TaxTMI 
TaxTMI 
2021 (4) TMI 162
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....oomija Verma, Adv., Aditya Kumar, CA and Bhavesh Jindal, CA Respondent by: Ms. Sunita Singh, CIT-D.R. ORDER SHRI AMIT SHUKLA, J. The aforesaid bunch of 22 appeals relating to above named 16 assessees pertain to quantum of assessment passed u/s 143(3) for the assessment years 2012-13 and 2013-14 arising out of 9 separate impugned appellate orders. The issues involved in all the 22 appeals are arising out of identical set of facts and are inextricable interconnected with each other and common issue is permeating in all the appeals with similar additions. Brief Background of the case 2. The above named assessee-companies are essentially controlled and managed by the promoters of the erstwhile company, M/s Bhushan Steel Ltd., now known as TATA Steel Ltd. (TSL) after the acquisition of BSL by Bamnipal Steel Ltd. which is a wholly owned subsidiary of TATA Steel Ltd on 18th May, 2018 under the Insolvency and Bankruptcy Code, 2016. In nutshell the primary addition in all the appeals pertain to additions u/s.68 on the credits in the form of share capital/share premium and/ or loan and advances appearing in the books of assessee companies in the Assessment Year 2012-13 in 15 cases; in ....
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....re Capital - section 68 27.03.2015 2012-13 143(3) 62,00,00,000 26.09.2012 3,167/- 6. Kasper Information Technology Pvt. Ltd. - Share Capital - section 68 16.03.2015 2012-13 143(3) 46,00,00,000 27.09.2012 1,738/- 7. Kasper Information Technology Pvt. Ltd. - Share Capital - section 68 28.03.2016 2013-14 143(3) 16,00,00,000 22.09.2013 2,47,050/- 8. Landsky Real Estate Pvt. Ltd. -Share Capital - section 68 Advances - section 68 31.03.2015 2013-14 143(3) 16,00,00,000 2,60,00,000 22.09.2013 2,48,450/- 9. Sintex Consumer Electronics Pvt. Ltd. - Share Capital (including bonus shares of Rs. 18,22,80,000/-) - section 68 25.03.2015 2012-13 143(3) 78,22,80,000 26.09.2012 4,026/- 10. Starlight Consumer Electronic Pvt. Ltd. -Share Capital - section 68 -Current Liabilities - section 68 24.03.2015 2012-13 143(3) 32,25,00,000 30,18,00,000 22.09.2012 5,340/- 11. Stylish Construction Pvt. Ltd. -Share Capital - section 68 -Current Liabilities - section 68 -14A 24.03.2015 2012-13 143(3) 30,00,00,000 31,60,00,000 23,32,000 29.09.2012 15,48,189/- 12. Sukhna Real Estates Pvt. Ltd. - Share Capital (including bonus shares of Rs. 20,63,40,....
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....the reasoning given by the Assessing Officer. In tabular form the additions confirmed and deleted by the ld. CIT (A) in all the appeals are as under: Sl. No Name of the Assessee & nature of addition made by the Ld. A.O A.Y Asst. Order u/s Quantum of Addition Confirmatio n (C) or Deletion (D) by the Ld. C.I.T (A) Appeal before the Hon'ble ITAT filed by Revenue (R) or Assessee(A) 1. Angel Cement Pvt. Ltd. -Share Capital - sec 68 -Current liabilities (payables) - sec 68 2012-13 143(3) 66,00,00,000 54,70,00,000 Deleted (D) D R R 2. Delight Resorts Pvt. Ltd. -Share Capital - section 68 -Advance - section 68 -50% disallowance of employee benefit expenses 2012-13 143(3) 10,00,00,000 66,56,47,519 5,22,890 D D D R R Not challenged 3. Delight Resorts Pvt. Ltd. - Advance - section 68 2014-15 143(3) 37,70,00,000 D R 4. Jawahar Credit & Holdings Pvt. Ltd. -Share Capital - section 68 -Alleged Undisclosed Commission Income [added by C.I.T (A)] 2012-13 143(3) 73,50,00,000 1,47,00,000 D Fresh Addition made by C.I.T (A) R A 5. Jingle Bells Aluminium Pvt. Ltd. -Share Capital - section 68 -Alleged Undisclosed Commission Income [added by C.I.T (....
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....5,22,85,409/- made u/ss. 68, 69C & 14A in the cases of the Assessees herein, additions aggregating to Rs. 10,22,02,85,409/- have been deleted from the first appellate stage. The additions to the extent deleted by the Id. C.I.T (A)s have been contested in appeal before the Hon'ble ITAT by the Department. The confirmation of balance additions (as and where applicable) has been contested by the respective Assessees before the Hon'ble ITAT. Further, in the cases of three Assessees, namely i) Jawahar Credit & Hoidings Pvt. Ltd. (A.Y. 2012-13); ii) Jingle Bells Aluminium Pvt. Ltd, (A.Y. 2012-13); and iii) Kasper Information Technology Pvt. Ltd. (A.Y. 2012-13), the Ld. C.I.T (A), while deleting the additions made by the A.Os u/s. 68 has made fresh additions on account of alleged commission income aggregating to Rs. 3,63,00,000/- for providing facility to route the impugned transactions. Thus, the Ld. CIT(A) at the first appellate stage have adopted divergent views with respect to the sustainability of identical additions made by the Ld. A.O(s) u/s 68 in the cases of the Assessees herein under identical facts and circumstances. Whereas in most of the captioned cases the additions m....
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....td. (Cross appeal) [ITA NO. 5398/DEL/2019] 2012-13 N.A. As per the Revised Grounds of Appeal filed on 19.10.2020 Ground 1: The Ld. C.I.T.(A)-05, New Delhi while correctly deleting the addition of Rs. 73,50,00,000/- made by the Ld. A.O. u/s 68, erred in making fresh addition of Rs. 1,47,00,000/- to the income of the Appellant Company on account of alleged charges received by the Appellant Company @ 2% for providing facility to route the impugned transaction of Rs. 73,50,00,000/- purely on the basis of surmises and conjectures although the same is not backed by any substantive or tangible evidence on record. Ground 2: That the Ld. C.I.T.(A)-05, New Delhi acted beyond jurisdiction in enhancing income of the Appellant u/s 251(1)(a) of the Income-tax Act, 1961 (the 'Act') by introducing and assessing new source of income to the extent of Rs. 1,47,00,000/- beyond the record (i.e. the return of income and assessment order) and outside the subject matter of assessment appealed against. Ground 3: That the Ld. C.I.T(A)-05, New Delhi erred in making fresh addition of Rs. 1,47,00,000/- and thus enhancing the income of the Appellant to the said extent without issuing a prior show c....
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....of the Appellant u/s 251(1)(a) of the Income-tax Act, 1961 (the 'Act') by introducing and assessing new source of income to the extent of Rs. 92,00,000/- beyond the record (i.e. the return of income and assessment order) and outside the subject matter of assessment appealed against. Ground 3: That the Ld. C.I.T(A)-05, New Delhi erred in making fresh addition of Rs. 92,00,000/- and thus enhancing the income of the Appellant to the said extent without issuing a prior show cause notice as mandated u/s 251(2) of the Act for providing a reasonable opportunity to the Appellant of showing cause against such enhancement, thus resulting in gross violation of principles of natural justice. 5. Kasper Information Technology Pvt. Ltd. [ITA NO. 510/DEL/ 2019] 2013-14 Ground 1: Ld. C.I.T(A) was not justified to uphold addition of Rs. 16 crores made by the A.O on account of balance share capital/premium as an alleged unexplained cash credit u/s 68 on the ground that appellant had failed to discharge the onus cast on it at mandated by the said section and that the appellant has failed to prove the creditworthiness, genuineness and identification of the Investors NA 6. Landsky Rea....
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....ule 46A of the I.T. Rules, 1962 - challenged by the Department in the cases of Angel Cement Pvt. Ltd. (A.Y. 2012-13), Delight Resorts Pvt. Ltd. (A.Y. 2012-13) and Stylish Construction Pvt. Ltd. (A.Y. 2012-13). vi) Assessee's Ground challenging the passing of exparte order by the Ld. C.I.T. (A) - urged by the Assessee in the case of Globus Realinfra Pvt. Ltd. (earlier known as Sur Buildcon Pvt. Ltd.) for A.Y. 201314. 6. Now we come to the grounds challenging confirmation of deletion by the ld. CIT (A) on the addition made by the Assessing Officer u/s.68 on account of sums credited in the books of the assessee in the form of share capital/share premium and / or loans and advances as a lead case. 7. We will take up the appeal in the case of M/s. Jawahar Credit and Holdings Pvt. Ltd., in ITA No.5398/Del/2019 for the Assessment Year 2012-13 as a lead case. Ld. Assessing Officer noted that the company was engaged in the activities of investment in shares in various companies. On perusal of the balance sheet, he noticed that during the year under consideration the company has received Rs. 4,35,00,000/- as share capital and Rs. 69,15,00,000/- as share premium by issue of Rs. 3 lac full....
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....Copy of share certificate of the above company (JCHPL). 8. Please state what is the current status of these shares, whether these are still in your possession or have been sold. 9. In case the above certificates have been sold, please confirm with respect to your bank statement. Also give the name/address/PAN of the party to whom these shares of JCHPL have been sold. 10. Please provide the cop of ITR/Balance Sheet/Computation of Income for the A. Y. 2012-13 and the year in which the transaction mentioned in point no.9 above has been made, reflecting clearly the above transactions in respective balance sheets of your company. 11. Provide copy of ITR of Director/Substantial share holders of your company." 9. In response, these parties had given reply to the assessee. The Assessing Officer further sought for information u/s. 133(6) from the individual investors and in response to which again replies have been received. With regard to the details of security premium received during the year and justification of the premium charged on the issue of share the assessee vide letter dated 12.01.2015 had stated as under: "(a) During the year the Assessee Company has issued 300....
