TaxTMI 
TaxTMI 
2018 (3) TMI 1189
X X X X Extracts X X X X
X X X X Extracts X X X X
....f Income Tax (Appeal) has erred in law and on the facts in deleting the addition of Rs. 22,92,00,000/- made by AO on account of unexplained cash credit u/s 68 of the IT Act, 1961 from Kolkata based companies. 3. That the Ld. CIT(A) has erred in ignoring the facts as the assessee company failed to discharge the onus u/s 68 of the I.T. Act 1961 to prove the identity, creditworthiness and genuineness of the transactions made by the Investors. 4. The Ld. Commissioner of Income Tax (Appeal) has erred in law and on the facts in ignoring the fact that companies which have provided unsecured loans don‟t have the capacity/creditworthiness to grant such loans as evident from their bank statement and P/L account & Return of Income. 5. The Ld. Commissioner of Income Tax (Appeal) has erred in law and on the facts in deleting the addition of Rs. 10,05,974/^ made on account of interest paid without appreciating the fact that the loans on which such interest paid are bogus. 6. The Ld. Commissioner of Income Tax (Appeal) has erred in law and on the facts in deleting the addition of Rs. 15, 50, 00,000/- made by AO on account of unexplained cash credit u/s 68....
X X X X Extracts X X X X
X X X X Extracts X X X X
....32 and the original assessment had been completed, in terms of the ratio of the decision of Hon'ble Delhi High Court in the case of CIT vs. Kabul Chawla [61 taxmann.com 412 (Del)], no addition was warranted in assessment u/s. 143(3) r.w.s. 153 A of the Act." 4. For AY 2013-14 the ld AO has raised the following grounds of appeal:- "1. The ld Commissioner of Income Tax (Appeal) has erred in law and on the facts in deleting the addition of Rs. 579232/- made by AO on account of disallowance of expenses u/s 14A Rule 8D of the IT Act, 1961. 2. The Ld. Commissioner of Income Tax (Appeal) has erred in law and on the facts in deleting the addition of Rs. 61500000/- made by AO on account of unexplained cash credit u/s 68 of the IT Act, 1961 from Kolkata based companies. 3. That the Ld. CIT(A) has erred in ignoring the facts as the assessee company failed to discharge the onus u/s 68 of the I.T. Act 1961 to prove the identity, creditworthiness and genuineness of the transactions made by the Investors. 4. The Ld. Commissioner of Income Tax (Appeal) has erred in law and on the facts in ignoring the fact that companies which have provided unsecured loan....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed loans." 6. As the facts in both these appeals of the revenue and cross objections are identical except the amount of addition/ disallowances, both these appeals are heard together and disposed of by this common order. ITA No. 3223/Del/2016 & Co No. 249/Del/2016 Assessment Year 2012-13 7. We first briefly state the facts for AY 2012-13. Assessee is a company engaged in the business of transmission, distribution of power with state electricity boards and servicing and maintenance of transmission and distribution networks. The company along with its sister concerns was subjected to search and seizure operations under section 132/133A of the Income Tax Act, 1961 on 12/04/2012. Notice under section 153A of the act was issued on 23/10/2013. In response, assessee filed return for Rs. 89391530/- on 16/05/2014. Consequently, assessment under section 153A, read with section 143 (3) of the Income Tax Act, 1961 [ The Act] was passed by the Ld. Assistant Commissioner Of Income Tax, Central circle - 17, New Delhi (hereinafter referred to as the Ld. AO) at Rs. 475915230/- wherein following disallowances were made:- i. disallowance under section 14A of Rs. 481801/- ii....
X X X X Extracts X X X X
X X X X Extracts X X X X
....audited balance sheet, and profit and loss account along with the income tax returns were filed before the Assessing Officer. Therefore, the proof of their existence is available as demonstrated by the Registrar Of Companies records and there is no allegation that cash was deposited in the bank account of the investor or companies or have been routed through the assessee. She further examined the bank statements of the investors company, which revealed that the ‗source of source' was also explained and it was carried out through banking transaction. She also dealt with the various decisions relied upon by the Ld. Assessing Officer. She further rejected the inspector's report as inspector had not conducted the enquiry in the appellant's case and even otherwise, the inspector's report was refereeing to investor/ lender companies other than the companies for which addition is made in the case of the assessee. With respect to share application money, she held that there could be no reason to doubt the existence or identity of these companies since these companies have merged into Param Mitra Holdings private limited vide order of the Hon'ble Delhi High Court dated 9/11/2010. Ther....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the page No. 2 of the assessment order at para No. 5 and submitted that the Ld. Assessing Officer has recorded his satisfaction that claim of the assessee that it has not incurred any expenditure on the investment is incorrect. She further stated that rule 8D of the income tax rules, 1962 is mandatory which has been followed by the Ld. Assessing Officer therefore there cannot be any fault found with the assessment order. She further relied upon the provisions of section 14 A of the act and also on circular No. 14/2006 dated 28/12/2006, wherein it is stated that the legislative intent becomes crystal clear by the fact that disallowances to be made even if no income is earned during the year. She further referred to the decision of the Hon'ble Delhi High Court in case of Taikisha engineering India Ltd, India Bulls financial services Ltd versus DCIT, 76 Taxmann.com 268 and decision of the Hon'ble Supreme Court in case of Godrej & Boyce manufacturing Co. Ltd versus DCIT, 81 Taxmann.com 111. She further relied upon the several decisions of the coordinate benches. She further relied heavily on principles of interpretation of tax statute and submitted that in the light of all these decisi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tified. The reference to Rule 8D should only be invited in the case where AO concludes that certain expenditure has been incurred to earn exempt income which is not the case of Assessee Company. Such investment was not made by the respondentassessee with an intention or objective of earning dividend income, instead such investment was strategic in nature. The ld. A.O. without recording any satisfaction as to how the claim of the Assessee is incorrect having regard to the accounts of the Assessee, has ipso applied the method prescribed by Rules. The Id. A.O. in his calculation has taken the average of all the opening and closing investments and calculated the disallowance @1/2 % in accordance with Rule 8D by following Circular No. 5 dated 11/02/2014. Aggrieved the above Order of the Ld. A.O., appeal was duly preferred before the ld. CIT(A) pursuant to which the Ld. CIT(A) based on the facts of the case of the Assessee allowed relief to the Assessee, as brought out in the chart above. Aggrieved by the above, the Department is accordingly in appeal before your Honours followed by the cross-objection of the Assessee. In connection to the abo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ears under consideration. A perusal of the above reveals that the Hon‟ble ITAT Bench in the case of the Group Company itself, on identical facts, after considering the relevant decisions on the subject, has laid out that investments in group companies do not qualify for disallowance u/s 14A of the Act and thus dividends earned on the same though exempt cannot form part of disallowance u/s 14A of the Act r.w.r. 8D. 16. We have carefully considered the rival contentions and perused the orders of the lower authorities. The Ld. CIT (A) has mentioned that assessee's investments have been made in-group concern for exercising control and management of such concerns and in the relevant assessment year, the assessee has not derived any exempt income. This fact is not disputed by the revenue. Therefore, as there is no exempt income earned by the assessee during the year, respectfully following the decision of the Hon'ble Delhi High Court in case of Cheminvest versus CIT( Supra) , we do not find any infirmity in the order of the Ld. CIT (A) in deleting the disallowance under section 14 A of the income tax act. In the result ground No. 1 of the appeal of revenue is dismissed.....