of ca capital gains tax, the Assessing Officer was cutting the chain of events into two parts; one part upto 31-3 3-1999 and the other part after 31-3-1999.
1999. That approach adopted by the Assessing Officer was against law. When the Assessing Officer was relying on the materials collected in the course of search for making an assessment, he should have read the materials in a wholesome and continuous manner, which ultimately would lead to a lawful conclusion. Therefore, the order of the Assessing Officer was without the support of law.
The Dhanvarsha Builders v. DCIT [2006] [102 ITD 375] (Pune) ...6.1. We have considered the facts of the case and rival submissions. The main issue in this case is about quantification of undisclosed income of the assessee on the basis of seized material, placed in the paper book, on pages 59 & 60. The connected issue about the confessionary statement made by Shri Akalank M. Mishrikotkar, on 15.02.1996 and its subsequent retraction. On perusal of the seized material, it is seen that the as assessee sessee was found in Page |6 ITA No. 2045/Mum/2024 A.Y. 2012-13 Poddar Renaissance Reality pvt. Ltd.
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possession of meticulous record regarding monies received in respect of various godowns and shops to be constructed by it. The details interinter-alla contained the narration about the premises No., name of the customer, total sale cost, moneyey received by way of cash, money received by way of cheque and the balance amount to be received. All the figures are written by omitting three zeros. The learned Counsel of the assessee fairly admitted that names mentioned in the list are those of its cu customers.
stomers. He also fairly admitted that the amounts received by way of cheque will tally with the books of account if three zeros are supplied to the amount mentioned in the seized papers. His arguments against placing reliance on this paper inter inter-
alia were that i) the paper does not bear the name of the assessee, ii) no evidence has been found regarding actual receipt of cash, and iii) the paper does not contain the dates on which respective cash amounts were allegedly received. Therefore, his case was that the impugned document is a dumb document and, therefore, it cannot be relied upon for the purpose of assessment. We are unable to persuade ourselves to agree with the learned Counsel in either of these matters. The reason is that the authenticity of the names mes and decoding of amounts received by way of cheques lead to establishment the fact that the documents belongs to the assessee and various amounts entered therein are correct if three doros are supplied. The absence of the names of the assessee thus gets fully corroborated on the basis of aforesaid interpretation of the document. The document speaks of receipt in cash and also receipt by way of cheques. The receipts by way of cheques tally with the books of account. Therefore, it is a natural consequence that the receipt by way of cash have also been made. As we shall see subsequently, the date of receipt of cash is not material for deciding the assessment year in which the profits embedded in such receipts are to be taxed. Suffice it to say at the moment, the assessee is following project completion method and, therefore, all amounts, l.e., amounts received in cash as well as amounts received by way of cheques are taxable in the year in which project is completed or substantially completed. Therefore, the leamed Counsel's arguments on all three grounds fall. Accordingly, it is held that the document is not a dumb document but it is a speaking document and it pertains to the business transactions of the assessee. This conclusion is further fortified by answe answerr to question No. 12 of Shri Akalank to the effect that the cash will be shows for 1996 1996-97 97 assessment year as additional income over and above the book profits of Dhanvarsha Builders and Developers Pvt. Ltd. After this statement, the document becomes, in ffact, an eloquent document regarding the receipt 'on money' of the assessee. 6.2. It was also the argument of the learned Counsel that the impugned papers not only to show the receipts but also the expenditure. Therefore, it was argued that the document sho should uld be read as a whole and deduction for the expenditure incurred should be given to the assessee while computing undisclosed income. We have considered this argument also. We are of the view that the seized document should be read as a whole if it has to be relied upon. It cannot be read only to the extent it is advantageous to the revenue and not read when it becomes disadvantageous to the revenue. In other words, if we do not read the figure of expenditure of Rs. 4200 against the name of Rajender by doub doubting ting the expenditure, then all the receipts Page |7 ITA No. 2045/Mum/2024 A.Y. 2012-13 Poddar Renaissance Reality pvt. Ltd.