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....f dividend received during the year and the last three years, year wise break up of profit and loss account incurred by the assessee during the year and last three years, details of EPS and book value of shares, details of declaration of premium received during the year. In response the assessee had filed its detailed reply vide letter dated 20.03.2015 as mentioned by the Assessing Officer. Further the assessee again was required the identity, genuineness and creditworthiness of the subscribers in view of Section 68 the assessee had filed confirmation and bank statement the gist of which have been reproduced in the assessment order which are as under: Date Debit Credit Rs. 22.03.2012 40,00,00,000 23.03.2012 30,00,00,000 2. Bhushan Finance Pvt. Ltd. Bank: Axis Bank Ltd, New Delhi A/c No.: 910020042325288 Date Debit Credit Rs. 22.03,2012 30,00,00,000 23.03.2012 3,00,00,000 4. Uma Singal. Bank: Punjab National Bank, C,P, New Delhi A/c No. 0133002l60006815 Date Debit Credit Rs. 26.03.2012 2,00,00,000 26.03.2012 5,00,000 26.03.2012 2,02,50,000 5. Neeraj Singal HUF. Bank: Punjab National Bank, C.P....
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....e as under: A.Y. income from Operation Interest, Dividend & other Income Total Income, Net Profit EPS Claimed by the assessee 2011-12 393934 2380822 2774756 114440 0.01 2012-13 368137 368137 (820515) (0.05) 12. Thereafter, he has quoted the judgment of Hon'ble Supreme Court in the case of Mc. Dowell and Co. Ltd. in (1985) 154 ITR 148 and after detail reasoning and referring to catena of judgments, he held that the credits aggregating to Rs. 73,50,00,000/- is to be taxed u/s.68, because the assessee has failed to prove the genuineness of the transaction and the creditworthiness of the parties. 13. Ld. CIT(A) though held that on the facts and circumstances of the case, addition u/s.68 could not be made, but held that these companies must have charged 2% as commission on the total transaction as profit on such entries and in this case it was worked out at Rs. 1,47,00,000/-. Before the ld. CIT (A), the assessee has filed the very elaborate submission containing all the details and information and also how the money has been routed through from the main company to through web of group companies and along with the cash flow chart. The detailed remand report o....
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....ses. It is also stated that for the year under consideration, there was no statutory requirement to evidence and justify the source of source of the funds invested. The appellant also relied upon various judgments, as quoted in its submission, reproduced above, to justify that these transactions are genuine and addition u/s 68 is not called for as onus cast upon the appellant company has been duly discharged. It is also argued that the issue of share premium is a matter to be decided upon by the various investors and the companies concerned and not within the powers of AO to step into the shoes of business entities. It is also stated that reasons for making impugned additions are generic in nature and based on the interpretation by AO without clinching evidence. 7.3 On going through the submissions of the appellant, it is observed that all the ten investors are submitting their return of income, the transactions has been done through the banking channels. 7.4 The appellant has cited a number of decisions of the jurisdictional High Court and other jurisdictions, wherein the Hon'ble Court has disapproved the attempt of the AO to look into the source of the source of the dep....
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....s limited reserves and surplus. 7.6 It is also stated in the report of AO that the investment made by various investors, in the appellant company has received funds from the companies and persons related to Bhushan Steel Ltd which was further routed through the appellant company and further invested in eight companies as share application. In its reply, the appellant has not given any satisfactory reply to this fund flow and also the payments made by investors, immediately after receiving the funds from above companies. 7.7 Further, the address of the investors and the investment made by appellant company are same. 7.8 All these features as discussed in the foregoing paragraphs, 7.5 to 7.7 indicates that though the documentations are complete with respect to the investors and the appellant/company, payments received and made through banking channels and other formalities are complete, however, inability to produce directors in the case of investor company, investment at such high premium without justification and having no net worth or reserves and surplus and immediate investment in appellant company after receiving the funds, which was further invested by the appellant c....
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....ase of other investors for providing entries and routing the finances, therefore, the addition to the extent of Rs. 1,47,00,000/- is sustained for charges received in providing such entries, not disclosed by the appellant. For the balance amount, the appellant gets a relief." 15. By and large similar nature of finding has been given by the Assessing Officer in all the appeals before us. In tabular form, the summary of the finding and observation of the Assessing Officer and the finding of the ld. CIT (As) in all the appeals are as under:- 1. Angel Cement Pvt Ltd. -Revenue's Appeal 2012-13 Section 68: Share Capital (SC) share Premium - Rs. 66 crores Other Payables (current liability) -Rs. 54.70 crores Total: Rs. 120.7 crores * The assessee never came forward to prove identity, creditworthiness & genuineness (ICG)of the transactions. * The summons addressed to contributors remained uncompiled with. Notice 133(6) returned back un-served from all the parties (Page - 4, Para 3.2) * Summons returned back un-served from three parties namely Cantabile (Left), Sintex (No such firm), Supreme (no such firm) (Page- 4, Para 3.2) * The assessee adopted a prevaricate and non-coopera....
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....of the transactions. (Page 31 - 37 - CIT(A)'s order). The source of funds invested in share capital and share premium by each investor stands explained (Page 37 - CIT(A) order) * The source of funds by the investor companies in the appellant in its share capital stands explained. (Page 37 - CIT(A) order). * All the investor companies are assessed to tax in their jurisdiction either in Delhi or in Mumbai. The copies of assessment have been submitted(Page 37 - CIT(A) order). * The appellant company has filed copies of bank statement, profit & loss account, balance sheets to establish source of funds in hands of investor companies(Page 37 - CIT(A) order). * The AO contention in making the addition on ground that the notice U/s 133(6) and summons U/s 131 could not be served is not acceptable as the investor companies have been assessed to tax U/s 143 of the Act, therefore all the details must have been filed before their respective AO's. Therefore it can be said that these companies are very much present at the given address and has got all necessary establishments (Page 37/38 - CIT(A) order). * The AO did not bring any adverse material to reject the explanations and evidences....
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....te to determine genuineness of a transaction (Page 4 - AO's Order). Transactions of advances have been undertaken with a purpose to defraud the revenue and is a colorful device (Page 4 - AO's Order). The assessee failed to bring on record that why the Axis bank account is being maintained at Angul, Orrisa, detail of the person who maintains the account at such location (Page 4 - AO's Order) * Bank account opened on March 22, 2012, major advances received in bank account maintained at Orrisa only (Page 4 - AO's Order). All the bank accounts from where money transferred are apparently located at Angul, Orrisa (Page 5 - AO's Order). All bank accounts are joint bank accounts including assessee's bank account (Page 5 - AO's Order) * ICG of the transaction and the investor are deeper and obstructive than mere completion of paper work or documentation (Page 8 - AO's Order). Assessee is a private limited company, neither came out with any public issue nor issued any advertisement, still failed to produce the persons who invested towards share capital shows that the transactions are merely accommodation entry (Page - 8/9 - AO's Order) * In a private limited company, it is generally not d....
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....y the evidences and explanations of the Appellant (Page - 25, Para - 3.1 - CIT(A)'s Order). *That Pace Iron is an investment company and having SC of Rs. 2.41 crores and advances of Rs. 32.7 crores as on March 31, 2011 (Page - 24, Para - 3.1 - CIT(A)'s Order). * There are no cash deposits in the bank accounts of in case of both the investors (Page - 24, Para - 3.1 - CIT(A)'s Order). * Group companies have filed various details in support of subscription made, replies U/s 133(6) filed by parties, AO having no credible information to deny explanations of appellant with either genuineness or creditworthiness (Page - 30, Para - 3.3 - CIT(A)'s Order). *Therefore it is held that appellant has filed necessary details regarding identity and creditworthiness(Page - 30, Para - 3.3 - CIT(A)'s Order) Regarding addition related to advances recived during the year : * That the amount received as advance have been adjusted against sale of shares in case of four companies and balance refunded and wholly refunded in case of one company (Page - 31, Table Para - 4.1 - CIT(A)'s Order). * Appellant filed relevant documents from the creditors (Page - 31, Table Para - 4.1 - CIT(A)'s Order) ....
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....tion(Page - 6, Para 6(b) - AO's order) * No interest was paid, the purpose of advance is missing, huge fund transaction which clearly means dummy transactions(Page - 6, Para 6(b) - AO's order). *Both the companies have meager income (Page - 6, Para 6(b) - AO's order) * These facts indicate and reflect proper paperwork or documentation but genuineness, creditworthiness and identity are deeper and obstructive (Page 8, 2nd Para) * It may, as in the present case, required entail a deeper scrutiny (Page 8, 2nd Para - AO's order) * It would be incorrect to state that the onus stands discharged if the transaction is done through banking channels or account payee instruments (Page 8, 3rd Para - AO's order) Case laws relied upon by A.O * Kale Khan Mohammad Hanif V CIT (1963) 50 ITR 1,4 (SC) * Sreelekha Banerjee V CIT (1963) 49 ITR 112 (SC) * Nanak Chandra Laxman Dass V CIT (1983) 140 ITR 151 (All.) * A. D. Jayaveerapandia Nadar V CIT (1964) 54 ITR 401 (Mad.) * Oriental Wire Industries P Ltd V CIT (1981) 131 ITR 688 (Cal.) * Sikri & Co. Pvt Ltd V CIT (1977) 106 ITR 682 (Cal.) * VeljiDeoraj& Co. V CIT (1968) 68 ITR 708 (Bom.) * AnrajNarainDass V CIT (9151) 20 ITR 562 (P....