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... H/6, Eliot Lane, Ground Floor, Kolkata, West Bengal-16 AABCJ9134E 1,75,00,000/- 5 Kailash Pati Vincom Pvt. Ltd. R. No. 2 7A, 1« Floor, 23A, NS Road, Dalhouse, Kolkata, West Bengal-01 AAECK5648K 70,00,000/- 6 Oscar Retailers Ltd. 2nd Floor, R.No.226, 1, Crooked Lane, 2^nd Floor, Dalhouse,Kolkata, West Bengal-01 AABC04147N 75,00,000/- 7 Vidhan Sales Agencies Pvt. Ltd. 9th Floor, R. No. 907-C, Marshall House, 33/1, NS Road, Dalhouse, Kolkata, West Bengal- 01 AABCB3775D 75,00,000/- 8 Winner Commosales Pvt. Ltd 28D, Nayan Chand Dutta Street, Girish Park, Kolkata, West Bengal-06 AABCW1153E 60,00,000/- 9 Jubilee Vincom Pvt. Ltd. 28/D, Nayan Chand Dutta Street, Firish Park, Kolkata, West Bengal-06 AACCJ6266E 75,00,000/- 10 Khetan Tracon Pvt. Ltd. R.No. 3A, Ashirwad Apptt. 171/12, Roy Bahadur Road, Kolkata, West Bengal-34 AABCK9871F 50,00,000/- 9,75,00,000 Share application money Name of the party Address ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....es are Kolkata based companies only Before coming to the facts of the present case, it is first required to examine the assessee‟s case of having received the unsecured loans from the perspective of Sec.68 of the I. T. Act, 1961. The Sec.68 of the I. T. Act provides as under : 68. Cash credits.-Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to Income-tax as the income of the assessee of that previous year. The various Courts including the Hon‟ble Supreme Court, while interpreting the provisions of Sec.68 has held that the initial burden is on the assessee to prove 3(three) things, viz., the identity of the creditors, the capacity (creditworthiness) of the creditor and the genuineness of the transactions. The observations of Hon Tile Supreme Court in the case of [2007] 161 TAXMAN 169 (SC), Commissioner of Income-tax vs. P. Mohanakala with regard to nature 8s scope of Sec.68 is very pertinent and....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ged creditor did not have the means to advance the amount of loan. It was contended on behalf of the assessee that he has discharged his onus in proving a credit in the name of a third party by producing the creditor and by producing his assessment orders and it was not necessary for him to do anything more. This contention was not accepted by the Tribunal. On a reference, this court considered a number of decisions of the other High Courts and observed as follows: "We find that by a series of decisions of different High Courts as well as of the Supreme Court it has been consistently laid down that when an assessee claims that he has borrowed money from a third party the initial onus lies on the assessee to establish, (a) the existence of the third party; (b) the ability of the third party to advance moneys; and (c) that prima facie the loan is a genuine one. The assessee by proving these facts discharges the onus upon him. But that does not prevent the authority concerned to probe 'further into the matter and investigate the case on materials available to the authority to come to an independent and unbiased finding as to the genuineness of the transaction. It is true ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....emphasis supplied). The relevant details of the same are as under: Details of unsecured loans as on 17.06.2010 SI . No. Particular Amount (Rs.) 1 Good Hope Vyapaar Pvt. Ltd. 16,91,00,000.00 2 Jagnath Commodities 15,20,00,000.00 3 Komal Tie Up Pvt. Ltd 2,40,00,000.00 4 Omkara Agencies Pvt. Ltd. 3,80,00,000.00 5 Sindhu Holdings Ltd. (UL) 4,60,00,000.00 6 Sindhu Trade Links Ltd. (UL) 9,00,00,000.00 Total 51,91,00,000.00 Details of ICD given as on 17.06.2010 SI. No. Particular Amount (Rs.) 1 Bhandari Consultancy & Finance Ltd. (UL) 2,00,00,000.00 2 Hari Bhoomi Communication Pvt. Ltd. 2,50,00,000.00 Details of share application money SI No. Particular Amount (Rs.) 1 Sindhu Trade Links Ltd. 3,00,00,000.00 The assessee company was specifically requested to submit the information of seized documents from time to time, it is stated that no paper was found/seized. However, on going through the seized....
X X X X Extracts X X X X
X X X X Extracts X X X X
....iry, the Inspector of the office was deputed to conduct the physical enquiry in respect of the various companies which have provided unsecured loan/share application money and it has come to notice that most of the companies either are not existing at the address given and even the other occupants of such addresses are not aware of the whereabouts of some companies. For ready reference, the relevant extract /findings of the inspector‟s report in respect of some of these companies are as under: • M/s Goodhope Vyapaar Pvt. Ltd.: Premise found closed. No name plate found at premise. Neighbors have no idea about business/nature of the shop, name or owner. • M/s Jagannath Commodities Pvt. Ltd.: Insufficient address to locate the premise, no room no. or block or floor provided. Apporx. 600 shops running from 71, Canning Street, Kolkata. • M/s Komal Tie Up Pvt. Ltd.: Premise found closed. No name plate found at premise. Person available at the premise has never heard the name of company. He has been working from the address for last 2 years. • M/s Omkara Agencies Pvt. Ltd.: Premise found closed. No name plate found at premise. Pers....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nappropriate/ excessive/ inadmissible". From the perusal of records, it is seen that the assessee has not furnished any reasons in respect of the department‟s contention that the companies which have provided huge loans/share capital have not been found at the. addresses mentioned. Further, the assessee was again asked vide show cause notice dated 23.11.2015 for the block period (covering the current year also) and the relevant extract of the show cause notice is reproduced as under: "It is also noticed, from the extract of hard disk of A-l, seized from BS-14, that there were details of unsecured loans, ICD given as on 17.06.2010 and details of share application money (emphasis supplied). The relevant details of the same are as under: SI No. Particular Amount (Rs.) 1 Good Hope Vyapaar Pvt. Ltd. 16,91,00,000.00 2 Jagnath Commodities 15,20,00,000.00 3 Komal Tie Up Pvt. Ltd 2,40,00,000.00 4 Omkara Agencies Pvt. Ltd. 3,80,00,000.00 5 Sindhu Holdings Ltd. (UL) 4,60,00,000.00 6 Sindhu Trade Links Ltd. (UL) 9,00,00,000.00 &nbs....