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mentioned therein also comes under cloud of doubt. It is an accepted principle of interpretation of documents that they should be read as a whole as persons of common prudence will read them. They cannot be read in bits and parts to suit the convenient of one or other party. Therefore, the expenditure of 4200 will also have to be read on proper appreciation of the document. Such reading gets further fortified by the fact that one Mr. Rajender Agarwal was one of th thee contractor of the assessee and his bill was placed on page 112 of the paper book. Though the figure of Rs. 4200 is qualified by the remark approximately in the sald papers, the expenditure on that basis will have to be estimated. Such conclusion also get gets strength from the fact that the figure is a round figure. Accordingly, it is held that the expenditure of round some of Rs. 40.00 lakh becomes admissible to the assessee as cash expenditure in relation to cash receipts of the assessee. Thus, the excess o off receipts over the expenditure can be worked out at Rs. 8,95 lakh. The matter does not end here. It has been pointed out earlier that there are certain other figures of cash amount to be received by the assessee. The two sums of 400, being old and 179 fro from m Dhawal, aggregating to 579, are to be received in cash. Therefore, this amount will have to be added to the undisclosed income. Thus, the undisclosed income, by reading the document as a whole is calculaed at Rs. 14.74 lakh (Rs. 8.95 lakh + Rs. 5.79 lakh).
). The argument of the leamed DR in this matter may also be considered here. His case was that the expenditure has to be proved by the assessee. We are unable to agree with this submission if the impugned seized material is to be considered for the purpose of computation of the undisclosed income. The learned DR had pointed out that the AO had verified some of the cash receipts from the customers. It appears that no opportunity of cross examination has been given by the AO to the assessee in this behalf. Therefore, erefore, the evidence gathered by him in respect of receipt of 'on money' is only a tentative evidence on which no firm conclusion can be drawn. If the learned DR's arguments regarding expenditure were to be accepted, then, the figures of cash receipts men mentioned tioned in the seized paper will also have to be ignored. Such course of action will be against the tenor of the evidence seized in the course of search operation, more particularly when the evidence gives clear picture of the undisclosed income of the asse assessee."
6. Upon hearing the submissions of the parties and examining the material placed on record, we find that during a search operation conducted at the premises of the director of M/s Loha Ispat Ltd., certain documents were seized indicating the payment of commis commission sion or brokerage at the rate of 1%. This commission was calculated to amount to ₹15 lakh, as explicitly stated in the documents. Based on this, the search team inferred the purchase price to be ₹15 crore. The director of M/s Loha Ispat Ltd. admitted durin duringg questioning that this 1% commission was paid Page |8 ITA No. 2045/Mum/2024 A.Y. 2012-13 Poddar Renaissance Reality pvt. Ltd.
(Now Known as Imperial Renaissance Reniasance Reality Pvt. Ltd.
in connection with the purchase of two flats for the assessee company, M/s Poddar Renaissance Realty Pvt. Ltd. It was revealed that the registered sale deed reflected a consideration of only ₹10 crore, while the t remaining ₹5 crore and the ₹15 lakh commission were paid in cash. The director further stated that the cash payments were sourced from funds generated through cheques issued for bogus purchases recorded in the books of M/s Loha Ispat Ltd. It is pertinen pertinentt to note, however, that the seized documents do not conclusively establish the source of the cash payment for the two flats. The claim that the funds originated from bogus purchases was based solely on the statements of the director of M/s Loha Ispat Ltd. and lacked corroborative documentary evidence.
6.1 Given these facts, the he AO observed that the unexplained investment of ₹5.15 crore must be attributed to the assessee. The purchase consideration of ₹10 crore, which was reflected in the registered sale deed, has been duly accounted for in the books of the assessee. However, no addition has been made in the hands of M/s Loha Ispat Ltd. for the unexplained investment of ₹5.15 crore, even though the source of this payment was purportedly explained by M/s Loha Is Ispat Ltd. as arising from undisclosed income generated through bogus purchases. Notably, the seized documents did not contain any evidence to substantiate the flow of such funds. Under these circumstances, irrespective of whether the Assessing Officer made additions for undisclosed income in the case of M/s Loha Ispat Ltd., the onus remains squarely on the assessee to satisfactorily explain the source of the unexplained investment under the provisions of Section 69 of the Income Tax Act, 1961. For reference, Section 69 states:
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"Unexplained Unexplained investments.
69. Where in the financial year immediately preceding the assessment year the assessee has made investments which are not recorded in the books of account, if any, maintained by him for any source of income, aand nd the assessee offers no explanation about the nature and source of the investments or the explanation offered by him is not, in the opinion of the [Assessing] Officer, satisfactory, the value of the investments may be deemed to be the income of the assessee see of such financial year.
year."
6.2 In the present case, the assessee has failed to include the cash payment of ₹5 crore in the registered sale deed for the properties and has also failed to substantiate the source of this payment with credible documentary ev evidence.