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....remium Rs. 73.50 crores *On perusal of bank statement, it is observed that subscriber companies and individual investors did not have their own creditworthiness, as the money come into their account seldom rests for a day, finds its destination immediately. It seems an accommodation entry to evade tax (Page 6, Para 3.6.1 - AO's Order) Assessee company has not done any business activity, major part of turnover is derived from dividend and miscellaneous income (Page 6, Para 3.7.1 - AO's Order) * Past performance totally ignored for valuation of company, did not bring anything on record to justify bright future prospect of the company which could enhance its profitability leading to higher valuation (Page - 7, Para - 3.7.2, Sub Para - (a)- AO's Order) * EPS is negative, major net income constitutes miscellaneous income nothing to do with objectives of company, difficult to digest why investors would invest in such a company which has no future objectives. * Prima facie appears that subscribers are well aware of nature of transactions (Page - 8 - AO's order) * Assessee failed to justify charging of premium (Page - 8 - AO's order) * Transaction between assessee company and ....
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....wing any worthwhile income and has limited reserves and surplus (Page 35, Para 7.5 - CIT(A)'s order) * Appellant company has not given any satisfactory reply regarding fund flow (Page 35, Para 7.6 - CIT(A)'s order) * Though the documentation is complete in all respects like banking channel, confirmation etc considering inability to produce directors, it seem that appellant company and its investor are nothing but a creation of paper companies to transfer funds from Bhushan Steel Ltd through appellant company (Page 36, Para 7.7 - CIT(A)'s order) * No reserves/ No funds nor any business, it is nothing but routing of funds by Bhushan Steel (Page - 36, Para 7.8 - CIT(A)'s order) * The basic requirement to justify the identity, creditworthiness and genuineness of the transaction has been prima facie established.(Page - 36, Para 7.9 - CIT(A)'s order) * Neither the appellant company nor the investors are ultimate beneficiary of the transactions but there is routing of funds from Bhushan Steel Ltd. The funds received are given to other companies as soon as they are received(Page - 36, Para 7.9 - CIT(A)'s order) * Therefore, the CIT(A) has deleted addition of Rs. 73.5 crores and made ....
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.....9. Page - 16 - AO's order) Case laws relied upon by the A.O * McDowell & Co Ltd. [1985] 154 ITR 148 * Workmen of Associated Rubber Industry Ltd V Associated Rubber Industry [1986] 157 ITR 77 (SC) * CIT V Sree Meenakshi Mills Ltd 63 ITR 609 (SC) * CIT V Durga Prasad More 82 ITR 540 (SC) * Bombay Oil Industries Ltd V DCIT [2000] 82 ITD 626 * CIT V Frostair (P) Ltd ITA No. 183 0f 2002 and 1638 of 2006 * CIT V Youth Construction (P) Ltd 44 taxmann 364 * CIT V Precision Finance Pvt Ltd (1994)208 ITR405 * Nova Promoters &Finlease (P) Ltd (High Court of Delhi) * Mancherial cement V Income Tax Officer ITA No. 115/Hyd/2012 * Nipun Builders and Developers Pvt Ltd )Delhi HC) ITA No. 120/2012 * Vaibhav Cotton Co Ltd Indore V Assessee ITA No. 253/Ind/2010 Indore Bench * The assessments U/s 143(3) of the Act in case of investor companies have been completed accepting the contention of the said companies and no major addition has been made on this count (Para 7.3 - Page 37 - CIT(A)'s order) * Though the documentation is complete in respect of investor companies, the findings of the AO that non availability of investor companies at the given address, inability to produ....
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....hich remained uncomplied, no confirmation ever received not even till date of passing of order. (Para 3(A)(ii) - Page 6 - AO's order). * Assessee failed to bring the directors of the investor company along with books of accounts and confirmation to prove the identity of the contributors. * No confirmations and return/PAN of parties - cross verification not possible - onus is on the assessee to prove the ICG - assessee failed to discharge onus. - assessee's own money routed these concerns (Para 4(A)(i) - page 8 - AO's order). * Evidence available impeaching the credentials of the "investor companies" and their "directors" (Para 4(A)(i) - page 8 - AO's order). * Amt received through private placement - contributors personally known to assessee - must be aware of whereabouts - corporate veil needs to be lifted - assessee converted its unaccounted funds in the form of share capital from 4 concerns * Assessee failed to submit documents related to credits in the books - assessee provided various addresses of alleged contributors of share application only to mislead dept. (Para 4(A)(vi) -AO's order) * Differentiated Lovely Exports (SC) on ground that it is not having binding effect ....
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....xports and Kamdhenu Steel Para 7.4 Page 22 & 23 of CIT(A)'s order) * Where the complete particulars of the share applications are furnished to the AO and the AO has not conducted any enquiry into the same or has no material in his possession to show that those particulars are false, then no addition can be made in the hands of the company u/s 68. (Para 7.4 Page 23 CIT(A)'s order) * The appellant company and its investor companies are nothing but a creation of paper companies to transfer its funds from alleged Bhushan Steel Ltd. to various companies, through the appellant company and its investor companies. The appellant company has not given any cogent reasoning for the fund flow. Appellant company is only routing transactions of alleged Bhushan Steel Ltd. and not the ultimate beneficiary. It has further passed on funds to other companies. (Para 7.3 & 7.8, page 23 & 24) * CIT(A) deleted addition of Rs. 46 crores and made addition of Rs. 92 lakhs @ 2 percent as undisclosed income received by the appellant for routing these transactions of having been providing a fluid mechanism from one company to another. Addition enhanced by Rs. 92 lakhs for routing transactions. (Para 7....
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....y assessee to change the color of transaction and not justified it case in spite of opportunities(Para 4.6.4 Sub-Point (4) Page 6/7 - AO's order). * The case of the assessee for the AY 2012-13 is also pending disposal in which addition on same ground was made and the assessee has failed to discharge its onus because merely filing some papers in support of transaction cannot be termed as genuine transaction.(Para 4.7.8 Page 11 - AO's order) Case laws relied upon by the A.O * McDowell & Co Ltd. [1985] 154 ITR 148 * CIT V Durga Prasad More 82 ITR 540 (SC) * Workmen of Associated Rubber Industry Ltd V Associated Rubber industry Ltd [1986] 157 ITR 77 (SC) * Bombay Oil Industries Ltd V DCIT [2000] 82 ITD 626 * CIT V Sree Meenakshi Mills Ltd 63 ITR 609 * CIT V Frostair (P) Ltd ITA No. 183 0f 2002 and 1638 of 2006 * CIT V Youth Construction (P) Ltd 44 taxmann 364 * Bombay Oil Industries Ltd V DCIT [2000] 82 ITD 626 * Mancherial cement V Income Tax Officer ITA No. 115/Hyd/2012 * Nipun Builders and Developers Pvt Ltd (Delhi HC) ITA No. 120/2012 * Nova Promoters &Finlease Ltd (P) Ltd [2012] 206 Taxman 207 * CIT V Precision Finance Pvt Ltd (1994) 208 ITR 405 ....
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....egarding share capital of Rs. 16 crores: * The assessee company has not discharged its onus to prove genuineness and creditworthiness of transactions even after so many opportunities (Page - 4, Para 4.11). * The assessee company has failed to produce the directors of the investor company prove the identity of the investor company(Page - 4, Para 4.10). * The assessee has not done any business activity during the year under assessment and in subsequent assessment years also. i.e, AY 2014-15 & AY 2015-16(Page - 4, Para 4.12). * The assessee has ignored the valuation criteria of past performance for valuation of the company(Page - 4, Para 4.12). * The registered office of the investor companies (Winfiled and Quadrel) are located in Dilshad Garden and West Vinod Nagar (situated in east Delhi) but they have sent the part replies from RK Puram post office and pattern of both the replies are same. They may have been sent by a common person. Therefore, genuineness is doubtful.(Page 3, Para 4.4, 4.5 - AO's Order). * The assessee has failed to prove the ICG of the transaction(Page - 9, Para 5.4 - AO's Order). * The assessee has brought nothing on record to justify its bright fut....
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....- 4.2.3.6 - CIT(A)'s Order). * The submissions filed by the appellant have been considered and are not found tenable. The case laws cited by the appellant are distinguishable in facts(Page -, 27, Para - 4.2.3.6 - CIT(A)'s Order). * CIT(A) distinguished Lovely Exports [216 CTR 195] and Gourdin Herbals India Ltd ITA No. 665/2009 dated Sep 17, 2009 Case laws relied upon by the CIT(A) * NR Portfolio Pvt Ltd [96 DTR 0281 (Delhi)] * CIT V Nova Promoters & Finlease (P) Ltd [ITA No. 342 of 2011] * GKN Driveshafts (India) Ltd. V ITO (259 ITR 19) (SC) * Navodaya Castle [56 taxmann.com 18 (SC)] (distinguishing Lovely exports) * CIT V Sophia Finance Ltd 205 ITR 98 (Del.) (F.B.) * Titan Securities Ltd [357 ITR 184 (Del)] * MAF Academy Pvt Ltd [361 ITR 02858 (Delhi)] * Tarika Properties Investment Pvt Ltd [221 Taxman 0014 (Del) ] * Nova Promoters and Finlease Pvt Ltd (2012) 342 ITR 169 (Delhi) * Globus Securities and Finance PVt Ltd [224 Taxman 237 (Delhi) ] * Focus Exports Pvt Ltd [111 DTR 0012 (Del) ] * Rathi Finlease Ltd (215 CTR 429 MP) * Empire Buildtech Pvt Ltd [366 ITR 110 (Delhi)] * Onassis Axles Private Limited [364 ITR 53 (Delhi)] * Kundan Investment L....