X X X X Extracts X X X X
X X X X Extracts X X X X
....5 has furnished the following reply: The assessee has already furnished year wise copies of accounts of all parties including these six parties from whom these unsecured loans were received during the block period. All these transactional parties are duly appearing in assesses books of accounts. As per the assessee's books of accounts on 17.06.2010, the following balances are appearing regarding these six parties. Party Balance as per books as on 17.06.2010 Goodhope Vyapaar Pvt Ltd 16r91,00,000/- Jaggannath Commodities Pvt Ltd 15,20,00,000/- Komal Tie Up Pvt Ltd 2,40,00,000/- Omkara Agencies Pvt Ltd 3,80,00,000/- Sindhu Holdings Ltd 4,71,35,856/- Sindhu Trade Links Ltd 9,92,82,021/- In respect of above parties, the assessee has furnished the following particulars: a. Name, Address & identity of the Party b\ PAN Details c. Copy oflTR d. Copy of Bank Statement e. Confirmation It will be apparent from above, that, the above referred transactions are not unaccounted transactions and entire evidence as required u/s 69 of the Act ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... seen that the assessee has not furnished any clear cut reply in respect of the non existence of the alleged login givers/share application money providers at the addresses mentioned and merely submitted that they are again furnishing the various details like name, address, PAN, copy of ITR etc. of those persons which appears to be an afterthought and cover up when the department has found out the truth about the non existence of such companies from physical enquiries. Thus, from the above it absolutely clear that the assessee failed to discharge basis onus/burden of proving the identity of the person from whom huge unsecured loan/share application money was received. Creditworthiness, of the various persons from whom unsecured loan/share application money received Though the assessee failed to prove the identity, as stated- above, it has furnished some documents in respect of the companies from whom unsecured loans were received. However, a very striking feature which comes out from the perusal of the copies of the Return of Income of these companies is that though these companies have given huge amounts as unsecured loans, but almost all of the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ished the genuineness of the transactions. However, it is now well settled law, that by mere furnishing of confirmation of the A/cs or the Balance sheet etc., the genuineness of the transactions cannot be established. Also the stand of the assessee is, that, the unsecured loans received by the company should be accepted because these are received by cheques and through banking channel and also the TDS has been deducted on the same. But then mere receipt of certain money by Cheque or through banking channels cannot be the conclusive factor for determining the genuineness of any transactions and the onus / burden is on the assessee to first prove the identity and the creditworthiness of the persons from whom such loans were received. Thus, the confirmation of A/cs or the use of banking channels for any receipt / payment cannot provide legitimacy to such receipt / payment unless & until the creditworthiness of the persons who lends that money is proved. Thus, the payment / receipt though banking channels cannot be seen / looked into in isolation and it has to be examined in context with the creditworthiness of the persons from whom such money was received. Thus, the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n view of the above discussion as well as the reasons mentioned below: 1. In respect of Kolkata based companies, the Investigation Directorate categorically mentioned that these companies have invested in the assessee‟s group in the form of share capital, whereas the business activities and creditworthiness of these Kolkata based companies are suspicious. 2. During the course of Investigation/enquiry conducted by the Inspector of this Office at the given addresses of these companies in the case of M/s Garuda Imaging & Diagnostics Pvt. Ltd. It was found that such addresses of the said share applicant entities were not inexistence or not operational and no such business activity was carried out in these premises. On that basis of enquiry additions were made in the group companies of the assessee namely M/s Garuda Imaging & Diagnostic Pvt. Ltd. and M/s Sindhu Holdings Ltd for AY 2009-10 & AY 2010-11. 3. On a close examination of Bank Statements filed by the investors/lenders, it is observed that there was a high value transactions, i.e. a substantial amount were deposited "into Bank Account through transfer before the share application money was paid t....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Mere furnishing of the particulars is not enough. The enquiry of the ITO revealed that either the assessee was not traceable or there was no such file and, accordingly, the first ingredient as to the identity of the creditors had not been established. If the identity of the creditors had not been established, consequently . the question of establishment of the genuineness of the transactions or the creditworthiness of the creditors did not and could not arise. The Tribunal did not apply its mind to the facts of this particular case and proceeded on the footing that since the transactions were through the bank account, accordingly, it is to be presumed that the transactions were genuine. It was not for the ITO to find out by making investigation from the bank accounts unless the assessee proved the identity of the creditors and their creditworthiness. Mere payment by account payee cheque is not sacrosanct nor can it make a non-genuine transaction genuine. In that view of the matter, the question before us is answered in the negative and in favour of the revenue. Also the similar view was taken by the Hon‟ble Calcutta High Court in the case of CIT vs. Korley Trading C....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e made by cheques. The Tribunal misdirected itself in holding that the transactions were genuine simply because some of the transactions were made by cheques. The ITO has found that the parties accommodated by handing over the cash to the hundi bankers and account payee cheques were issued against the same by them. On the due date for the discharge of the hundis, the party issued account payee cheques. These were credited in the bank account and after the proceeds were cleared, cash was withdrawn from the bank and paid to the parties. The transactions made by cheques, therefore, lost their usual importance and the genuineness of the loans cannot be accepted merely because cheques were exchanged between the parties. The assessee had failed to prove the creditworthiness of the alleged lenders and that those lenders actually had any funds of their own out of which loans‟could have been advanced to the assessee. If the alleged lenders were genuine hundi bankers, they would not have closed down their office or would not have refused to produce their complete books of account for scrutiny and verification. A number of other assessees had also admitted that loans obtained f....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sessee. viz.. the receint of moneu. and if he fails to rebut, the said evidence being unrebutted, can be used against him by holding that it was a receipt of an income nature. While considering the explanation of the assessee the department cannot, however, act unreasonably - Sreelekha Banerjee's case (supra) at p. 120. (Para-4) Besides the above judgments, reliance is also placed on the following latest decisions of the Hon'ble High Courts / Hon‟ble ITAT in which the Hon‟ble Courts have decided in favour of the revenue on similar facts : a. High Court of Gujarat in the case of Manoj Kumar Saraf vs. ITO, OSD-II [2014] 45 Taxmann.com 63 (Gujarat), b. High Court of Gujarat in the case of Umesh Krishnani vs. ITO [2013] 35 Taxmann.com 598 (Gujarat), c. High Court of Delhi in the case of CIT-VI vs. T. S. Kishan & Co. Ltd. [2014] 50 Taxmann.com 368 (Delhi), d. High Court of Delhi in the case of CIT vs. Empire Builtech (P.) Ltd. [2014] 366 ITR 110 (Delhi), e. High Court of Delhi in the case of CIT vs. Youth Construction (P.) Ltd. [2014] 44 Taxmann.com 364 (Delhi), f. ITAT Agra Bench in the case of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....doubt, the assessee‟s undisclosed income u/s.68 of the I. T. Act, 1961, because of the assessee‟s failure to prove the identity, creditworthiness of the payers as well as the genuineness of the transactions. Accordingly, as the loans have been proved bogus, the interest payments of Rs. 10,05,974/- on such loans has also to be treated as bogus expenditure booked by the assessee in its P & L A/c and disallowed. , (Addition: Rs. 10,05,974/-) Thus, in the light of the above discussions on the earlier pages, regarding Issues No. 7, penalty proceedings u/s 271 (1) (c) of the I T act, 1961 is initiated separately for furnishing of inaccurate particulars of income as well as concealment of income. Issued penalty notice u/s 274 / 271 (1) (c) of the I T Act, 1961. Unexplained cash credit from Non Kolkata based companies 9. Apart from the Kolkata based companies, it is further noticed that the assessee company has raised unsecured loans from several other companies whose details are given below: SI No. Party PAN Returned income Amount of loan/ICD Taken 1 Arya Marketing Pvt. Ltd. AAICA7684A 11....