In light of the facts and circumstances of the case, we are of the opinion that the addition of ₹5.15 crore must be made on a substantive basis in the hands of the assessee. The finding of the Learned Commissioner of Income Tax (Appeals) on this issue sue is hereby set aside, and the addition of ₹5.15 crore is upheld as the unexplained investment of the assessee under Section 69 of the Act. Accordingly, Ground No. 1 of the revenue's appeal stands allowed,, and the addition is sustained in the hands of the assessee on substantive grounds. Ordered accordingly accordingly.
7. Ground Nos.. 2 & 3 relate to addition of Rs. 11,71,32,000/-
11,71,32,000/ made by the AO in respect of the share premium received from the subscribers and held by the AO as unexplained but deleted by the Ld. CIT(A CIT(A).
8. The facts, qua, issue issues and disputes have been summarized by the Ld. CIT(A) in his findings. The assessee received share capital along with share premium from four share subscribers including two promoters. The AO did not make any addition in respect of share capital received from those subscribers but made addition u/s 68 of the Act in respect of the share P a g e | 10 ITA No. 2045/Mum/2024 A.Y. 2012-13 Poddar Renaissance Reality pvt. Ltd.
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premium only. Relevant findings of the Ld. CIT(A) in re respect spect of all the four share subscribers is reproduced here as under:
" 6.4 I have carefully considered the assessment order, remand report and the submissions of the learned counsel. During the year under consideration, the assessee has raised share capit capital al along with premium which is as under:-
under:
From above details, it is seen that the company has received share capital and premium from four shareholders at a different premium. The face value of shares issued by the assessee is at Rs. 10 per share whereas the premium per share differs for different parties.
6.5 As regard egard the shares issued to M/s. Loha Ispaat Ltd.,, it is seen that premium of Rs. 6 per share is fetched from it in December, 2011. It is noted that the total subscription of M/s. Loha Ispaat LtdLtd.. in the company is only to the tune of Rs.
5,15,00,000/- as the investments in two flats no. 501 and 601 of Bandra (W) as discussed above were made by M/s. Loha Ispaat Ltd. Accordingly, since the agreement of the said flats were in the name of the assesseassesseee company and the property ought to have been shown in its books, consideration was given to M/s. Loha Ispaat Ltd. in the form of issue of shares. Thus, there is no cash outflow to M/s. Loha Ispaat Ltd. in the said transaction but is merely a case of recor recording the investment in the books of the assessee company in consideration of the issue of shares to M/s. Loha Ispaat Ltd. Further, the total own funds of M/s. Loha Ispaat Ltd. is Rs. 39.51 crores and the profit before tax is reported at Rs. 65.29 crores fo for the year under consideration. Thus, the nature and source of transaction in relation to M/s. Loha Ispaat Ltd. gets duly substantiated.
6.6 As regard the shares issued to Mr. Aayush Poddar,, it is seen that premium of Rs. 10 per share is fetched from it iin n March, 2012.It is noted that the total subscription of Mr. Aayush Poddar, managing director of the assessee company is Rs. 5,99,000/-.. In this regard, the Id. Counsel submitted that the identity and genuineness of the transaction is not in doubt even by the AO. It is noted that the networth of Mr. Aayush Poddar is Rs. 63,34,059/ 63,34,059/- which is quite adequate to cover the meagre investment of Rs. 5,99,000/ 5,99,000/- in the assessee company. The AO is of the view that assessee failed to produce him in the remand proceedi proceedings.
ngs. However, since the records clearly establish the identity of the investor, genuineness of the transaction and creditworthiness of the lender, addition cannot be sustained merely because the party was not produced before him. Reference in this regard ccan be made to the decision of Hon'ble Apex Court in the thecases cases of CIT vs Orisssa Corporation (P) Ltd. 1986 159 ITR 78 (SC) and CIT v/s. Orchid Industries (P.) Ltd. (2017) 88 taxmann.com 502 (Bom) 6.7 As regard the shares issued to Mis. Jagdhara Dealcom Pvt. Ltd. and M/s. Jhilmil Deal Trade Pvt. Ltd Ltd., ., it is seen that premium of Rs. 115 per share is fetched from them in March, 2012. It is noted that the total subscription made by these two companies is Rs. 10,60,00,000/ 10,60,00,000/-.. Undoubtedly, the share premium received from these two companies is high as comp compared ared to other shareholders. In P a g e | 11 ITA No. 2045/Mum/2024 A.Y. 2012-13 Poddar Renaissance Reality pvt. Ltd.