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....explanations andevidences submitted bythe appellant. * It is not the case of Ld.AO that any person hasgiven any statement ormade any allegationagainst these companies(Page 23 - CIT(A)'s order). * The reasons given by AOare generic in nature andnot backed by anyconcrete evidence. (Page23 - CIT(A)'s order) * No cash deposit in thebank accounts of investorcompanies for makinginvestment in theappellant company (Page23 4- CIT(A)'s order). * The appellant companyhas allotted shares forthe application moneyreceived by it (Page 24 -CIT(A)'s order). * Depositors have givenconfirmation, providedtheir income tax returnsentire amount receivedthrough normal bankingchannels (Page 23/24 -CIT(A)'s order). The appellant hasestablished the ICG of thetransactions.(Page 27 -CIT(A)'s order). * Onus cast upon theappellant with regardduties enjoined by virtueof cash credit standsfulfilled and discharged,cannot be said thatappellant failed todischargecreditworthiness andgenuineness (Page 24 -CIT(A)'s order). * No adverse inference iswarranted or sustainable(Page 24 - CIT(A)'s order). * The shares issued asbonus shares have notbrought any inflow ofincome which is nothingbut the credit in thebooks ....
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.... the genuineness of transaction.(Page 6 - AO's order) * Since the payments were transferred to other companies as and when they were received, the creditworthiness of the investor does not in any way get established. The bank accounts of all the investors are in same branch, no profit making apparatus, no business. * It seems it is just an accommodation entry just to evade tax. (page 5 - AO's order). * Amount has been received through private placement, which means contributors were personally known to assessee. Since the existence of the investors could not be proved, there is no question of taking cognizance of the such non-existent person, meaning thereby money actually belonged to assessee itself and fraudulently routed through bank account of investors. (Page 6 - AO's order) * Regarding the other current liabilities, the assessee has failed to bring the directors of the eight companies from whom money received shown as other liability, to explain the nature of the current liabilities. (Page 12 - AO' order) * As it can be seen from the BS and P&L account of the assessee that these are not trade liabilities.(Page 12 - AO' order) Case laws relied upon by the A.O Divine Le....
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....ss and genuineness (Page 32/44 - CIT(A)'s order) * No adverse inference is warranted or sustainable (Page 32/44 - CIT(A)'s order). There is no denial at any stage of assessment proceedings by any of the subscriber of share capital of having deposited money in the appellant company (Page 43 - CIT(A)'s order) * The appellant has established the ICG of the transactions.(Page 47 - CIT(A)'s order) * CIT has made analysis of the judgment in the case of "Nova Promoters & Finlease (P) Ltd (342 ITR 169 (Del))" and has reached a conclusion that appellant through various documents submitted to establish ICG, it would constitute acceptable proof or acceptable explanation by the assessed. (Page XX - CIT(A)'s order) Case laws relied upon by the CIT(A) * MOD Creation Pvt Ltd V ITO [(2013) 354 ITR 282 (Delhi)] * CIT V Kamdhenu Steel & Alloys Ltd & Others [(2012) 206 taxman 254 (Delhi)] * CIT V Gangeshwari Metals P. Ltd * ITO V Neelkanth Finbuild ITA No. 2821/Del/2009 ITO V NC Cables ITA No. 4122/Del/2009 (ITAT Delhi) * CIT V Oasis Hospitalities P. Ltd [(2011) 333 ITR 119 (Delhi)] * ITO V Rakam Money Matters P Ltd 2821/Del/2011 * ACIT V Kisco castings Pvt Ltd 34 taxmann.com 37 ....
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....rs (page 10 - AO's order). The subscribers did not have creditworthiness as money in their bank accounts seldom rests for a day and finds its destination, no profit making apparatus, no business activity (Page 4 - AO's order) * Merely that the transaction was conducted through proper banking channel does not substantiate the genuineness of transaction. * Since the payments were transferred to other companies as and when they were received, the creditworthiness of the investor does not in any way get established. The assessee company has not explained the nature of other liabilities. It is seen that above liabilities are not trade liabilities. The facts in regard to other liabilities are same as that of share capital which has been discussed at length and in view of case laws discussed above (Page 12 - AO's order) Regarding section 14A, the assessee has not filed calculation sheet for disallowance made along with computation of income. In view of provisions of section 14A r.w.r. 8D disallowance is Rs. 25,56,473/-. Therefore balance is added to income of assessee. (Page 13 - AO's order) Case laws relied upon by the A.O * CIT V Divine Divine Leasing Finance Ltd * CIT V McDowe....
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....the instant case (Page 40 - CIT(A)'s order) * Documents submitted establish that money came from depositor's account and nowhere connected with appellant company (Page 45 - CIT(A)'s order). No cash deposits into bank accounts of the investors for purchase of shares (Page 33 - CIT(A)'s order). * No circumstances to suggest that transactions are not genuine and that onus cast upon it has not been discharged. (Page 30 - CIT(A)'s order). CIT(A) has made analysis of the creditworthiness of investors. No comments made but figures showing handsome creditworthiness (Page 33 - CIT(A)'s order) * The provisions of section 68 would be applicable only when shares have been issued in the name of * non-existing person which is not the situation in the instant case. * No adverse inference drawn by Ld. AO with reference to funds received by appellant company. (Page 33 - CITR(A)'s order). * No denial by any of the subscribers of the appellant company's share capital that they did not invest their money into it. * The AO has failed to bring any credible evidence on record to neutralize the evidences filed by the appellant. Therefore, addition cannot be sustained. (Page 47 - CIT(A) order). T....
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....funds back to back (Page 3 - AO's order) * After few days of local enquiry, confirmation of all parties received through speed post in the office of AO.(Page 2 - AO's order) * Summons U/s 131 remain un-complied "(Page 3 - AO's order) * Assessee offered no explanation about as to why these investors agreed to invest when there is no scope for making an exit out of investment. (Page 5- AO's order) * Also not explained that why shares were not allotted and share application money returned (page 5 - AO's order) * The entire approach of assessee for shying away from filing requisite documents and the necessary details strongly suggests that entries are accommodation entries ((Page 5- AO's order) * Intent of assessee to avoid furnishing the details and then take spacious plea that addition made without making direct enquiries from persons who advanced money. (Page 6 - AO's order). * Since the assessee was well aware of the fact of bogus credits in its books, it has chosen not to subject itself investigation/ enquiry conducted by the department. * Merely that the transaction was conducted through proper banking channel does not substantiate the genuineness of transaction. * Since....
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....30 - CIT(A)'s order) * Provisions of section 68 not applicable in case of bonus shares (Page 30 - CIT(A)'s order). The shares issued as bonus shares have not brought any income which is nothing but the credit in the books of accounts of the company, therefore when no sum has been credited, addition cannot be made U/s 68 of the Act.The amount of issue of bonus shares does not represent any fresh credit but only a transfer entry representing capitalization of reserves and surplus and is not hit by section 68 of the Act. * Differentiated Roshan Di Hatti, Mittal Belting and Machinery Stores, Sophia Finance Ltd, McDowell & Co Ltd Case laws relied upon by the CIT(A) * MOD Creatiosn Pvt Ltd V ITO [(2013) 354 ITR 282 (Delhi)] * CIT V Kamdhenu Steel & Alloys Ltd & Others [(2012) 206 taxman 254 (Delhi)] * CIT V Oasis Hospitalities P. Ltd [(2011) 333 ITR 119 (Delhi)] * ITO V Rakam Money Matters P Ltd 2821/Del/2011 * ACIT V Kisco castings Pvt Ltd 34 taxmann.com 37 * CIT V Fivest Ltd [2014] 44 taxmann.com 356 (Delhi) * CIT V Oasis Hospitalities Pvt Ltd (333 ITR 119 Delhi) * CIT V Lovely Exports [2008] 216 CTR 195 (SC) 13. Sukhna teel Pvt Ltd Revenue's appeal 2012-....
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....)'s order). * Reasons given by AO are generic and not backed by any concrete evidence (Page 30 - CIT(A)'s order) * Entire amount received through banking channels, investors confirmed, no evidence to prove funds actually emanated from coffers of appellant company, no concrete evidence against appellant company (Page 30/31 - CIT(A)'s order) * Section 68 not applicable on bonus issue, it does not represent fresh credit (Page 31 - CIT(A)'s order). The amount of issue of bonus shares does not represent any fresh credit but only a transfer entry representing capitalization of reserves and surplus and is not hit by section 68 of the Act.(Page 42 - CIT(A)'s order) * The appellant has established the ICG of the transactions.(Page 41 - CIT(A)'s order) Case laws relied upon by the CIT(A) * MOD Creation Pvt Ltd V ITO [(2013) 354 ITR 282 (Delhi)] * CIT V Kamdhenu Steel & Alloys Ltd & Others [(2012) 206 taxman 254 (Delhi)] * CIT V Gangeshwari Metals Pvt Ltd (2013) 30 taxmann.com 328 * CIT V Oasis Hospitalities P. Ltd [(2011) 333 ITR 119 (Delhi)] * ITO V NC Cables Ltd. ITA No. 4122/Del/2209 * ITO V Rakam Money Matters P Ltd 2821/Del/2011 * ACIT V Kisco castings Pvt Ltd 34 tax....
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.... of investor companies with reference to funds received by appellant company * AO has not brought on record any adverse material to reject the explanations and evidences submitted by the appellant. * Not the case of the AO that any person has given any statement or made allegations against the company. * There is no cash deposits in the bank accounts of the parties from whom share capital/ premium has been received. * Entire amount received through banking channels, depositors have confirmed of having deposited money in the company, no evidence that funds received emanated from coffers of the assessee. * Assessee has allotted shares for the share application money received. * With regard to bonus shares the provisions of section 68 are not applicable since the amount in question does not represent fresh credit in the books of account. * Assessee established ICG, addition wrt share capital and share premium and bonus issue deleted. CIT(A) has differentiated the following case laws: A. CIT vs. Nova Promoters - page 31 B. Roshan Di Hatti (SC) -pg 32 C. CIT vs. Nipun Builders & Developers CIT(A) has relied upon the following case laws: * M/s. MOD Creations Pvt. Ltd. ....