X X X X Extracts X X X X
X X X X Extracts X X X X
....il in the above noted paragraphs when the creditworthiness and genuineness of transaction of Kolkata based companies was discussed, accordingly in order to avoid repetition and for the sake of brevity, the same are not discussed again. Thus, the above discussions conclusively prove that the assessee has failed to discharge the basic onus / burden cast upon it by the provisions of Sec.68 of the I. T. Act to prove the identity and capacity of the creditors and also the genuineness of the transactions and accordingly, the amount of Rs. 15,50,00,000/-, is treated as income from undisclosed sources u/s.68 of the I. T. Act, 1961. (Addition: Rs. 15,50,00,000/-) The amount added at Rs. 15,50,00,000/- amounts to concealment of income/furnishing of inaccurate particulars of income as per section 271(l)(c) and hence penalty proceedings u/s 271(l)(c) are being initiated separately. Interest payments on fresh Unsecured Loans of Rs. 7.22.730/- (Non.Kolkata based company) : 10. From the perusal of the assessee‟s details of unsecured loans, it is seen that the assessee has paid the following interest on fresh unsecured loans of Rs. 7,22,730/- raised dur....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ompanies, it is clear from the records that no Shares had been issued to these Companies till AY 2013-14 albeit, the Appellant had taken Unsecured Loans and Share Application Money from these Companies. Moreover, as argued by the Ld ARs, the AO is not clear about the nature of these credits. At times the AO refers to these Credits as Share Application Money while on other occasions the AO refers to them as Unsecured Loans. The Ld ARs have also pointed out that the AO had called for different requirements to be filed for Unsecured Loans and Share Application Money vide AO‟s letter dated 15.10.2015. (iii) The AO has relied upon the observation of Hon‟ble Supreme Court in the case of [2007] 161 TAXMAN 169 (SC), Commissioner of Income-tax vs. P. Mohanakala with regard to nature and scope of Sec. 68. The Appellant has therefore clearly distinguished the cited case from Appellant‟s case. (iv) Regarding the decision of the Hon‟ble Jurisdictional High Court of Calcutta in the case of Shankar Industries vs. CIT (1978) 114 ITR 689 (Cal), while discussing the unrcported decision of Hon‟ble Calcutta High Court in the case of Kni....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cient to prove the identity of the investor. (xi) The Appellant has submitted that "It is merely a presumption of the AO that a company must show very high income in their ROI as against the Share Application Money. The companies can also invest out of their share capital or out of their borrowings. It is therefore not necessary for a company to show very high income in its ROI. Even a loss making company can make investments." The submissions of the Appellant are true. (xii) The investors are corporate entities. They are maintaining proper Books of accounts. These books of accounts are subjected to statutory Audit by Independent Auditors. The Audited Balance Sheet & Profit and Loss accounts are duly filed with Income Tax Department and Registrar of Companies and are available in public domain. There is no allegation that cash was deposited in the Bank accounts of the Investors companies on dates immediately preceding the dates on which investment was made in the Appellant company. A perusal of Bank statements of Investors Companies reveal that the "source" of "source" was also explained and was through banking transaction. The ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e AO had held that the "Present case is covered by the decision of Hon‟ble Jurisdictional High Court in the case of CIT Vs. Precision Finance Pvt. Ltd.[1995]82-Taxmann31(Cal)". The ld ARs have demonstrated that the facts of the relied upon case are different from the present case. The AO also placed relianceon following cases: • CIT Vs. Korley Trading Co. Ltd. [1998]232 ITR 820 • Hon‟ble Calcutta High Court in Shankar Industries Ltd. Vs. CIT [1978] 114 ITR 689 (Cal) • Hon‟ble Calcutta High Court in the case of United Commercial and Industrial Co. Pvt. Ltd. [1991] 56 Taxmann 304 (Cal) • The Hon‟ble Supreme Court in the cases of SumatiDayal Vs. CIT and CIT Vs. P. Mohalkala The ld ARs have fully explained as to how and why the relied upon cases are neither relevant nor applicable in the case of Appellant. xvi)(2) The AO had also placed reliance on following cases. The Appellant has distinguished each case. The excerpts from Appellant‟s submissions are as under: (a) High Court of Gujarat in the case of Manoj Kumar Saraf Vs. ITO, OSD-II [2014] 45 Taxman....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., the genuineness of the Creditors was fully established in the eyes of Law. Since the facts of the cited case are entirely distinguished from those the appellants case and since the cited case does not pertain to the appellants jurisdiction it is respectfully submitted that no reliance should be placed on this case." (c) High Court of Delhi in the case of CIT-VI Vs. T.S. Kishan& Co. Ltd. [2014] 50 Taxmann.com 368 (Delhi), "In the cited case, it is seen the assessee could not produce the PAN Number, address and confirmation of Creditors. However, in the case under appeal, the appellant had already submitted PAN Number, address, account confirmation, copy of acknowledgment of ITR and the bank statements of the said Creditors. Thus, in the case under appeal, the identity and creditworthiness of the Creditors was fully established in the eyes of Law. The cited case is therefore distinguished from the case under appeal on bare facts." (d) High Court of Delhi in the case of CIT Vs. Empire Bulltech (P.) Ltd. [2014] 366 ITR 110 (Delhi), "In the cited case, the assessee did not even submit the confirmation from the investor. The assesse....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... case of Smt. Suman Gupta Vs. ITO, Ward- 1, Aligarh [2012] 25 Taxmann.com 220(Agra) "In the case under appeal, no direction was issued by the AO to produce the investor companies or their directors. Moreover, the Creditors were corporate entities and had maintained proper books of accounts that were also subjected to statutory audit and their Balance sheets and P&L A/c were duly filed with their return of income. Thus, in the case under appeal, the creditworthiness of the Creditors was fully established in the eyes of Law and there can be no preponderance of probabilities that these loans were in fact accommodation entries. Since the facts of the cited case are entirely distinguished from those the appellants case and since the cited case does not pertain to the appellants jurisdiction it is respectfully submitted that no reliance should be placed on this case." As in earlier years, the Appellant has relied upon Case Laws in support of Appellant‟s claim: - a. In the case of Kamdhenu Steel & alloys Limited v. CIT [2012] 19 taxmann.com 26, (Delhi), it was held that, "In conclusion, once adequate evidence/material is gi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....se creditors as non-genuine in view of the principles laid down by the Supreme Court in the case of Orissa Corporation [1986[ 159 ITR 78. In the said decision the Supreme Court has observed that when the assessee furnishes names and addresses of the alleged creditors and the GIR numbers, the burden shifts to the Department to establish that revenue‟s case and in order to sustain the addition the revenue has to pursue the enquiry and to establish the lack of creditworthiness and mere noncompliance of summons issued by the Assessing Officer under section 131, by the alleged creditors will not be sufficient to draw an adverse inference against the assessee. In this case of six creditors who appeared before the Assessing Officer, they have admitted having advanced loans to the assessee by account payee cheques and in case the Assessing Officer was not satisfied with the cash amount deposited by those creditors in their bank accounts, the proper course would have been to make assessments in the cases of those creditors by treating the cash deposits in their bank accounts as unexplained investments of those creditors under section 69" Similar views were taken in many other....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ion could be made under section 68 in the absence of any positive material or evidence to indicate that the shareholders were benamidars or fictitious persons or that any part of the share capital represented company's own income from undisclosed sources. The similar view has been taken by the other High Courts. As the Apex Court has considered the law in Lovely Exports (P.) Ltd.'s case (supra) and in view of law laid down by the Apex Court, we find that the substantial questions framed in these appeals do not arise for our consideration. Accordingly, all these appeals are dismissed with no order as to costs. " In fact, similar view has also been expressed in the following cases: i) 350 ITR 220 (All) CIT vs. Jay Dee Securities and Finance Ltd. ii) 350 ITR 222 (All) CIT vs. Misra Preservers (P) Ltd. ii) 361 ITR 220 (Del) CIT vs. Kamdhenu Steel and Alloys Ltd. iv) 320 ITR 619 Bhav Shakti Steel Mines (P) Ltd. vs. CIT v) ITA No. 1497/2010, 1518/2010 (Del) CIT vs. Derby Overseas (P) Ltd. vi) ITA No. 904/2010 (Del) CIT vs. Dhawan Jewellers (P) Ltd. vii) 329 ITR 110 (Del) Sarthak Securities C....
X X X X Extracts X X X X
X X X X Extracts X X X X
....assessee to establish the identity and credit worthiness of the investor and to prove the genuineness of the transaction. In the instant case it is observed that the Appellant has discharged the initial onus by furnishing the Name, Address, PAN, Copy of ITR, Copy of Bank Statement and Confirmation from the Investor/Creditor. The Inspector‟s Report cannot be relied upon as the Inspector had not conducted the enquiry in the Appellant‟s case and even otherwise these Companies were not appearing in the list of Companies that had been enquired into. There can be no reason to doubt the existence or identity of these companies since these had merged into Param Mitra Holdings Pvt Ltd vide order dated 09/ 11/2010 passed by the Hon‟ble High Court Delhi. The amount of investments from these companies had come through account payee cheques/ bank transfers. The same had not come through cash. As per the admission of the AO, no cash was deposited in the investor company‟s bank account on dates immediately proceedings the dates on the said cheques were issued. The statutory requirements u/s 68 till A.Y. 2012-13 was that the assessee was duty boun....