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response to this, the appellant submitted that the shares issued to other shareholders referred above were at a low premium as they belonged to the same group. In order to substantiate the transaction entered with M/s. Jagdha Jagdhara DealcomPvt. Ltd. and M/s. Jhilmil Deal Trade Pvt. Ltd., the assessee has filed the copies of confirmation, audited financial statements, PAN and address of the investors. It is seen that in the course of remand proceedings before the AO, these parties also lso filed their bank statements, copies of board resolution along with the audited financial statements. All these documents have been examined by the AO thoroughly. In his remand report, the AO states that the bank statements of these two entities show a pattern and non non-conduct conduct of any real business transactions, except rotation / laundering of funds and inter inter-alia alia strengthen and reinforce the fact that these transactions are nothing bu butt are of the nature of accommodation accommod entries. Also, the assessee failed to produce their directors before him. 6.8 In rebuttal to the remand report the appellant submitted that all the vital documents have not been disputed or controverted by the AO except the entries in the bank statements. It further submitted that even the allegation of the AO about the rotation of funds is misplaced and unjustified and merely driven on the suspicion and surmises of the AO. The appellant further submitted the copies of the assessment order of both the investor companies before me and also th the copy of notice issued to M/s. Jhilmil Deal Trade Pvt. Ltd. for A.Y. 2011 2011-12 12 and the reply by the said party filed before AO. The appellant also submitted that this is a case of share subscription and its onus is limited to establish the identity and the genuineness of the transaction and not the creditworthiness of the investors although proved beyond doubt as evident from the assessment orders of the investor companies. The appellant further submitted that the premium fetched from the investors is also not ot high and even otherwise, the addition on this count is not justified in view of the decision of the jurisdictional High ?Court in the case of Vodafone India Serivces (P.) Ltd. v. UOI [2014] 50 taxmann.com 300 (Bom), CIT v. Gagandeep Infrastructure Pvt. Ltd. [2017] 80 taxmann.com 272 (Bom) and CIT v. Green Infra Ltd. [2017] 78 taxmann.com 340. 6.9 I have carefully considered the submissions of the appellant and the impugned assessment order and the contentions of the AO in his remand report and the materialal on record on this issue. The appellant has submitted adequate documents in the form of confirmation, board resolution, copy of audit report and financial statements, bank statements along with PAN and address. Further, the appellant has also filed the assessment ssessment order of the aforesaid investors for A.Y. 2011 2011-12 which is the year in which these companies were incorporated and had raised their share capital. The AO of these two companies have already examined the genuineness of said share capital raised an and d has found it to be in order. It is these funds which have been invested by these two companies in the assessee company during the year which is not in doubt and therefore, mere criteria of low income ignoring the networth of these two companies cannot be given due weightage in deciding the creditworthiness of these investors. The net worth of M/s. Jagdhara DealcomPvt. Ltd is Rs. 38.26 crores and that of M/s. Jhilmil Deal Trade Pvt. Ltd. is Rs. 29.23 crores. This view finds support from the decisions of Ho Hon'ble n'ble Delhi High Court in the case of CIT v. Vrindavan Farms (P.) Ltd. and jurisdictional Tribunal in the case of H.K.Pujara Builders v. ACIT. Essentially, in view of the assessment orders of investors, even the source of source of investments made in the assessee company gets established.
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6.10 Section 68 is not a charging section but a deeming fiction dealing with the burden of proof. The section casts initial onus u/s. 68 of the Act on the assessee to prove identity, genuineness and creditworthiness of th thee transaction to the satisfaction of the AO. If the assessee fails to do so or the explanation offered by him is not satisfactory to the AO, the AO is empowered to add the same to the total income of the assessee. The said power is to be exercised judiciou judiciously sly by the AO.
A Thus, once the initial onus is discharged by the assessee, the onus shifts on the AO to bring out fallacies in evidenc evidencee brought by the assessee or by bringing new evidence that indicate the transactions undertaken by the assessee are non non-gen genuine. Thus, the section deals with an equilibrium of onus of proof and must be viewed to evaluate as to whether the evidences brought by the assessee or AO weigh more and accordingly in whose favour the equilibrium bends. In the present case, on one hand, the assessee has placed ample evidences but the AO has failed to bring anything contrary on record to disprove these evidences. It is not even the case where the AO has unearthed any adverse material on enquiry. In fact, it is a case where no enquiry has b been een carried out at all by the AO but he has formed his opinion based on surmises and conjectures. Merely because the parties were not produced before the AO, he cannot make the addition u/s. 68 of the Act. This position is well settled in view of the decis decision ion of the Hon'ble Apex Court in the case of CIT v. Orissa Corporation (P) Ltd. (1986) 159 ITR 78 (SC) and CIT v. Orchid Industries (P.) Ltd. [2017] 88 taxmann.com 502 (Bom.). It is not even the case where the AO has relied upon the statements of any entry providers who were indulged in said transactions. Thus, it is a case of absence of any enquiry on part of the AO and therefore AO has failed to discharge his onus u/s. 68 of the Act.