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.... * CIT(A) has made analysis of the creditworthiness of the investors and observed that no adverse inference has been drawn by Ld. AO with reference to funds received by appellant company. (Page 29 - CIT(A)'s order) * CIT(A) has observed that addition has been made by AO on ground that replies U/s 133(6) were incomplete, no compliance was made U/s 131 and the inspector's report that no such companies exist (Page 29 - CIT(A)'s order). AO did not bring any adverse material to reject the explanations and evidences submitted by appellant (Page 29 - CIT(A)'s order) * Neither any person has given any statement nor made any allegation against these companies (Page 29 - CIT(A)'s order) * Reasons given by AO are very generic and not backed by any concrete evidence (Page 29 - CIT(A)'s order) * No cash deposit in the bank account of investors (Page 29 - CIT(A)'s order)Transaction took place through normal banking channel (Page 29 - CIT(A)'s order) * Parties involved positively confirmed (Page 29 - CIT(A)'s order) * No iota of evidence to prove that money actually emanated from coffers of appellant company (Page 29 - CIT(A)'s order). Appellant allotted shares for amount received (Page 29 ....
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....eyond doubt.(Page 9 - AO's order). Since the assessee was well aware of the fact of bogus credits in its books, it has chosen not to subject itself investigation/ enquiry conducted by the department.(Page 9 - AO's order) Case laws relied upon by the A.O * Nova Promoters &Finlease (P) Ltd (342 ITR 169 (Del)) * CIT V Nipun Builders &Developers [2013] 350 ITR 407 (Del) * Kale Khan Mohammad Hanif V CIT [1963] 50 ITR 1 (SC) * CIT V Oasis Hospitalities 333 ITR 119 (Delhi) 2011 * Roshan Di Hatti [1977] 107 ITR (SC) * Addition made by AO on ground that replies to notice U/s 133(6) are incomplete, no compliance to summons U/s 131 and the investor's report that companies did not exist at the address (Page 29 - AO's order). * The AO did not bring any adverse material to reject the explanations and evidences submitted by the appellant (Page 29 - AO's order). * Neither any person has given any statement nor made any allegation against these companies (Page 29 - CIT(A)'s order) * Reasons given by AO are very generic and not backed by any concrete evidence (Page 29 - CIT(A)'s order). * No cash deposit in the bank account of investors (Page 29 - CIT(A)'s order) * Transact....
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....ying that this address does not belongs to the investor in question. (Table, page 4/5 - AO's order) * Investor companies received funds back to back arrangement (Page 4- AO's order) * Summons issued U/s 131 remain un-complied (Page 4- AO's order). * Assessee has willfully desisted from furnishing any details/ particulars/ documents/ to prove genuineness of the amount received from parties (Page 5- AO's order). * Assessee offered no explanation about as to why these investors agreed to invest when there is no scope for making an exit out of investment. (Page 6- AO's order). * It has not been explained why share application money was returned to these parties and shares not allotted.(Page 6- AO's order) * AO did not find merit in the contention of the assessee that the decision of share premium is the discretion of the board of directors of the company. * That the investor did not provide the complete bank statement enabling the AO to verify source of source. * That the compliance made by the investor companies is not found satisfactory. Case laws relied upon by the A.O * Nova Promoters &Finlease (P) Ltd, Delhi high court * Nipun Builders & Developers Pvt Ltd, ITA No. 1....
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....Bench * CIT V Oasis Hospitalities P. Ltd [(2011) 333 ITR 119 (Delhi)] * ITO V Rakam Money Matters P Ltd 2821/Del/2011 * ACIT V Kisco castings Pvt Ltd 34 taxmann.com 37 * CIT V Fair Fivest Ltd [2014] 44 taxmann.com 356 (Delhi) * CIT V Expo Globe India Ltd [2014] 51 taxmann.com 208 (Delhi) * ITO V Neelkanth Finbuild Ltd ITA No. 2821/Del/2009 * CIT V Lovely Exports [2008] 216 CTR 195 (SC) 18. Globus Real Infra Pvt Ltd (Formerly Sur Buildcon Pvt Ltd) Assessee's Appeal 2013-14 Section 68 Share Application n Money - Rs. 5.6 crores Unsecure d loans - Rs. 2.95 crores * On perusal of reply filed by the assessee it was noted that parties who have given amount don't have much creditworthiness to advance such huge share capital (Page- 2, Para - 2 - AO's Order) * It is duty of the assessee primarily to establish creditworthiness of persons who have given credit and genuineness of transaction, merely filing PAN, ITR, BS dors not absolve assessee from its responsibility of discharging onus (Page- 5, Para - III - AO's Order). * Investors/ lenders have hardly any business to generate income to extend such huge amount (Page - 11, Para (i) - AO's Order). Regarding the source o....
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.... V Sampat Raj Ranka (2001) 73 TTJ (Jd) 642 * Mc Dowell Ltd. V CTO (1985) 154 ITR 148 (SC) * CIT V Youth Construction Pvt Ltd 44 taxmann 364 * Wood Polymer Ltd. Bengal Hotels Limited, 40 Company Cases 597 * Campbell V Inland Revenue Commissioners (1), Stamp J. * CIT V Precision Finance Pvt Ltd (1994) 208 ITR 405 (Cal) * Bharati Pvt Ltd W.B. V CIT WB (1978) 111 ITR 991 CIT(A) decided the appeal exparte * Notice for hearing dated April 11, 2017 served via speed post dated March 27, 2013. No compliance made by appellant, appeal decided on basis of facts on record. ( Page - 3, Para 4 -- CIT(A)'s Order) * The appellant was asked to establish source of source of share capital and loans due to movement of funds between different companies and also due to insertion of proviso in section 68 effective for year under consideration (Page - 4, Para - 7 - CIT(A)'s Order) * Share applicant companies and lender companies have same address in Delhi except KBN Infra which has Mumbai address (Page - 4, Para - 7 - CIT(A)'s Order) * KBN Infra, NRA Iron & steel and Vistrat Real Estate have common director namely Shailendra Singh Bhadoria. (Page - 4, Para - 7 - CIT(A)'s Order) * No reason why....
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....age - 9, Para 6.7 - AO's order). * One thing is common that whole of the sale proceeds are used for buying shares of other companies and at the end there is no income earned even after transaction of hundred of crores (Page 9, Para 6.7 - AO's order). * Bank statement show similar pattern, receipts of huge amount of money without interest, no proportionate expense booked, in turn providing huge amounts to various companies without interest (Page 9, Para 6.7 - AO's order) * The assessee failed to prove the genuineness of transactions and creditworthiness of the investor companies.(Page 10, Para 6.10 - AO's order). * Further accommodation entries have been taken on payment of certain amount of money, estimated to 25 paisa per Rs. 100. On accommodation entry od Rs. 31 crores, assessee paid Rs. 7.75 lakhs, since No details and source of this payment has been shown, held to be paid out of undisclosed sources (Page10, Para 7 - AO's order) * CIT(A) has made analysis of Reserves & Surplus position of all the investors. All have been found to have adequate investment apart from appellant company and having decent reserves (Page 19-20, Para 5 to 5.2 CIT(A)'s order) * The amendment made ....
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....#39;s/depositor's account and nowhere connected with the Assessee Company. * That there is no cash deposit in the bank accounts of the parties from whom share capital/ loan is received. * That the entire amount was received through normal banking channels. * That the depositors have also confirmed of having deposited money in the company which confirmations also reveal source of funds, particulars of bank accounts through which payments have been received and income tax particulars. * That the Assessee has allotted shares for share application monies received. * That there is no mandate of law to look into the source of source for the A. Ys prior to A. Y. 2013-14. * That the Assessee cannot be fastened with liability u/s 68 unless a causal connection between the cash deposit in the bank account of the investor (if any) and the Assessee is established. * That where complete particulars of the share applications are furnished to the A.O and the A.O has not conducted any enquiry into the same or has no material in his possession to show that those particulars are false, then no addition can be mode in the hands of the company. * That the Investor companies are having a....
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.... form of share capital/loan/advance etc. and the investor/loan company has acted only as conduit for routing the money back to the books of account of that person. In the instant case there is no involvement of any undisclosed fund or any fictitious/books entries in the entire transactions. There is no information or inquiry or any material that the assessee's company availed any accommodation entry through any entry operator or anyone whereby it has been found that assessee have routed their own unaccounted/undisclosed fund in their books of account. 19. Apart from that, all the assessee's in the respective assessment proceedings have filed detailed documentary evidences effectively discharging the primary onus of discharging the requisite ingredient of Section 68, viz., identity and creditworthiness of the investor/lenders and the genuineness of the credits and therefore, the nature and source of the impugned credit stood fully explained on standalone basis in each of the cases of the respective assessees. The peculiar facts which is permeating in all these appeals which is different from many other cases is that one assessee company has served as investor/lender of funds into t....
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....ds belonging to M/s. Sukhna Steel Pvt, Ltd. * Again, a sum of Rs. 10 crores out of the said funds of Rs. 31 crores, has been received by M/s. Track Casting (India) Pvt. Ltd. (at SI. No. 19) in the form of share capital from M/s. Jawahar Credit & Holdings Pvt Ltd. (at Si. No. 4). The said sum of Rs. 10 crores has been paid by Jawahar Credit Holding Pvt. Ltd. to M/s. Track Casting (India) Pvt. Ltd. out of the share capital of Rs. 73.50 crores received by the former company from various parties. The said share capital of Rs. 73.50 crores has also been added u/s 68 in the hands of Jawahar Credit & Holdings Pvt. Ltd. by treating the same as unaccounted funds belonging the M/s. Jawahar Credit & Holdings Pvt. Ltd. The chain continues in a similar fashion. * Thus, the same funds routed via M/s. Jawahar Credit & Holdings Pvt. Ltd. to M/s. Track Casting (India) Pvt. Ltd. and subsequently to M/s. Sukhna Steel Pvt. Ltd, have been treated as belonging to and representing the undisclosed funds of all the three group entities at the same point in time. * Again, Rs, 13.50 crores invested by M/s. Jawahar Credit & Holdings Pvt, Ltd. out of its share capital of Rs. 73.50 crores (w.r.t which add....