X X X X Extracts X X X X
X X X X Extracts X X X X
....to maintain current accounts that yield no interest, it will therefore be imprudent for any company to keep large balances in their bank accounts." The investor had confirmed the transaction and furnished the entire corroboratory. The Appellant had therefore fully discharge the Initial owners cast upon on him u/s 68 of the Act. Following my own decisions in the case of Garuda Imagining & Diagnostics centre and Sindhu Holdings Limited and respectfully following the judicial pronouncements of the Apex Court in the case of Lovely Exports Private Limited v. CIT [2008] 216 CTR 195 SC and CIT vs. Stellar Investment Ltd. reported in 251 ITR 263 and by the Jurisdictional High Court in the case of Kamdhenu Steel 8s alloys Limited v. CIT [2012] 19 taxmann.com 26, (Delhi) the addition of Rs. 22,92,00,000/- and Rs. 6,15,00,000/- made u/s 68 of the I T Act in assessment years 2012-138s 2013-14 respectively is hereby deleted. This ground of appeal is therefore allowed and the addition of Rs. 22,92,00,000/- and Rs. 6,15,00,000/-in A.Y. 2012-13 and 2013-14 respectively is hereby deleted. Ground raised in appeal is allowed." 19. Ld. CIT DR relying on the findings of th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....versus ITO 41 Taxmann.com 526. She also heavily relied on the decision of Navodaya Castles private limited versus CIT (367 ITR 306) (Delhi). A written submission made on this aspect of the various judicial precedent is as under:- "It is well settled law that onus of proving credits in its book of accounts lies squarely on the assessee and such proof consists of proving the identity of the subscriber or creditor, capacity of such creditor or subscriber to make payment and also prove the genuineness of the transaction. It is only when the assessee discharges this primary onus, that onus shifts to the Department. • Merely establishing the identity of the creditor is not sufficient. This is the ratio laid out numerous decisions including Shankar Industries Vs. CIT (1978) 114 ITR 689(Cal);. • The manner of payment by the account payee cheque is also not sacrosanct and this cannot make a bogus transaction as genuine one [(CIT VS. Precisions Finance Pvt. Ltd. (208 ITR 465, 470,471 (Cal). Cf. Nizam Wool Agency Vs. CIT, (1992) 193 ITR 318, 320 (All)). • The Hon'ble Delhi High Court in the case of Commissioner Of Income -tax v. Nova Promote....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rs." • CIT vs. Divine Leasing 299 ITR 268 Delhi - "Practice of conversion of unaccounted money through the masquerade or channel of investment in the shape of a company must be firmly exorcised by the Revenue." • Where any sum is found credited in the books of the assessee for any previous year it may be charged to income tax as the income of the assessee for that previous year if the explanation offered by assessee about the nature and source thereof is, in the opinion of the Assessing Officer, not satisfactory. Sumati Dayal Vs CIT (SC) 214 ITR 801 Vasantibai IM. Shah Vs CIT (Bom) 213 ITR 805 Sreelekha Banerjee & Ors. Vs CIT (SC) 49 ITR 112 • There is ample authority for the position that where an assessee fails to prove satisfactorily the source and nature of certain amount of cash received during the accounting year, the Income Tax Officer is entitled to draw the interference that the receipt are of an assessable nature. Govindarajulu Mudaliar 34 ITR 807 (SC) Sec. 68 does not confine to cash entries in books. V.I.S.P. (P) Ltd. Vs CIT (MP) 265 ITR 202 • Sec. 68 appli....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ivate placement basis. CIT Vs N.R. Portfolios Pvt. Ltd. in ITA Nos. 134/2012 • Doctrine of "source of source" or "origin of origin" cannot be applied universally, without reference to the factual matrix and facts of each case. Commissioner of Income Tax Vs NR Portfolio Pvt. Ltd., 206 (2014) DLT 97. • Commissioner of Income Tax Vs Independent Media (P) Ltd. 210 TAXMANN 14(Delhi)(2012). • Navodava Castle Pvt Ltd Vs CIT (2015-TIQL-314-SC-IT) (Copy Enclosed) where Hon'ble Supreme Court held that merely because the assessee has been able to show that the shareholder companies were duly incorporated and their identity & genuineness stands established, there were deposits of cash in the bank accounts prior to issue of cheque or pay orders, the same would raise suspicion and addition can be made on such account • CIT Vs Navodava Castle Pvt Ltd T20141 367 ITR 306 (Del) (Copy Enclosed) where Hon'ble Delhi High Court accepted^that since the assessee was unable to produce the directors and the principal officers of the six shareholder companies and also that as per the information and details collected by th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ts produced by assessee, the onus shifts on assessee to further substantiate the facts or produce the share applicant in proceeding. • CIT Vs Empire Builtech (P.) Ltd (366 ITR 110) (Copy Enclosed) where Hon'ble Delhi High Court held that u/s 68 it is not sufficient for Assessee to merely disclose address and identities of shareholders; it has to show genuineness of such individuals or entities. (Delhi)/f20151 228 Taxman 88) (Copy Enclosed) where Hon'ble Delhi High Court held that where in respect of share application money, assessee failed to provide complete address and PAN of certain share applicants whereas in case of some of share applicants, there were transactions of deposits and immediate withdrawals of money from bank, impugned addition made under section 68 was to be confirmed. • Om Logistics in ITA 4301/Pel/2014 for A.Y 2001-02 • CIT Vs Focus Exports (P.) Ltd (51 taxmann.com 46 The above submissions and judgements may kindly be considered while adjudicating the case of the Revenue. Without prejudice to the arguments taken above it is submitted as under: [A] The provisions ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....has discussed both the legal aspect to the case [as raised by the additional grounds of cross objections] and merits [as contested by the department in its appeal and justified by the respondent assesse in its cross objections filed. Further since the quantification of the amount for each of the assessment years has already been brought out earlier in the chart made, the same is not repeated under each head for sake of brevity. Each of the three heads are now discussed here-under:- Addition of cash credit under section 68 The facts pertaining to the said share capital and premium are as under: - AY 2012-13 The respondent assessee had received the following amounts as unsecured loans from certain Kolkata based companies:- Name Amount WellbuildMarketings Pvt Ltd 3,00,00,000/- Concrete Credit Ltd 55,00,000/- Eagle Deal Trade Pvt Ltd 40,00,000/- Jagdhatri Commodities Pvt Ltd 1,75,00,000/- KailashpatiVincom Pvt Ltd 70,00,000/- Oscar Retailers Ltd 75,00,000/- Vidhan Sales Agencies Pvt Ltd 75,00,000/- Winner Commosales Pvt Ltd 60....