6.11 The decision of the Hon'ble Jurisdictional ITAT in the case of ITO v. Sringeri Technologies Pvt Ltd [ITA No. 3924/Mum/2014] is also relevant wherein it was observed as under:
11. Having considered arguments of both the sides and materials available on record, we do not find any merit in the reasons given by the AO to com come to the conclusion that the assessee has failed to prove the genuineness of transaction and creditworthiness of the parties on the ground that the assessee has filed enormous details in respect of 9 companies including their PAN details, CIN master data, affidavits sworn before Executive Magistrate, reply to the notices issued u/s 133(6). The assessee also filed copies of assessment ord order passed u/s 143(3) by the departmentartment in respect of 4 companies. The assessee also filed a cert certificate ificate from a Chartered Accountant A certifying the active status of the company in the website of Ministry of Corporate Affairs. On going through various detailed filed by the assessee, we find that there is no reason for the AO to doubt the genuineness of transactions of creditwor creditworthiness thiness of the parties. We further notice that all 9 companies are active in the website of ROC and also they have filed their balance-sheet sheet upto 3131-03-2016 2016 and in some cases upto 31-03-2017.
31 We further notice that the AO has furnished a report accepting tthe fact that all these companies are active in the website of MCA and none of the companies' name is struck off from the list published by the MCA as shell company. We further notice that the assessee has filed balance balance-sheet sheet of all 9 subscribers wherein they ey have huge share capital and reserves and surplus to establish creditworthiness of the parties. On perusal of the balance sheet filed by the P a g e | 13 ITA No. 2045/Mum/2024 A.Y. 2012-13 Poddar Renaissance Reality pvt. Ltd.
(Now Known as Imperial Renaissance Reniasance Reality Pvt. Ltd.
assessee, we find that the aggregate of share capital and reserves of 9 companies is at Rs.333.67 crores, whereas investment in assessee company is only Rs.12 crores. We further notice that all companies are having regular business ranging from 2 to 3 crores. The assessee also furnished copies of sales-tax tax returns filed with Commercial Tax Department to prove the business iness activity of the assessee. All these evidences go to prove an undoubted fact that these companies are not paper companies and recognized with business activity. We further observe that the assessee also filed affidavit from the directors of subscriber companies, wherein thy have explained the reasons for not receiving communication sent by the AO u/s 133(6) of the Act. They further stated in the affidavit that they have subscribed to the share capital of the company and also furnished supporting eviden evidences ces to justify investment in share capital of the company. We further notice that the assessee has furnished bank statement of subscribers wherein we do not find any instance of cash deposits or transfer from other companies prior to the date of transfer ttoo the assessee company. Therefore, we are of the view that the AO was incorrect in treating share capital alongwith share application money as unexplained cash credit u/s 68 of the Income Income-tax Act, 1961."
6.12 Further, I find that the decision of the Hon'b Hon'ble le jurisdictional High Court in the case of CIT v. Paradise Inland Shipping Pvt Ltd (TA No. 66 of 2016) (Bom HC) applies to this case wherein it was observed as under:
5. We have given our thoughtful considerations to the rival contentions of the learned Counsel ounsel and we have also gone through the records. The basic contention of the learned Counsel appearing for the Appellants revolves upon the stand taken by the Appellants whether the shareholders who have invested in the shares of the Respondents are ficti fictitious tious or not. In this connection, the Respondents in support of their stand about the genuineness of the transaction entered into with such Companies has produced voluminous documents which, inter alia, have been noted at Para 3 of the Judgment of the CIT Appeals which reads thus:
"The assessment is completed without rebutting the 550 page documents which are unflinching records of the companies. The list of documents submitted on 09.03.2015 are as follows:
1. Sony Financial Services Ltd. - CIN U74899DL1995PLC068362 5PLC068362- Date of Registration 09/05/1995 Memorandum of Association and Article of Association Certificate of Incorporation Certificate of Commencement of Business Acknowledgment of the Return of Income AY 08 08-09 Affidavit of the Director confirming the investment Application for allotment of shares Photocopy of the share certificate P a g e | 14 ITA No. 2045/Mum/2024 A.Y. 2012-13 Poddar Renaissance Reality pvt. Ltd. (Now Known as Imperial Renaissance Reniasance Reality Pvt. Ltd.