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....re share capital/share premium received by the assessee from its own group companies have been invested/advanced to other group companies. On these facts it cannot be held that the credit appears in the books of account are unaccounted or undisclosed income of the assessee. 21. Ld. Counsel reiterated that fund flow statements (with accompanying bank statements) effectively and conclusively establish the following facts: i. That the Impugned credits in the form of share capital/share premium and/or loans & advances (as may be applicable) appearing in the books of account of the Assessees herein have arisen on account of the actual movement of funds originating from the regular books of account of BEL into a maze of group companies (Including the Assessees herein) via regular banking channels. ii. There is no fake or bogus entry in the entire chain which has been used as a camouflage by any of the group companies (including the Assessees herein) to put through their own unaccounted funds. iii. That there are no cash deposits in the entire chain and the credits are ultimately sourced out of the accounted funds of BEL; iv. That the Assessees herein are placed at different leve....
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.... statement already on record of the Department. Further, similar additions made u/s.68 in the case of several investor/lender companies who have invested in the case of present assessees are also pending for disposal at the first appellate stage. Thus in such a situation and facts it cannot be held that these are non existing entities and it is clear cut case of double whammy. 24. Even otherwise also if the common antecedent and origination and the ultimate destination of the impugned funds arising from the same entity, i.e., BEL which has been routed to all through group companies is kept aside, then on standalone basis each and every assessee had successfully discharge the primary onus of establishing the identity, creditworthiness and genuineness of the transaction. In support, the assessee before the authorities below has submitted all the documents explaining the nature and source of the share capital/share premium appearing in the books of account which has remain uncontroverted by the Assessing Officer. The same have been placed in the paper book also. The assessees have furnished following documents before the Assessing Officer and CIT(A):- (i) Names, addresses and PAN d....
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....lenders also show significant net worth fair enough to make the investments. The confirmations of the investors/lenders are also on record. Thus, where the funds have flown through normal banking channels and have been duly disclosed in the regular books of account of both the parties and the transactions have been confirmed by the respective parties and not repudiated in any manner, the creditworthiness of the parties is proved beyond doubt 26. In all these cases, Assessing Officer has not conducted any such enquiries or has brought anything on record to even remotely suggest that the monies received by the Assessees in the form of the impugned credits recorded in their books of account represent the undisclosed or unaccounted funds/ income of the Assessees. Apart from alleging that notices issued by the Ld. A.O to few investors/lenders remained unserved or non-complied with and that the Assessees failed to produce directors of the investors/lenders companies and that some of the investor companies did not have their own profit making apparatus which cannot be sole reasons to sustain additions u/s 68. The Ld. A.Os have not brought anything on record to disprove/refute the genuine....
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.... whose cases are also pending for disposal either before this Tribunal or the first appellate authority. The details of such companies by way of an example were given as under: Name of Assessee Names of Investors/ Lenders Quantum of addition made by the A.O u/s 68 w.r.t funds received from the investors/lenders Year in which addition u/s 68 was made in the hands of Investors/ Lenders Section under which assessment was completed in the case of Investors/ Lenders Quantum of addition in the hands of Investors/ Lenders Nature of Addition in the case of Investors/ Lenders Whether addition was confirmed/ deleted by C.I.T(A) in the case of Investors/ Lenders Pendency of appeal in the case of Investors/ Lenders Angel Cement Pvt.Ltd. 1. A.Y. 2012-13:- A) Share Capital fully Paid Up Sintex Consumer Electronics Pvt.Ltd. Rs. 1,00,00,000 A.Y.2012-13 143(3) 1)Rs. 78,22,80,000 Share Capital deleted ITAT (Assessee herein at Sl. No. 9 of the captioned matters in the index supra) C.I.T(A) A.Y.2012-13 147 1)Rs. 3,90,00,000 Advance Rececived NA 2) Rs. 3,90,000 Commission Expense (3.9 Cr @ 1%) Venus Recruiter Pvt.Ltd. ....
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.... Rs. 2,00,00,000 A.Y. 2012-13 147 Rs. 73,70,07,363 Share Capital & Unexplained Credit NA C.I.T(A) Kasper InformationTechnology Pvt.Ltd. 2. A.Y. 2013-14:- A) Share Capital converted into Partly Paid Up to Fully paid up Landsky Real Estate Pvt.Ltd Rs. 8,00,00,000 A.Y. 2013-14 143(3) Rs. 18,60,00,000 Share Capital confirmed ITAT (Assessee herein at Sl. No. 8) Sintex Consumer Electronics Pvt.Ltd 1. A.Y. 2012-13:- A) Share Capital:- Jingle Bells Aluminium Pvt.Ltd. Rs. 4,55,70,000 (bonus) A.Y.2012-13 143(3) Rs. 62,00,00,000 Share Capital Fresh Addition on account of alleged commission income ITAT (Assessee herein at Sl. No. 5) Angel Cement Pvt.Ltd. Rs. 4,37,10,000 (bonus) A.Y.2012-13 143(3) Rs. 120,70,00,000 Share Capital Deleted ITAT (Assessee herein at Sl. No. 1) Frozen Iron & Steel Pvt.Ltd. Rs. 9,00,00,000 A.Y.2012-13 147 Rs. 1,00,00,000 Alleged Accomodations Entries NA C.I.T(A) Reinforce Recruiter Pvt.Ltd. Rs. 9,00,00,000 A.Y.2012-13 147 Rs. 4,50,00,000 Current Liabilities - Unexplained credit u/s 68 NA C.I.T(A) STARLIGH....
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....ATE LIMITED Rs. 1,58,000 (BONUS) A.Y. 2012-13 143(3) Rs. 73,50,00,000 Share Capital Fresh Addition on account of alleged commission income ITAT (Assessee herein at Sl. No. 4) Sunlight Tour & Travel Pvt.Ltd. A.Y. 2012-13:- A) Share Capital:- Sukhna Real Estate Pvt.Ltd. Rs. 5,46,84,000 (bonus) A.Y.2012-13 143(3) Rs. 80,63,40,000 Share Capital Deleted ITAT (Assessee herein at Sl. No. 12) Navayuga Consultancy Pvt.Ltd Rs. 5,46,84,000 (bonus) A.Y.2012-13 147 Rs. 15,00,00,000 Share Capital NA C.I.T(A) Delight Resorts Pvt.Ltd. Rs. 1,08,00,000 (bonus) A.Y.2012-13 143(3) 1. Rs. 10,00,00,000 2. Rs. 66,56,47,519 3. Rs. 5,22,890 Share Capital Advance Received Unverifiable Expenses Deleted ITAT (Assessee herein at Sl. No. 2) Janitor Infrastructure Pvt.Ltd. Rs. 20,00,00,000 A.Y.2012-13 147 Rs. 36,00,00,000 Share Capital converted partly to fully NA C.I.T(A) SUPER STAR AGENCY PRIVATE LIMITED A.Y. 2012-13:- A) Share Capital Fully paid up: BNR INFOTECH PRIVATE LIMITED Rs. 5,00,00,000 A.Y. 2012-13 153C r.w.s 153A Rs....
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....nbsp; 29. Under these facts, the identity and existence as well as source of the credit and the creditworthiness stand fully discharged in cases of all the assessee-companies. The Department cannot blow hot and cold for making similar additions in the hands of the investor/lender company u/s.68 on the same amount and then again treating it to be bogus credit entry or unaccounted money of the assessee company. 30. Apart from that, he submitted that the assesseecompanies have furnished the bank statements of the investor/lender companies which prove beyond doubt that the investors/lenders had adequate funds for making the impugned investments/deposits in the assessee-companies. Further, the Assessee(s) have also filed the audited accounts of the investor/lender companies which clearly depict that such investors/lenders had sufficient net worth (i.e. share capital plus reserves & surplus) and/or borrowings to make the impugned investments/deposits in the Assessee(s) herein. As held by the Hon'ble Bombay High Court in the case of PCIT vs. Ami Industries (supra), cited supra, that it is not necessary that the investme....
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....ssee and the creditor/investor. (iii) The creditor's/investor's creditworthiness has to be judged, vis-a-vis, the transactions, which have taken place between the assessee and the creditor/investor, and it is not the business of the assessee to find out the source of money of his creditor/investor or of the genuineness of the transaction, which took place between the creditor/investor and sub-creditor and/or creditworthiness of the sub-creditors. (iv) It is not the burden of the assessee to prove that the money advanced/invested by the creditor/investor is properly taxed. (v) Once the assessee establishes that the assessee has received the impugned amount from the creditor/investor by way of cheques, the assessee must be taken to have proved that the creditors/investors had the creditworthiness to advance the loans/share capital. Thereafter, the burden shifts to the A.O. to prove the contrary. (vi) On failure on the part of the creditors/investors to show that their sub-creditors and creditworthiness to advance the said amounts to the assessee, these amounts as a corollary, cannot under the law, be treated as the assessee's income from the undisclosed sources, when ....
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....rs/lenders actually emanated from the coffers of the Assessees or represented the undisclosed income of the Assessees. 33. Though the proviso to Section 68 inserted by Finance Act, 2012 w.e.f. 01.04.2013 casting the additional onus on the assessee of proving the source of the source raising the share subscription cannot be held to be retrospective which has been held by Hon'ble Bombay High Court in the case of CIT vs. M/s. Gagandeep Infrastructure Pvt. Ltd. (2017) 80 taxmann.com 272 (Bombay) wherein it was observed and held as under: "...(e) We find that the proviso to Section 68 of the Act has been introduced by the finance Act 2012 with effect from 1st April, 2013. Thus, it would be effective only from the Assessment Year 2013-14 onwards and not for the subject Assessment Year. In fact, before the Tribunal, it was not even the case of the Revenue that Section 68 of the Act as in force during the subject years has to be read/understood as though the proviso added subsequently effective only from 1st April, 2013 was its normal meaning. The Parliament did not introduce to proviso to Section 68 of the Act with retrospective effect nor does the proviso so introduced states that it ....