X X X X Extracts X X X X
X X X X Extracts X X X X
....two heads as under:- a. AY 2009-10 & 2010-11 b. AY 2012-13 & 2013-14 The discussion is done as above, since there is one common CIT(A) order for the first two assessment years i.e., AY 2009- 10 & 2010-11 and again one common CIT(A) order for AY 2012-13 & 2013-14. Hence to address each and every issue the discussion is done under the afore-said two heads :- AY 2009-10 & 2010-11 A.Y.2009-10 : Rs. 4,50,00,000/- & : Grds 2,3 & 4 of Departmental Appeal &nb....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... • All these four companies were also investors in Garuda Imaging & Diagnostics Pvt Ltd., and Sindhu Holdings Pvt Ltd. All these four companies were also alleged to have been not found at their original address in the inspectors report. All these four companies were seen to be not visited upon and do not find mentioned in the inspectors report. All these four companies had merged in Paramitra Holdings Pvt Ltd., vide order of Delhi High Court dated 09.11.2010. • In AY 2009-10 the amounts were received through cheques whereas in AY 2010-11 the amounts were received as "Transfer through Journal Entries ". • The group has routed its unaccounted money earned from uppression/ underreporting of profits into the business in the form of share application money issued at high premium through various Kolkata based companies. • Some notings were found in the course of search in the form of documents and hard discs • Case laws relied upon the by the Ld AO. In regards to the above the under-signed would like to submit as under:- In the first place attention is sought to the evidences placed on record by the respond....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ht out in the said submission that:- a. The allegation that the said companies were not found at their addresses by the inspector deputed is incorrect in as much as, as apparent from the report of the Inspector furnished to M/s Garuda vide AO‟s letter dated 04.03.2015, the inspector had visited the following companies:- • Galore Suppliers Pvt Ltd • Elgin Sales Promotion Pvt Ltd • Simpro Vanijya Pvt Ltd • Echolac Vinimay Pvt Ltd • Leander Manufacturers and Credit Pvt Ltd Hence the Inspector had not visited the premises of the afore-said four companies. b. Moreover the said companies had made investments in FY 2008-09 while the alleged enquiry was being conducted in 2015. The respondent assesse had already informed the ADI in response to summons u/s 131 dated 05.07.2012 that these two companies had merged with Paramitra Holdings Pvt Ltd., pursuant to an order dated 09.11.2010 passed by the Hon‟ble High Court of Delhi. In fact during the course of enquiry conducted upon the said two companies, the summons were served with notices u/s 131 in the name of the post-merger entit....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e AO during the assessment proceedings: a. Name and address of the subscriber b. PAN and Income Tax Details c. Amount received d. Date of receipt along with mode of receipt e. Confirmations Hence the said amounts were originally received as cheques and later transferred from one head to another by means of transfer entries. In view of the afore-said discussion it is most humbly requested that the additions made may kindly be dropped. AY 2012-13 & 2013-14 A.Y.2012-13 : Rs. 22,92,00,000/- & : Grds 2,3,4,&6 of Departmental Appeal : Rs. 15,50,00,000/- :Grds 3 & 4 of Assessee‟s Cross Objection A.Y.2013-14 : Rs. 6,15,00,000/- :Grds 2,3,4,6 & 7 of Departmental Appeal Rs.30,00,000/- :Grds 3 & 4 of Assessee‟s Cross Objection As already brought out in earlier paragraphs The respondent assessee had received the following amounts as unsecured loans from certain Kolkata based companies:- Name Amount WellbuildMarketings Pvt Ltd 3,00,00,000/- Concrete Credit Ltd 55,00,000/- Eagle Deal Trade Pvt Ltd 40,00,000/- ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ies of the respondent-assessee. However the bank statement shows the address as 14, Weston Street, Kolkata, West Bengal-12. Their PAN also bore Kolkata based addresses as under:- Name of the party PAN Jurisdiction Address Amanat Agencies Pvt Ltd AAGCA4515M ITO, Ward-6(3), Kolkata 4th Floor R.No. 109 5/1 Clive Row Kolkata ........... Skipper Vinimay Pvt Ltd AAMS1544G ITO, Ward-1(3), Kolkata 7/1 A, Grant Lane, Kolkata Oasis Commotrade Pvt Ltd AABCO0636Q ITO, Ward-1(2), Kolkata 14, Weston Street, Kolkata Hence the respondent assesse has wrongly shown Delhi address when the said companies are Kolkata based. Therefore the said companies must have been acquired by the assesse group, the details of which are not disclosed with the department. Further the said companies were not found at the said Kolkata addresses. Further the companies showing to have advanced unsecured loans did not have much income. The bank statements show that for each debit entry there was a credit entry of more or less identical amount within the same or next day. The balances in the accounts we....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Rs. 1,99,52,894/- :Grd 5 of Departmental Appeal : Grd 4 of Assessee‟s Cross Objection A.Y.2012-13 : Rs. 10,05,974/- & : Grds 5,7 & 8 of Departmental Appeal Rs. 7,22,730/- : Grd 5 of Assessee‟s Cross Objection A.Y.2013-14 : Rs. 48,90,986/- : Grd 5 of Departmental Appeal : Grd 5 of Assessee̶....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cannot be disputed. With respect to the change in the registered address of these companies, He further submitted form No. 18 filed under the companies act with the Registrar Of Companies. He further stated that as Honourable Delhi high court has passed an order of merger it cannot be stated that these companies do not exist at the given address of Delhi. He further submitted that merely because the bank accounts were showing Calcutta address of these companies which is in fact prior to the merger, it cannot be used against the assessee for making the huge addition. He further referred to the several letter addressed to the assessing officer which are placed at page No. 192 - 218 of the paper book submitted where in assessee has established the identity , credit worthiness of these investors/ lenders and also the genuineness of the transaction of loan as well as the share application money. 24. He further referred to page No. 219 of his paper book wherein the detailed inspector's report is given. He submitted that whole addition has been made by the ld AO based on one inspector's report which is not at all correct report. He firstly submitted that inspector's report is pertainin....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the investor companies placed at page No. 50 - 247 of the paper book to show that assessee has given complete details to the Ld. assessing officer and the Ld. AO has not cared to even verify the above details. He submitted that no Inquiry letters under section 133 (6) as well as summons under section 131 of the income tax were issued to any of the investors/ lenders. With respect to the source of the funds, he submitted that all these companies are having huge availability of funds in their accounts and merely because in some of the cases where income is low, it cannot be said that there did not have the sources of the funds and they are not credit worthy. He referred to the bank account of the investor/ lender companies where in the accounts are normal and no cash are deposited. He further referred to the balance sheet of some of the companies where the huge shareholders' funds was shown, which is much more than the investment and loan given to the assessee. He submitted that whole addition has been made by the Ld. AO on conjectures, surmises and guesswork. 25. He further submitted that all these companies were also lenders in the Assessee Company in AY 2009-10 and 2010-11 whe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....dentical facts and circumstances the addition is deleted. He further submitted that the case of the assessee is that there is no allegation that assessee has taken money from all these companies as an accommodation entry and further none of the companies who have invested money in the assessee is shown to be involved in accommodation entries business. In the end he relied upon the decision of the Hon'ble Supreme Court in case of CIT versus Orissa Corporation private limited 159 ITR 78. He referred to para No. 13 of the order and submitted that assessee had given the names, address, details of the income tax assessment and in the present case, the AO has not issued any summons or enquiry letter to those assessee, as even not enquired correctly, relied upon the wrong name in inspector's report, overlooked the decision of the Hon'ble high court of merger of those companies. He also referred to para no 34 of the Decision of Honourable Delhi high court which is relied up on by the revenue, in case of Nova Promoters Limited relied up on by the revenue to say that when the assessee submits the complete details then, in absence of any inquiry by the ld AO proving the details submitted by t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....19 ITR (St.) 5 (SC) ; [2008] 216 CTR (SC) 195 it would be necessary to examine the facts of that case and the ratio laid down therein in order to decide the applicability of that case to the one before us. It would also be necessary to examine the string of decisions of this court on the question of applicability of section 68 of the Act to monies received as share capital. 34. The facts of CIT v. Lovely Exports P. Ltd. [2009] 319 ITR (St) 5 (SC) have been set out in the judgment of this court in that case, reported as CIT v. (1) Divine Leasing and Finance Limited (2) General Exports and Credits Ltd. and (3) Lovely Exports P. Ltd. [2008] 299 ITR 268 (Delhi). In that case, the share capital subscription was received through banking channels and complete records were maintained by Divine Leasing and Finance Ltd. The Assessing Officer issued summons under section 131 and thereafter impounded the shareholders' register, share application forms and share transfer register. It was contended by the assessee in that case that because of the action of the Assessing Officer, it was not able to furnish any details about the share subscribers. The Tribunal found that the allotment....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y of the appropriate authority under that Act. Accordingly, the ultimate decision of the Tribunal cancelling the addition was upheld. 36. The facts of Lovely Exports P. Ltd., as noted by this court, are these. The assessee-company in that case had furnished the necessary details such as PAN No./Income-tax ward No./ration card of the share applicants and some of them were assessed to tax. The monies were received through banking channels. In some case, affidavits/confirmations of the share applicants containing the above information were filed. The Assessing Officer did not carry out any inquiry into the Income-tax records of the persons who had given their file numbers in order to ascertain whether they were existent or not. He neither controverted nor disapproved the material filed by the assessee. Further, the assessee had specifically invited the Assessing Officer to carry out an enquiry and examine the assessment records of the share applicants whose Income-tax file numbers were given. Though the Assessing Officer had sufficient time to carry out the examination, he did not do so, but put forth an excuse that the assessee was taking several a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....applicability of section 68 to share application monies, and the position was pithily summed up as follows at page 282 (of 299 ITR) : "In this analysis, a distillation of the precedents yields the following propositions of law in the context of section 68 of the Income-tax Act. The assessed has to prima facie prove (1) the identity of the creditor/subscriber ; (2) the genuineness of the transaction, namely, whether it has been transmitted through banking or other indisputable channels ; (3) the creditworthiness or financial strength of the creditor/subscriber ; (4) If relevant details of the address or PAN identity of the creditor/subscriber are furnished to the Department along with copies of the shareholders register, share application forms, share transfer register, etc., it would constitute acceptable proof or acceptable explanation by the assessee ; (5) The Department would not be justified in drawing an adverse inference only because the creditor/subscriber fails or neglects to respond to its notices ; (6) the onus would not stand discharged if the creditor/subscriber denies or repudiates the transaction set up by the assessee nor should the Assessing Officer take su....