Audited account and Directors report thereon including balance sheet, Profit and Loss Account and schedules for the year ended 31.03.2009. Audited account and Directors repor reportt thereon including balance sheet, Profit and Loss Account and schedules for the year ended 31.03.2010 The Bank Statement highlighting receipt of the amount by way of RTGS. Banks certificate certifying the receipt of the amount through Banking channels."
6.On going through the documents which have been produced which are basically from the public offices, which maintain the records of the companies.
mpanies. The documents also include assessment Orders for last three preceding years of such Companies
7. The Appellants nts have failed to explain as to how such Companies have been assessed though according to them such Companies are not existing and are fictitious companies. Besides the documents also included the registration of the Company which discloses the registered address of such Companies. There is no material on record produced by the Appellants which could rebut the documents produced by the Respondents herein. In such circumstances, the finding of fact arrived at by the authorities below which are based on documentary mentary evidenc evidence onn record cannot be said to be perverse. Learned Counsel appearing for the Appellants was unable ble to point out that any of such findings arrived at by the authorities below were on the basis of misleading of evidence or failure to examine a any ny material documents whilst coming to such conclusions. Under the guise of the substantial question of law, this Court in an Appeal under Section 260A of the Income Tax Act cannot re-appreciate appreciate the evidence to come to any contrary evidence. Considering ththat at the authorities have rendered the findings of facts based on documents which have not been disputed, we find that there are no substantial question of law which arises in the present Appeal for consideration.
8. The Apex Court in the case of Orissa Cor Corpn.
pn. (P.) Ltd. (supra), has observed a Para 13 thus:
"13. In this case the assessee had given the names and addresses of the alleged creditors. It was in the knowledge of the revenue that the said creditors were income income- tax assessees. Their index number was in the file of the revenue. The rerevenue, venue, apart from issuing notices under S. 131 at the instance of the assessee, did not pursue the matter further. The revenue did not examine the source of income of tthe said alleged creditors to find out whether they w were ere credit-worthy credit or were such who would uld advance the alleged loans. There was no effort made to pursue the so called alleg alleged creditors. In those circumstances, the assessee could no nott do anything further. In the premises, pre if the P a g e | 15 ITA No. 2045/Mum/2024 A.Y. 2012-13 Poddar Renaissance Reality pvt. Ltd.
(Now Known as Imperial Renaissance Reniasance Reality Pvt. Ltd.
Tribunal came to the conclus conclusion ion that the assessee has discharged the burden rden that lay on him then it could not be said that such a conclusion was unreasonable or perverse or based on no evidence. If the conclusion is based on some evidence on which a conclusion could be arrived at, no question of law as such arises.
9. This court in the Judgments relied upon by the learned counsel appearing for the Responden Respondents,s, have come to the conclusion that once the assessee has produced documentary evidence to establish the existence of such Companies, the burden would shifted the revenue revenue-appellants appellants herein to establish their case. In the present case, the appellants are se seeking to rely upon pon the statements recorded of two persons who have admittedly not been subjected to cross examination. In such circumstances the question of remanding the matter for re re-examination examination of such persons, would not at all be justified. The assess assessing ing officer, if he so desire ought to have allowed the assessee to cross examine such persons in case the statement were to be relied upon in such proceedings. Apart from that, the voluminous documents produced by the Respondents cannot be discarded merely on the basis of two individuals who have given their statements contrary to such public documents.
10. We find no infirmity in the findings arrived at by the ITAT as well as CIT appeals on the Contentions raised by the Appellants Appellants-Revenue Revenue in the present case se and, such question of interference by this court in the present proceedings under section 260A of the Income Tax Act would not at all be justified. Apart from that, as rightly pointed out by the Learned counsel appearing for the Responents, the CIT Appe Appeals als had also noted that proceedings under Section 147 of the Income Income-tax tax Act caanot lead to re-
re verification of the records. These findings of the CITCIT-Appeals Appeals have not been assailed before the Income Tax Appellate court.
11. In such circumstances, we find th that at there is no case made out by the appellants-revenue revenue for any interference in the impugned orders passed by the Courts below:
12. Hence, the appeal stands rejected.
The SLP filed against the said order of the High Court is also discussed by the Hon'ble Ap Apex ex Court in [2018[ 93 taxmann.com 84 (SC).
