TaxTMI 
TaxTMI 
2019 (10) TMI 719
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....etails filed by the assessee that it has received an amount of Rs. 2 crores as unsecured loan from M/s. Raffle Mercantile P. Ltd. and Rs. 20 lacs as share application money from M/s. Purushottam Vinimay P. Ltd. To substantiate the above two amounts, the assessee filed confirmation and bank statement of M/s. Raffle Mercantile P. Ltd. and M/s. Purushottam Vinimay P. Ltd. and copy of their balancesheet alongwith relevant schedules showing the investment. The Assessing Officer asked the assessee to substantiate the identity, genuineness and credit worthiness of the above two parties and asked the assessee to explain as to why said amount should not be taxed u/s. 68 of the IT Act, 1961 being unexplained credit. The relevant portion of the reply of the assessee which has been reproduced by the Assessing Officer in the body of the assessment order reads as under :- 5.1 For Rs. 2,00,00,000/- received from M/s. Raffle Mercantile Pvt. Ltd. "That the following amount has been received in A. Y.2011-12 Rs. 95 lacs on 28.08.2010 Rs. 85 lacs on 30.08.2010 Rs. 20 lacs on 30.08.2010 Rs. 2.00 crores Rs. 2.00 crore recd. In A. Y. 2011-12 have b....
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....iding companies which are based out of Kolkata. He noted that before transferring the funds to a company, the funds were arranged through one or two entities and then the same were transferred to the beneficiary on the same or the next two or three following dates leaving normal balance in the account which is a typical characteristic of entry providing company by creating a web of companies which are used only to transfer funds. On verification of the financials of M/s. Raffle Mercantile P. Ltd. he noted that the income and turnover of the company are very meager. Therefore, it is not possible on the part of M/s. Raffle Mercantile P. Ltd. to invest such huge amount in the assessee company. Further the amount which was received out of repayment of its loan given to Kala Devi Education Society and Shankar Enterprises is beyond economic logic since the company has not earned a single paise as interest although such huge amounts were given as advance for a considerable time. Rejecting the various explanation given by the assessee the Assessing Officer held that the unsecured loan / share application money received by the assessee in its books of account is clearly the income of the as....
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....s share application money from M/s Purushottam Vinimay P. Ltd. which is claimed to have been repaid subsequently. 11.4 On perusal of various details submitted, it is observed that in the case of M/s Raffle Mercantile P. Ltd., Rs. 2 crores has been advanced by it is out of the funds received from Kala Devi Educational Society. The appellant has provided the confirmation of account from Kala Devi Educational Society, 17/5, Rolland Tower, The Mall, Kanpur for 2 years. The payments have been made to Raffle Mercantile P. Ltd. through cheques and source of the funds in the hands of Kala Devi Educational Society is also duly explained as shown in its bank account details. Further funds received by Raffle Mercantile P. Ltd. is through M/s Shankar Enterprises, (Rs. 80 lacs) for which the bank account has been provided alongwith the copy of return filed for the AY 2011- 12 and confirmation from the party. 11.5 In the case of M/s Purushottam Vinimay P. Ltd., it is observed that Rs. 7 lacs and Rs. 9 lacs has been received by it as loan on 24.12.2010 from M/s Nine News Ltd. and Rs. 4 lacs has also been received as loan on 28.12.10 from M/s Nine News Ltd. The confirmat....
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.... in foregoing paragraphs. 11.8 Further, a search had been conducted at the premises of the appellant and no incriminating documents or other assets were found or seized to indicate that the appellant had in fact routed its own money through these persons. The peculiar fact of this case may have caused suspicion in the mind of AO but despite having conducting the search on the premises of the appellant, no evidence or other material could be gathered to hold that the appellant had routed its own money. 11.9 This is also noted that the representative of the lending entities were presented before the AO. It is also observed that the loan amount was subsequently repaid. 11.10 It has been stated by the appellant that in paragraph 5.4 and 6.6 of the assessment order, AO has mentioned about the "unqualified admission of the assessee company" regarding the addition, which is incorrect. No such admission has been made by anybody on behalf of the company and they are vigorously contesting the addition. 11.11 The AO in his report has stated that this expression in the assessment order is with respect to the introduction of share capital of Rs. 2.20 crores, ....
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....that these companies have the capacity to advance such huge funds. Although the Ld. CIT(A) has called for remand report, however, there is no finding by the CIT(A) as to how and why he has admitted the additional evidences in violation of provisions of section 46 A. Further this company is a Kolkata based company and funds have been transferred to the assessee within a few days of the receipt of the same from other companies/concerns which clearly prove that these are all entry providing companies. Therefore, it is nothing but assessee's own money which has been introduced by it in the garb of unsecured loan or share application money. 9. Further the address of Kaladevi Educational Society and M/s. Raffle Mercantile Private Limited are same. Therefore, this substantial evidences have to be considered and merely by relying on the excellent power work done by the assessee the addition cannot be deleted. Relying on various decision including the decision of Hon'ble Delhi High Court in the case of NDR Promoters vide ITA No.49/2018 order dated 17.01.2019 and the decision of Hon'ble Supreme court in the case of NRA Ispat vide ITA No.1731/Del/2016 order dated 30.04.2019, she submitted ....
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....of the IT Act. 13. So far as the amount of loan / advance received from Raffle Mercantile Private Limited is concerned the Ld. Counsel for the assessee referring to page 1 to 49 of the paper book drew the attention of the bench to the following documents : 1. Copy of letter dated 26.03.2015 alongwith explanation 2. Letter to AO dated 20.03.2015 by Raffle confirming the transaction alongwith source thereof. 3. Share certificate issued by assessee to Raffle 4. Audited Balance Sheet of A.Y.2011-12 5. Schedule -4 of Audited Balance Sheet of A.Y.2011-12 6. Bank Statement of Raffle of PNB Bank for the period 01.04.2010 to 05.05.2011. 7. Confirmed copy of account of Raffle Mercantile Pvt. Ltd. for A. Y.2011-12 in books of Assessee 8. Summons u/s. 131 dated 27.05.2013 issued by DDIT Kanpur 9. Summons u/. 131 dated 21.01.2013 issued by DDIT Delhi 10. Reply dated 29.01.2013 in response to summons u/. 131 dated 21.01.2013 to DDIT Delhi 11. Abstract of order sheet of AO. 12. Certified ledger a/c of Raffle in the books of assessee for A.Y.2014-15 13. Affidavit of Raghvinder Ga....
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....e also considered the various decisions cited before us. We find the AO in the instant case has made addition of Rs. 2 crores being the amount received from M/s. Raffle Mercantile Private Limited as unsecured loan and another Rs. 20 lacs being the amount of share application money from M/s. Purushotam Vinnimay P. Ltd. While doing so the Assessing Officer noted that M/s. Raffle Mercantile Private Limited has invested in Land Craft Developers P. Ltd. from money obtained from Kaladevi Education Society and Shankar Enterprises through sham transactions. Further the assessee failed to substantiate the credit worthiness of the said company. So far as the share application money received from M/s. Purushotam Vinnimay P. Ltd. is concerned, the AO noted that the assessee failed to discharge the onus of establishing beyond doubt, the genuineness and the creditworthiness of M/s. Purushotam Vinnimay P. Ltd. We find the Ld. CIT(A) deleted both the additions, the reasons of which have already been reproduced in the preceding paragraphs. It is the submission of the Ld. Dr that the Ld. CIT(A) without considering the circumstantial evidences has deleted the addition which is not justified in the....