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... one, where the involvement of the assessee in such modus operandi is clearly indicated by valid material made available to the Assessing Officer as a result of investigations carried out by the Revenue authorities into the activities of such "entry providers". The existence with the Assessing Officer of material showing that the share subscriptions were collected as part of a pre-meditated plan-a smokescreen- conceived and executed with the connivance or involvement of the assessee excludes the applicability of the ratio. In our understanding, the ratio is attracted to a case where it is a simple question of whether the assessee has discharged the burden placed upon him under section 68 to prove and establish the identity and creditworthiness of the share applicant and the genuineness of the transaction. In such a case, the Assessing Officer cannot sit back with folded hands till the assessee exhausts all the evidence or material in his possession and then come forward to merely reject the same, without carrying out any verification or enquiry into the material placed before him. The case before us does not fall under this category and it would be a travesty of truth and justice t....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... is applicable to a private limited company. c. In case of a private limited company, if the shares are issued or loans are obtained, then the onus is on the assessee company to furnish the i. names of the shareholders, ii. their complete address, iii. permanent account number, iv. copies of the bank account of the investors where from the share application money for loans has been advanced by them to the assessee, v. Their income tax details such as return of income and latest assessment orders and balance sheets etc. In such cases, if there is no other adverse material with the assessing officer, the assessee has discharged its initial onus. If in such a situation the AO accepts the submission of the assessee or does not make any further enquiry on these details, then addition under section 68 cannot be made. The above principles are culled out from the various decisions of Hon'ble High Courts. d. In case of a private limited company if the assessee furnishes all the details as mentioned in above para and the assessing officer makes any enquiry on the submission of the above details, then in such cas....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lso submitted that above companies are not paper companies and are doing business respectively. It was further submitted that there is not a single investor company whose identity, creditworthiness and genuineness remains to be established. The assessee further submitted that if the AO needs any further information then, AO might ask by guiding the assessee about the party and nature of information required by him with respect to any of such companies. Regarding the source of investment in share capital, the assessee also submitted vide letter dated 28.10.2015 about the investment of above companies that section 68 amended w.e.f. AY 2013-14 requires assessee company to prove source of investment made by the investors with supporting evidence to the satisfaction of the ld Assessing Officer. Despite that assessee submitted the complete details showing the bank account of the investors. Vide letter dated 02.11.2015 assessee further submitted copy of the bank statement of the investors along with the details regarding the source of the funds of the investor. Further, vide letter dated 26.11.2015 assessee submitted the year wise details appearing in the books of account of all the lende....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ion wing with respect to these ten companies from which assessee has received unsecured loan of Rs. 9.75 crores or other three companies from whom the assessee has taken share application money. Further, more from any of the report of the investigation wing also, the ld AO did not show us that assessee is engaged in earning unaccounted income and routed it through such unsecured loans and share application money. However, ld AO has made allegation but it were not substantiated with any mention of such reports qua the assessee company or the investor lender companies. No such evidences were placed before us during the hearing also despite query. Even the FTTR correspondences submitted did not also show any such evidences. Naturally, even otherwise the investor and lender companies are not foreign companies therefore even otherwise it does not apply in the facts before us. b. Ld AO also referred to seized material for making addition. From the seized documents, which were provided to us in a pen drive, books of the assessee company itself as well as the ledger account of investor's company were found. These are the regular books of the assessee company. Therefore, n....
X X X X Extracts X X X X
X X X X Extracts X X X X
....mpanies for March 2012, March 2013 were also placed on record. Vide para No. 7 the exchange ratio was also decided and approved wherein, Amanat Agencies Pvt. Ltd was to be receiving 367544 shares, Skipper Vinamay Pvt. Ltd 848106 shares and Oasis Comotrade Pvt. Ltd 903010 shares in the Param mitra Investment Pvt. Ltd. Before the Hon'ble High Court, the Registrar of the Companies in terms of section 394 of the Companies Act as well as the Official Liquidator also filed their objections but none of the objections were on the existence of those companies or financial data related to them. The official liquidator also did not comment anything adverse about these companies. The advertisement was also given in National Newspaper. No person including the income tax department furnished any adverse information to the Official Liquidator and the Registrar Of Companies about the amalgamation. Further, in para No. 3.2, 3.3 and 3.4 of the Company petition the complete details with respect to the companies were furnished. It was also noted therein, that in case of Oasis Comotrade Pvt Ltd the registered office was changed from Kolkata to New Delhi on 01.10.2012, in case of Skipper Vinimay Pvt. Lt....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed at page No. 8 of the assessment order where 10 companies are named from whom the assessee has taken unsecured loan. To our utter surprise, in the Inspector's report none of the companies for which addition is made finds any place in such report. Therefore, there is no Inspector's report available with the Assessing Officer with respect to the company from whom assessee has taken loan during the year. Further, the only company with which the assessee has made any transaction is Skipper Vinimay Ltd from assessee has obtained share application money of Rs. 3.23 crores during the year which has been part of merger as per the order of the High Court therefore, naturally as the registered office of this company transferred to Delhi on 01.10.2012 naturally the above company did not exist at Kolkata Address and merged with another company. In view of this, the ld Assessing Officer did not have any Inspector's report with respect to above lender companies. f. Lesser-returned income of the lender companies was also one of the reasons for making addition of loans. The ld Assessing Officer has stated that all these 10 companies have lesserreturned income to prove the credi....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... engaged in providing accommodation entries. In absence of any evidence, it becomes a wild guess only. In fact the merger of the investor companies in Param Mitra Investments limited where those companies have submitted the requisite details before hon. High court, before the investigation wing in response to queries which have been accepted, there is no objection by any of the regulators. j. Further, the ld AO has stated that all these companies are shell companies. However, no such notification or the list of the shell companies was shown to us where these companies have been named. There is no evidence available with the Assessing Officer to show that the companies are bogus or shell companies. k. However, we fully agree with the ld Assessing Officer and ld DR on the point that merely because the transactions are carried through banking channel they cannot be considered as genuine for that reason only. There cannot be any quarrel on this issue as Hon'ble Delhi High Court in Nova Promoters has already held so. In fact, accommodation entries are carried out through banking channel only. l. No statement of the directors of the company or the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ess the facts are also matched with those decisions or investigation and inquiry is carried out in similar fashions. There is no inquiry made by the ld AO in this case. 34. From the above discussion, it is apparent that on furnishing of information by the assessee of all these companies , from whom the assessee has taken unsecured loan as well as share application money, the ld Assessing Officer has not at all carried out any investigation to show that a. those companies do not exist but are paper company, b. they are not having worth of investing in the company and the transaction lacks genuinity despite having their income tax details and annual accounts. c. Despite specific request, no details are called for either from the assessee or form the investor / lender companies or from bankers. d. Despite specific request by assessee, no summons u/s 131 or inquire letter u/s 133 (6) of the act were issued. e. No inspector report with respect to the investor/ lender company was obtained or available with AO. f. Investigation wing report was not mentioned or shown about the assessee 35. In fact, ld Assessing Officer should have....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o have been collected in subsequent proceedings of penalty etc and placed before either the CIT (A) or coordinate bench as additional evidences. Even that is not being done. Even otherwise, it is not for us to say that what options are available with the ld AO and in what manner and up to what extent he must do the investigation and inquiry, but we are of the view that he is bestowed up on with immense power under the income tax act as well as other acts. None of them has been looked at leave aside the exercise of such powers. In such circumstances, it is apparent that ld AO does not have any evidence to allege that share application money as well as such loans taken by the assessee is bogus. Hence, we are of the view that assessee has discharged initial onus cast up on him u/s 68 of the act with respect to loan as well as share application money. 36. The ld CIT DR relied upon plethora of decisions to support the case of the revenue, but in absence of any evidence collected by the ld AO, they do not advance the case of the revenue , still, we deal with them as under:- a) Ld. CIT DR heavily relied up on the decision of Hon'ble Delhi High Court in CIT Vs. Nipun builder....