6.13 The only issue which remains now is the premium fetched from the investors @ Rs. 115 per share. It is found that the appellant has not even submitted any valuation report in regard to this valuation. The AO h has made the addition for this reason u/s 68 of the Act. During the course of appellate proceeding, the Id. Counsel for the assessee submitted that the said premium was justified to third parties and charging of the premium is prerogative of the Board of Di Directors rectors of the company and the subscribers. The appellant submits that vide Instruction no. 2/2015, CBDT has accepted the ratio decidendi of the judgment of Hon'ble Bombay High Court in the P a g e | 16 ITA No. 2045/Mum/2024 A.Y. 2012-13 Poddar Renaissance Reality pvt. Ltd.
(Now Known as Imperial Renaissance Reniasance Reality Pvt. Ltd.
case of Vodafone India Services (P.) Ltd. v. UOI [2014] 50 taxmann taxmann.com 300, wherein it was held that that the premium cn share issue was on account of capital account transaction. Accordingly, the share premium received by the assessee has to be construed as a capital receipt. However, this can still be taxed u/s. sectio sectionn 68 of the Act of the Act under peculiar facts. Similar issue of high share premium has come across before the Hon'ble jurisdictional High Court in the following cases:-
Major Metal Ltd. v. UOI [2012] 359 ITR 450 (Bom) Assessee an unlisted company was given huge loan of Rs. 6 crores by two companies - Later on these companies were allotted 30,000 shares each of face value 10 at huge pr premium of Rs. 990 - Settlement Commission fund that neither these two companies had financial standing for giving such hu huge loan nor past performance of as assessee sessee would justify payment; hence hen addition was made under section 68 in assessee's hand - Assessee submitted that Commissioner's had identified two companies being income income-tax assessees, recourse to section 68 was not in order - Whether since view taken by Settlement Commission was borne out on basis of material record, same could not be interfered with - Held, yes CIT V. Green Infra Ltd. (2017) 78 taxmnn.com 340 The Hon'ble Bombay High Court has upheld the order of the H Hon'ble Mumbai Tribunal in this case report reported d in (2013) 149 ITD 240 wherein the ITAT had taken view that No doubt a non est company or a zero balance company asking for a share premium of Rs 490 per share defies all commercial prudence, but at the same time one cannot ignore the fact that it is a prerogative of the Board of Directors of a company to decide the premium amount and it is the wisdom of the shareholders whether they want to subscribe to such a heavy premium. The revenue authorities cannot questionn the charging of such huge premium without any bar from any legislated law of the land.
On a complete and conjoint reading of the aforesaid decisions, it is seen tthat the case of Major Metals Ltd. does not apply in present facts as the decision was rendereded on distinguished facts where in that case, none of the investors had a financial standing or creditworthiness to justify payment of high premium and even the nature a and source of the transaction entered was not accepted to be genuine. Whereas in view of the discussion made above, the assessee has clearly established the three ingredients viz identity, genuineness and creditworthiness u u/s.
/s. 68 of the Act. Even the source of source of investment made by subscribers is proved. On the contrary, the decision of Gagandeep Infrastructure P. Ltd. and Green Infra P. Ltd., Sringeri Technol Technologies Pvt. Ltd and Paradise Inland Shipping Pvt. Ltd.
P a g e | 17 ITA No. 2045/Mum/2024 A.Y. 2012-13 Poddar Renaissance Reality pvt. Ltd.
(Now Known as Imperial Renaissance Reniasance Reality Pvt. Ltd.
becomes applicable in the present context of the facts and circumstances of the case.
6.14 Respectfully following the decisio decisions of thee binding courts / tribunal, I find nd that the addition u/s. 68 of the Act is uncalled for in the present facts and circumstances of the case in view of the discussion made above.
Accordingly, the addition of Rs. 11,71,32,000/- made by the AO deserves deserve to be deleted. This ground of appeal is accordingly ALLOWED.
ALLOWED."
9. Before us, Ld. counsel for the assessee referred to documents document filed by the assessee before lower authorities supporting identity,, creditworthiness and genuineness of the transaction in respec respectt of all four share subscribers, subscribers which are placed ed on paper book page from PB 237 to PB 300. The Ld. Counsel for the assessee submitted that the source of share premium of Rs. 5,15,00,000/ 5,15,00,000/- in the hands of M/s. Loha Ispaat Pvt. Ltd. has already been explained explain by way of the undisclosed income of Rs. 5,15,00,000/ 5,15,00,000/- offered by said company in the return of income filed and same has been adjusted against the investment in cash of Rs. 5.15 crores made towards purchase of the two flats No. 501 & 601 in the name of assessee company. Regarding the share premium received from Shri Aayush Poddar, Ld Ld. Counsel submitted that the net worth of Rs.
63,34,059/- has not been disputed against the investment of Rs. 5,99,000/ 5,99,000/-.