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....logy Pvt. Ltd. A.Y. 2013-14 Share Capital - Rs. 16 crores (i) Rs. 8 crores (ii) Rs. 8 crores (i) Landsky Real Estate Pvt. Ltd. (ii) Quadrel Infrastructure Pvt. Ltd. (i) Confirmation/ ITR/ Bank statement/ Audited Accounts/ Asst. Order 143(3) (ii) Confirmation/ ITR/ Bank statement/ Audited Accounts/ Asst. Order 143(3) PB-7B Pgs. 1-24 Pgs. 25-39 Landsky Real Estates Pvt. Ltd. A.Y. 2013-14 A. Share Capital - 16 crores (i) Rs. 8 crores (ii) Rs. 8 crores B. Current Liabilities -Other payables (i) Rs. 1.30 crores (ii) Rs. 1.30 crores (i) Winfields Iron & Steel Pvt. Ltd. (ii) Quadrel Infrastructure Pvt. Ltd. (i) Cantabile Minerals & Minings Pvt. Ltd. (ii) Angel Cement Pvt. Ltd. (i) Confirmation/ ITR/ Bank statement/ Audited Accounts/ Asst. Order 143(3) (ii) Confirmation/ ITR/ Bank statement/ Audited Accounts/ Asst. Order 143(3) (i) Confirmation/ ITR/ Bank statement/ Audited Accounts (ii) Confirmation/ ITR/ Bank statement/ Audited Accounts PB-8B Pgs. 1-15 Pgs. 16-29 Pgs. 30-43 Pgs. 44-58 Globus Real Infra Pvt. Ltd. (earlier known as Sur Buildcon Pvt. Ltd.) A.Y. 2013-14 A. Share Capital - 5.60 crores: (i) Rs. 1.20 crores (ii) Rs. 1.40 crores (iii) Rs. 80....
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....aced on record. (vii) The subscribers to the share capitals did subscribe to the share capital of the Assessee-companies and shares were duly allotted to them in most of the cases. (viii) There is no denial at any stage of the assessment proceedings by any of the investors/lenders of having deposited money in the Assessee-Companies. (ix) The impugned amounts have been received through undisputed banking channels. (x) There is no cash deposit in the bank account of the parties from whom the impugned amounts by way of share capital/ share premium/loans have been received. (xi) The documents submitted by the Assessee(s) establish that the money came from the investor's/lender's account and is nowhere connected with the Assessee companies. (xii) There is no proof or evidence to suggest that the impugned sums actually emanated from the coffers of the Assessee companies or represented the undisclosed incomes of the Assessee companies. (xiii) The A.Os have not brought on record or confronted the Assessees with any such money trail or calculation or derivation to show that the impugned share capital/ loans & advances (as the case may be) received by the Assessees represented ....
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....uch higher than the prevalent market trend, the action of the A.O was not tenable unless the A.O had brought on record some material to show that confirmation and other evidence placed by the Assessee was not genuine, he could not have simply discarded the documents produced by the Assessee. Since the provisions of sec 56(2)(viib) of the Act is introduced w.e.f from 01.04.2013 cannot be applied retrospectively. Reliance was placed on decision of Hon'ble Bombay High Court in the case of CIT Vs Green Infra Limited ITA No. 1162 of 2014 Dt: 16.01.2017 and CIT vs. M/s. Gagandeep Infrastructure Pvt. Ltd. (PB 95-98) MANU/MH/1274/2017 : (2017) 394 ITR 680 (Bom). Similarly, in the case of CIT vs. Anshika Consultants Pvt. Ltd. (2015) 93 CCH 16 (Del HC), the Hon'ble Jurisdictional High Court opined that the fact that the assessee company charged higher premium or not, should not have been subject matter of the enquiry-Instead, issue must involve amount invested by share applicants were from legitimate sources or not. Reference is further craved to the judgment of the Hon'ble Madhya Pradesh High Court in the case of Pr. CIT (1), Indore v. Chain House International (P) Ltd. [2018] 98 taxma....
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....A, page 10 38. In all these cases, the ld. CIT(A) has held that Section 68 is not applicable on increase in share capital on account of issue of bonus shares. The amount representing bonus share does not represent group of any sum in the books of account of the assessee it merely denotes a transfer entry representing the capitalization on reserve and surplus and not any fresh credit in the books of the assessee and therefore it is not hit of Section 68. Regarding grounds challenged the fresh addition made by the ld. CIT(A) on account of alleged commission income @ 2% for providing facility to route transaction resulting of introduction of new source of income. He submitted that this issue is raised in assessee's appeal in the following cases:- (i) Jawahar Credit & Holding Pvt. Ltd. (A.Y. 2012-13) - ITA No. 5398/DEL/2019 - Assessee's Appeal. (ii) Jingle Bells Aluminium Pvt. Ltd. (2012-13) - ITA No. 5397/DEL/2019 - Assessee's Appeal. (iii) Kasper Information Technology (P) Ltd. (A.Y. 201213) - ITA No. 357/Del/2019. 39. To challenge this, assessee has raised identical grounds in all these cases which reads as under: 1. That on the facts and in the circumstances of the case, ....
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.... Assessees above named in their respective appeals filed before this Hon'ble ITAT. 41. The relevant observations of the Ld. C.I.T (A) in these three cases are reproduced hereunder for the sake of ready reference: Name of the Assessee A.Y Findings of the Ld. C.I.T (A) Jawahar Credit & Holding (P) Ltd. 2012-13 "7.8 As stated earlier, there is no worth/reserves of the appellant company nor any business carried out, the investor companies and other persons are also not carrying out any visible business activity, therefore, this is nothing but routing of its funds by the Bhushan Steel Ltd. and its related parties where neither the investors and other persons nor the appellant company are ultimate beneficiary. The funds received were given to the other companies, as soon as it is received and the assets in the balance sheet is shown in the form of investment in shares for the share application money and premium thereon received. The appellant has also not given any cogent reasoning for the fund flow shown by the A.O in his report. 7.9 Therefore, looking to the facts and circumstances of this case where basic requirement to justify the identity, creditworthiness and genuineness of....
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....s narrated above, these transactions are found to be for routing finances of M/s. Bhushan Steel Ltd., through these companies and therefore these companies are just paper companies where appellant is not the ultimate beneficiary because it has further passed on those funds to five companies as shown in the flow chart. 7.11 In view of above, it is to be stated that as per the practice and also seen in various cases, the said person (in this case appellant) charges the amount to provide such entries which is generally 2% of the total transactions. Therefore, considering that the appellant has been providing the facility to route these financial transactions, the 2% of the total amount is treated as undisclosed income of the appellant, not shown in its return of income. This comes to Rs. 1,24,00,000/-. 7.12 Since the details have been duly provided with respect to the referred companies and the additions are out of the ambit of provisions of section 68 of the Act due to the reason that these investor companies are held to be just a paper company or conduit in the case of other investors for providing entries and routing the finances, therefore, the addition to the extent of Rs. 1,24,....
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....roviding such entries, not disclosed by the appellant. For the balance amount, the appellant gets a relief." 42. Therefore, the Ld. C.I.T (A) in the above three cases has categorically admitted that the respective Assessees have prima facie established the necessary ingredients of section 68, viz., identity, creditworthiness and the genuineness of the impugned transactions and therefore the additions made by the A.Os are beyond the purview of section 68 of the Act. While observing as above and deleting the impugned additions made by the respective A.Os u/s 68 of the Act, the Ld. C.I.T (A) has proceeded to introduce and assess a new source of income being the alleged undisclosed commission income of 2% allegedly earned by the respective Assessees for providing a fluid mechanism for the transfer of funds from one company to another. The alleged commission incomes as estimated by the Ld. C.I.T (A) in the aforesaid cases do not constitute the subject matter of assessments i.e. the same have neither been offered by the Assessees in their respective returns of income nor is there any whisper regarding the taxability of the alleged source of income in the assessment orders passed by the ....
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....eted. 45. Lastly regarding Revenue's appeal challenging the restriction of addition of Rs. 23,32,813/- made by the Assessing Officer u/s.14A read with Rule 8D to Rs. 5 lac in the case of Stylish Construction Pvt. Ltd. for Assessment Year 2012-13 for which the following grounds of appeal has been raised by the Revenue:- "5. On the facts and in the circumstances of the case and in law, the Ld. C.I.T(A) erred in restricting the addition to Rs. 5 lac from Rs. 23,32,813/- made by the A.O u/s 14A of the I.T. Act, 1961 read with Rule 8D of the I.T. Rules, 1961 in spite of the fact the decision on this issue is pending in Hon'ble Supreme Court in the case of Maxopp Investment Ltd. and in view of the facts that the financial expenses and administrative expenses debited in the P&L A/c are also relatable to the investments in shares purchased." 46. The facts in brief are that, M/s. Stylish Construction Pvt. Ltd. (hereinafter referred to as the 'Assessee' under para 5 and its sub-paras) filed its original return of income for A.Y. 2012-13 after making a suo-moto disallowance of Rs. 2,23,660/- u/s 14A of the Act on account of expenses attributable to exempt income. The aforesaid figure of ....
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....itional disallowance of Rs. 23,32,813/- u/s 14A of the Act r.w. rule 8D(2)(iii) of the Income-tax Rules, 1962 over and above Rs. 2,23,660/- already disallowed by the Assessee Company in its return of income. The said disallowance was computed by the A.O. by purportedly applying the method prescribed under Sl. No. Particulars Amount 1. The amount of expenditure directly relating to income which does not form part of total income A Nil 2. Expenditure on interest B Nil 3. The average of value of investment income from which does not or shall not form part of the total income [(Rs. 81,70,49,580 + Rs. 20,55,39,582)/2] C Rs. 51,12,94,581/- 4. The average of total assets appearing in the balance sheet of the Assessee [(Rs. 63,09,64,127 + Rs. 21,74,10,672)/2] D Rs. 42,41,87,400/- 5. B X C/D Nil 6. ½% of the average of the value of investment, income from which does not or shall not form part of the total income. E Rs. 25,56,473/- Total Rs. 25,56,473/- 48. On a perusal of the computation under Rule 8D given by the A.O, legal inference is that there are three limbs contained under Rule 8D, namely:- (i) expenditure directly....