X X X X Extracts X X X X
X X X X Extracts X X X X
....entries of loan and share application money taken by the assessee are bogus. There does not exist any enquiry made by the Ld. Assessing Officer by issue of summons under section 131 of the income tax act, either to the assessee or to the any of the Directors of those companies. The Ld. assessing officer has also sent the Inspector who went to examine some other companies but not the companies from which the assessee has taken unsecured loan or has received share application money. No direction has also been given to the assessee to produce the directors of the companies for examination. The case before us is complete lack of any enquiry by the assessing officer. Further, in that decision itself Hon'ble Delhi High Court has held that if the assessee furnishes the requisite information available with him and assessing officer does not make any enquiry on such information, then in such cases no addition u/s 68 can be made. c) The next decision relied upon by the Ld. CIT DR is of NR Portfolio Pvt. Ltd Vs. CIT 29 Taxmann.com 211 (Delhi) wherein case of a private ltd company where specific summons were issued to the shareholders of the company who did not atten....
X X X X Extracts X X X X
X X X X Extracts X X X X
....to cross the threshold of satisfaction u/s 68 of the Act and addition can be made on the basis of surrounding circumstances. In that particular decision in para No. 8 modus operandi adopted by the entry operator was also noted. However, in the present case there is no allegation of any entry operator involved as well as the shares are not at all allotted during the year but remained share application money only. Therefore, the facts of the above case are different. g) The Ld. CIT DR further relied upon the decision of the Hon'ble Supreme Court in case of Novadaya Castles Private Limited Vs. CIT, 56 Taxmann.com 18 (SC) wherein the special leave petition filed by the assessee against the decision of the Hon'ble Delhi High Court reported in 367 ITR 306 has been dismissed. in that particular decision the facts were that summons were issued to the alleged shareholders and they were required to personally come and depose. The summons remained unserved therefore, the assessee was asked to produce the share holder. Further, huge cash deposits were also deposited regularly in the accounts of the share holders and then cheques were issued to the assessee. The assessee also expressed....
X X X X Extracts X X X X
X X X X Extracts X X X X
....that AO must have made definite inquiries on the information submitted by the assessee to sustain the addition u/s 68 of the act. 38. We come to the request of the ld CIT DR who vehemently tried to salvage the case of revenue to set aside the matter back to the file of the ld AO. The ld AR vehemently objected citing the decision of the Hon'ble Delhi High Court In Laxman Industrial Resources (supra) where identical request was made. Hon High court dealt with as under :- "It is argued by the Revenue that the ITAT should have taken appropriate steps and remitted the matter, not merely confirming the CIT(A)‟s opinion since the Investigation Wing‟s report confirmed unequivocally that the assessee was beneficiary to bogus transactions whereby the genuineness of identity of the shareholders, the genuineness and identity of the share applicants and the genuineness of transactions was suspect. This Court notices that the assessee had provided several documents that could have showed light into whether truly the transactions were genuine. It was not a case where the share applicants are merely provided confirmation letters. They had provided their particu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....gandeep infrastructure private Limited ITA No 1613/2014 dated 20/3/2017 394 ITR 680(Bom) 2 Pr CIT V laxman industrial resources Limited ITA No 169/2017 dated 14/3/2017 ( Del) 3 Pr CIT V Dhanlaxmi Equipmemts Limited ITA No 189/2016 dated 23/10/2017 (Raj) 4 Pr CIT V A R Leasing P Limited ITA no 361/2012 dated 3/7/2017 (Del) 5 Pr CIT V Jatin Investments P Limited ITA No 43 & 44/2016 18/1/2017 ( Del) 6 Pr CIT V Oriental International co Limited ITA no 9/2018 8/1/2018 (Del) 7 Pr CIT V Hi Tech Residency p Limited IAT No 628/2016 7/7/2017 (Del) 8 Pr CIT V Inetrarch Estatae P Limited ITA no 258/2016 14/11/2017 ( Raj) 42. As in the present case the assessee has given complete details with respect to the addition of Rs. 22,92,00,000/- and the ld AO has failed to make any inquiry we confirm the finding of the ld CIT(A) in deleting the above addition. Consequently ground No. 2, 3, and 4 of the appeal for AY 2012-13 are dismissed. 43. The ground No. 5 of the appeal is with respect to disallowance of interest with respect to loans as discussed in ground ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....er that he is relying upon the same reasons. The submissions of the appellant are also on similar grounds. The only difference is that the Unsecured Loans in Ground no.7 and 5 in A.Y. 2012-13 and 2013- 14 respectively had been received from Kolkata based companies whereas the Unsecured Loans in this ground have been received from non Kolkata based companies. Keeping in view the above circumstances, with a view to avoid duplication, in the interest of brevity and reconfirming the reasons and my view taken in respect of Ground no.7 and 5 in A.Y. 2012-13 and 2013-14 respectively, it is held that the amounts of Unsecured Loans of Rs. 15,50,00,000/- and Rs. 30,00,000/- in A.Y. 2012-13 and 2013-14 respectively cannot be considered as unexplained cash credits u/s 68 of the Act. The addition of Rs. 15,50,00,000/- and Rs. 30,00,000/- in A.Y. 2012-13 and 2013-14 respectively is hereby deleted. This ground of appeal is therefore allowed and the addition of Rs. 15,50,00,000/- and Rs. 30,00,000/-in A.Y. 2012-13 and 2013-14 respectively is hereby deleted. Ground raised in appeal is allowed.‖ 46. We have given our detailed reasons wherein, addition u/s 68 canno....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he addition of Rs. 6.15 crores being loan taken by the assessee from 4 companies for which the assessee has submitted the confirmation, copy of the bank accounts, income tax return etc however, the ld Assessing Officer has made the addition for the reason that these are Kolkata based companies and have low income. The ld CIT (A) deleted the above addition as assessee has furnished the complete details but the ld Assessing Officer did not carry out any inquiry. The revenue is in appeal on this issue before us. Similarly, vide ground No. 5 the interest paid to such companies was also disallowed by the ld Assessing Officer but deleted by the ld CIT (A). 57. Both the parties before us submitted that their arguments are similar to their submissions made in ground No. 2 to 5 of the appeal of the revenue in case of this assessee for Assessment Year 2012- 13. It was further stated that reasons given by the AO for making addition and by the ld CIT (A) for deleting the addition are identical. They further stated that except the name of the lenders and the amount involved there is no difference in the facts of the case. 58. We have carefully considered the rival contentions and perus....