Regarding another two share subscribers M/s. Jagdara Dealcom Pvt. Ltd. and M/s. Jhilmil Deal Trade Pvt. Ltd., Ld. Counsel for the assessee submitted that those companies have duly responded to the notices issued by the AO and filed their confirmation, audited financial statements, PAN, bank statements, copies of board resolution etc. during remand proceedings. Ld. Counsel P a g e | 18 ITA No. 2045/Mum/2024 A.Y. 2012-13 Poddar Renaissance Reality pvt. Ltd.
(Now Known as Imperial Renaissance Reniasance Reality Pvt. Ltd.
submitted that the assessee could not meet the request of AO for producing the directors of those companies as same was beyond the control of the assessee company. Ld. Counsel, further, sub submitted mitted that once the assessee has discharged his onus of establishing identity, creditworthiness and genuineness of the transactions, the assessee was not required to esta establish blish the source of the source, despite, the assessee has reported that the scrutiny assessments assessment were carried out by the department in the hands of the two companies and examined the issue of share premium subscribed by them them,, and therefore, no addition is warranted in the hands of the assessee. Ld. Counsel for the assessee relied on the findings ndings of the Ld. CIT(A). On the contrary, Ld. DR relied on the findings of the AO.
10. We have heard submissions of both the parties and perused the material on record. We find that the Ld. CIT(A) has given detailed findings in respect of the applicability of provisions of section 68 of the Act in respect of share capital and share premium received from four parties. We find that as far as credit received against share capital no addition has been made by the AO which means those parties have been found to be genuine, but when the share premium is received from the said parties, the AO is doubting the identity, creditworthiness and genuineness of the transaction. We find that Ld. CIT(A) noted that undisclosed income of Rs. 5,15,00,000/ 5,15,00,000/- has been accepted by the M/s. Loha Ispaat Pvt. Ltd. and same amount has been been, by way of book entry, P a g e | 19 ITA No. 2045/Mum/2024 A.Y. 2012-13 Poddar Renaissance Reality pvt. Ltd.
(Now Known as Imperial Renaissance Reniasance Reality Pvt. Ltd.
adjusted against the share premium in the hands of the assessee against investment in cash made towards purchase of two flats. Similarly, in case of the share premium received fro from Shri Ayush Poddar, also the Ld. CIT(A) noted that against the credit worthiness of said party of more than 63,00,000/-, the investment in share premium of Rs. 5,15,99,000/-
5,15,99 is found to be justified. Further, in respect of another two sh share are subscribers viz. Ms/.
Jagdhara agdhara Dealcom Pvt. Ltd and M/s. Jhilmil Deal Trade Pvt. Ltd.
Ltd., also the identity and creditworthiness have been established before the Ld. CIT(A).
The assessee has already filed copies of the scrutiny assessments in the hands of those two companies nies which are available on the page No. PB 269 to PB 270 and PB 294 to PB 295 of paper book. On perusal of those scrutiny assessments, we find that no addition has been made in their hands which mean the department has accepted the source of investment of those two companies. In such circumstances, we do not find any infirmity in the order of the Ld. CIT(A) on the issue and dispute and, accordingly,, we uphold the order of the Ld. CIT(A) on deleting the addition.
11. Ground Nos.. 2 and 3 of the revenue are, acco accordingly, rdingly, dismissed.
P a g e | 20 ITA No. 2045/Mum/2024 A.Y. 2012-13 Poddar Renaissance Reality pvt. Ltd.
(Now Known as Imperial Renaissance Reniasance Reality Pvt. Ltd.
12. In the result, the appeal of the Revenue is partly allowed..
Order pronounced in the open cour court on 20.12.2024.
Sd/- Sd/
Sd/-
SANDEEP SINGH KARHAIL OM PRAKASH KA NT
( याियक सद य/JUDICIAL
JUDICIAL MEMBER) (ले खाकार सद य/ACCOUNTANT
ACCOUNTANT MEMBER )
Place: मुंबई/Mumbai
दनांक/Date. 20.12.2024
अिनके त सह राजपूत/ टेनो
आदे श की ितिलिप अ ेिषत षत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant
2. थ / The Respondent.
3. आयकर आयु / CIT
4. िवभागीय ितिनिध, आयकर अपीलीय अिधकरण DR, ITAT, Mumbai
5. गाड फाईल / Guard file.
स ािपत ित //True Copy// आदे शानुसार/ BY ORDER, उप/सहायक पं जीकार (Dy./Asstt. Registrar) आयकर अपीलीय अिधकरण/ ITAT, Bench, Mumbai.