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....al evidence by the C.I.T(A) without giving opportunity to the A.O in violation of Rule 46A of the IncomeTax Rules,1962 in the cases of Angel Cement Pvt. Ltd. (A.Y. 2012-13), Delight Resorts Pvt. Ltd. (A.Y. 2012-13) and Stylish Construction Pvt. Ltd. (A.Y. 2012-13), which has been urged by the Department in the following cases: Name of the Assessee A.Y. & ITA No. Ground of Appeal urged Angel Cement Pvt. Ltd. 2012-13, ITA No. 4691/Del/2016 Ground No. 2: That the Ld. C.I.T(A) erred in admitting additional evidence under Rule 46A without giving opportunity to the A.O. Delight Resorts Pvt. Ltd. 2012-13, ITA No. 5974/Del/2017 Ground No. 3 That the Ld. C.I.T(A) erred in accepting the evidences filed during the appellate proceedings without obtaining comments of the A.O in remand proceedings, thereby violating Rule 46A of the IT Rules, 1962 Stylish Construction Pvt. Ltd. 2012-13, ITA No. 5744/Del/2016 Ground No 4 That the Ld. C.I.T(A) erred in accepting additional evidence under Rule 46A without giving any opportunity to the A.O in respect of evidences of shareholders assessment proceedings & supporting documents. 52. In regard to the above, it has been ....
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....are premium and the same money again has been routed back to Bhushan Energy Ltd., can only be proved from fund flow statement which was not there before the Assessing Officer. The additional evidences which have been filed in the form of cash flow fund and the correlation with their respective bank statements etc., should be remanded back to the Assessing Officer for proper verification and examination in order to establish the credibility of this theory of fund flowing from one group to other and the source of these fund is coming from Bhushan Energy Ltd. which has been claimed to be already accounted for. Thus, she submitted that in all fitness matter should be remanded back to the file of the Assessing Officer. DECISION 55. We have heard the rival submissions and also perused the relevant findings given in the impugned orders as well as extensive materials referred to before us at the time of hearing. We had already discussed in the foregoing paragraphs the issues involved in all the appeals filed by the Department as well as by the assessee, and we have found that in all the appeals the similar facts are permeating and issues involved are interlinked and inextricably intercon....
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....s. * That the anus u/s. 68 cannot be said to be discharged merely because the transaction is done through banking channels or account payee instruments. * That in case of certain Assessees, speed post was booked from Delhi but the registered office of the investors was in Punjab & Chandigarh. It shows that the assessee itself filed replies to notices sent u/s 133(6). * That the registered offices of investor companies in some cases are located in different cities but are having their bank accounts operated from Delhi just to facilitate the Assessee. * That the subscriber companies did not have creditworthiness as money seldom rests for o day in their accounts, finds its destination immediately; * That Assessee Company, in most cases, has no business profit, negative CPS, major miscellaneous income nothing to do with business objectives of Assessee Company, no brand value, no past performance history, no future prospect-so as to attract such high premium. * Thai the Assessee offered no explanation as to why the companies agreed to invest in unlisted company where there was no scope for making an exit out of investments. * That the investor and Assessee Company are noth....
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....ely establish that the money came from the investor's/depositor's account and nowhere connected with the Assessee Company. * That there is no cash deposit in the bank accounts of the parties from whom share capital/ loan is received. * That the entire amount was received through normal banking channels. * That the depositors have also confirmed of having deposited money in the company which confirmations also reveal source of funds, particulars of bank accounts through which payments have been received and income tax particulars. * That the Assessee has allotted shares for share application monies received. * That there is no mandate of law to look into the source of source for the A.Ys prior to A.Y. 2013-14. * That the Assessee cannot be fastened with liability u/s 68 unless a causal connection between the cash deposit in the bank account of the investor (if any) and the Assessee is established. * That where complete particulars of the share applications are furnished to the A.O and the A.O has not conducted any enquiry into the same or has no material in his possession to show that those particulars are false, then no addition can be made in the hands of the company....
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.... capital, share premium or any such amount by whatever name called, any explanation offered by such assessee-company shall be deemed to be not satisfactory, unless a) the person, being a resident in whose name such credit is recorded in the books of such company also offers an explanation about the nature and source of such sum so credited; and b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory: Provided further that nothing contained in the first proviso shall apply if the person, in whose name the sum referred to therein is recorded, is a venture capital fund or a venture capital company referred to in clause (23FB) of section 10." 59. Now proviso to Section 68 cast an additional onus on the assessee company for proving the source of the source of share capital/share premium which has been effective from 01.04.2013 and memorandum explaining the Finance Bill, 2012 while introducing the proviso was with an object to curve out the pernicious practice of conversion of unaccounted money through masquerade of investments in the share capital of a company especially in the cases of closely held companies. In fact, the very ....
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....d the entities owned by common shareholder, which is a subsidiary flagship Company, Bhushan Steel Ltd. now merged with Tata Steels Ltd. The fund have flown from Bhushan Energy Ltd. through maze of group companies whereby the funds which has been accounted in the books of Bhushan Energy Ltd. have been routed through group companies and finally have been rerouted back into the books of the Bhushan Energy Ltd. The entire chain and link involves actual movement of accounted fund of BEL in the form of share capital and or loan advances into the assesseecompany herein and subsequent reintroduction of such funds into regular account of BEL to augment its capital base. 61. However, independent of that, we will first examine as to whether at the threshold, the assessees were able to discharge their primary onus cast upon them for discharging their burden of proving the nature and source of credit, i.e., identity and creditworthiness of the lender/subscriber companies and genuineness of the transaction. As discussed above the primary documents by the lender/subscriber companies have been filed which included confirmation, their bank statement, their income return, balance sheet and profit a....
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....tor companies had sufficient funds available with them in the books/ balance sheets and it is not necessary that loan or advances or shares are subscribed, should be out of taxable income only. Either it could be from borrowed funds or from the investments standing in their balance sheet. If the Assessing Officer doubted the source of the fund of the investor companies, then Assessing Officer was required to at least conduct prima facie inquiry from these investors to rebut the assessee's explanation about the source of the funds in the hands of the investor companies. Hon'ble Delhi High Court in the case of CIT vs. Vrindavan Farms (P) Ltd., ITA No. 71, 72, 84/2015, vide judgment and order dated 12.08.2015, wherein one of the ground raised by the revenue was that creditworthiness is not proved, because lender companies had shown low income in their Income Tax Return. The Court found that the entire details of share applicants were made available to the Assessing Officer, including PAN, confirmations, bank statements, their balance sheets and profit & loss accounts and certificates of incorporation, etc. Assessing Officer had not undertaken any inquiry or investigation of the veraci....
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....terial has been brought to rebut the same by the Assessing Officer. Thus, in our opinion this factor on the facts of the present case is not so detrimental. 65. One key contention and fact which has been harped upon by the ld. counsel and also discussed by us at several places herein in the foregoing paragraphs is that, all the funds have been routed through Bhushan Energy Ltd. by way of advances and loans given to the maze of its group companies who have invested or given loan within the same group companies which again has been reinvested in the Bhushan Energy Ltd. Ld. counsel before us has demonstrated by filing fund flow statement in the case of all the companies along with their bank statement and balance sheets. In so far as bank statement and balance sheets are concerned they have already been filed before the Assessing Officer and ld. CIT (A) and this specific plea was also raised before the Ld. CIT (A)s, except for the fact that now before us, he has tried to demonstrate the flow of money from Bhushan Energy Ltd. to the group companies and that all these funds have come from the accounted funds duly recorded in the books of the Bhushan Energy Ltd. and the books of the len....
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....n it be said that any of the entities have routed their own unaccounted money. This is the precise reason that in most of the cases Ld. CIT Appeals have deleted the addition; and in 3 cases, he has held that they must have received some commission for such rotation of funds, albeit such observation may not have legal and factual legs to stand. 68. Thus, in view of our discussion and finding of fact, we do not find any reason or justification for sustaining such an addition of share capital or share premium under the deeming provision of Section 68. We are in tandem with the arguments raised by the ld. counsel and the explanation given by him in view of supporting documents as dealt and incorporated above and are accepted. In the result additions as made by the Assessing Officer on this score are directed to be deleted. 69. Now coming to the issue of fresh addition made by the ld. CIT (A) by making enhancement on account of alleged commission income in three cases. Though as discussed above, the ld. CIT (A) has deleted the addition made u/s.68 on the ground that no unaccounted funds have come in the bank account of the assessee companies, nevertheless, has held that assessee compa....
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....n calling for a remand report on the four points the AAC had exceeded his jurisdiction. While computing the total business income of the assessee, the A.O had estimated the sales at an enhanced figure and had applied a higher rate of gross profit. Thus, the only matter dealt with by the A.O in the assessment order was the estimation of profits and gain of the business of the assessee. None of the four points raised in remand report had any bearing on the question of estimation of either the sales or the gross profit rate. It is evident that the AAC had his doubts about the capacity of the assessee to raise finances for the purchase of goods and show a huge turnover in the very first year of his business. In other words, the enquiry ordered by the AAC was to satisfy himself about the source of investment by the assessee. It is axiomatic that failure to prove the sources of investment will result in addition in the hands of the assessee under a different provision of law and will not have much relevance in the estimation of sales and gross profit rate adopted by the A.O. Any addition on account of unexplained investment would constitute a new source of income which was not the subjec....