AI Drafter 
TaxTMI 
TaxTMI 
2021 (4) TMI 626
X X X X Extracts X X X X
X X X X Extracts X X X X
....urse of assessment proceeding, the assessing officer on the basis of information received from DDIT (Inv)-II, Mumbai, that based on the information collected during search proceedings in the case of Mr Praveen Kumar Jain Group, it was observed by the wing in the above case that various persons were not doing any genuine business activity but was engaged in the activity of providing accommodation entries of various nature like bogus loans, bogus share application and bogus sales etc. As per the information received, the AO percieived that assessee had also taken accommodation entries of Rs. 547,50,000/- in the nature of bogus share application money from the 5 parties namely M/s Alka Diamond Industries Ltd, M/s Ansh Merchandise Private Limited (formerly New Planet Trading Company Private Limited), M/s Triangular Infocom Ltd (formerly Lexus Infotech Ltd), M/s Vanguard Jewels Ltd and M/s Yash-V-jewels Ltd. during the relevant previous year. In order to verify the genuineness of the transaction, AO issued show cause notices under section 133 (6) of the Act for furnishing the details to the addresses available on record. However, all notices were returned unserved, later assessee provid....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t verify the source of the source and hence the addition is wrongly made. It may be stated that the source of source in respect of share application can be verified by the assessing officer only from the assessment year 2013-14 as per Proviso to Section 68 of the Act which was added only with effect from 01104/2013. The Proviso was added by Finance Act 2012 w.e.f 01/04/2013. However, it may be stated that the assessee company has proved source of the fund. 3. The said parties have filed the confirmations in respect of the shore application. 4. The appellant has filed the following documents during the assessment proceedings. • Share application form along with Board Resolution to investment and certificate of investment made. • Confirmation along with full name and address of the parties who have been allotted shares. • Copy of Acknowledgement of Income Tax Return filed. • Copy of accounts as on 3 1.03.2010. • Copy of the bank statements showing the amounts paid by the Said Companies to the appellant company. • The affidavit by the Directors of the said companies confirming the investmen....
X X X X Extracts X X X X
X X X X Extracts X X X X
....officer. A natural justice requires that when the assessing officer relies on the documents, evidences or statements of third party. The AO is required to give a proper opportunity by way of cross examination of third party to rebut the allegation made by the said third party. However, in the appellant case no such cross examination was given. I) Analysis of Provision of section 68 of the Income Tax Act 1961 "Cash credits. 68. Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year: Provided that where the assessee is a company (not being a company in which the public are substantially interested), and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee-company shall he deemed to be not satisfactory, unless- (a) the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Appellant. On one the Income Tax Assessment of Mr. Pravin Kumar Jain has been completed by assessing his income at Rs. 170 Crores and on the other hand department holds that he does not have capacity to making investment in other group . Both the stands of the department are contradictory to each other. g) The said company has sizeable Share capital, Reserves & Surplus and other income. Under the circumstances, Your Appellant submits that credit worthiness on the lenders has also been established. As regards Genuineness of the Loan On this point Your Appellant would like to make the following submissions: • They have been reflected in the books of account of the appellant as well as the investor company. • Mr. Praveen Kumar Join as well as the directors of respective companies whom the share application money was taken by way of their affidavits, have not only confirmed the transactions of share application money but also Categorically deposed that these loan were through account payee cheques Banking channels are absolutely genuine The fact of share application money being received through proper banking channe....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... is also established by Your Appellant. 2) Thus, the appellant claims that the onus that lay upon him u/s 68 of the Act was discharged by him and, therefore, the AO was not justified in making the addition u/s 68 of the Act, as held in the following judicial decisions:- • CIT Vs Smt Sushila Devi Khadaria 319 ITR 0413 • Income Tax Officer Vs Anant Shel Ters (F) Ltd 51 SOT 0234 • CIT Vs Varinder Rawlley 366 ITR 0232 • CIT Vs Sahibganj Electric Cables (P) Ltd 11$ ITR 0408 • ITO Vs Deep Darshan Properties Put Ltd & Others IDA no. 2117 & 2118/Mum/2014 3) The appellant further relies on following judgments to prove the point that having established the identity of lenders, the creditworthiness of the creditors and the genuineness of the loan, he was thereafter not required to prove anything further and no duty was cast upon him to establish as to how the lenders had arranged their funds to advance loans to him:- • CIT Vs Orrisa Corporation (P) Ltd 159 ITR 0078 • Nemi Chand Kothari Vs CIT 264 ITR 0254 • Murlidhar Lahorimal Vs CIT 280 ITR 0512 • Labh chand ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the matter the three essential tests while confirming the pre-proviso Section 68 of the Act laid down by the Courts namely the genuineness of the transaction, identity and the capacity of the share subscriber have all been examined by the impugned order of the Tribunal and on facts it was found satisfied. Further it was a submission on behalf of the Revenue that such large amount of share premium gives rise to suspicion on the genuineness (identity) of the shareholders i.e. they are bogus. The Apex Court in Lovely Exports (P.) Ltd. (supra) in the context to the pre-amended Section 68 of the Act has held that where the Revenue urges that the amount of share application money has been received from bogus shareholders then it is for the Income Tax Officer to proceed by reopening the assessment of such shareholders and assessing them to tax in accordance with law. It does not entitle the Revenue to add the same to the assessee's income as unexplained cash credit. • Arceli Realty Limited (Formerly known as Ellora Electricals Ltd.) Vs. Income Tax Officer (ITA NO.6492/Mum./2016) dated 19.04.2017-ITAT (Mum.) It has been held in the said case that the appellant hav....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ears to be correct. The AR during the appellate proceeding submitted that the Assessing Officer has only referred the information related to the outcome of search in the case of Shri Pravin Kumar Jain Group who were providing accommodation entries but the Assessing Officer has failed to demonstrate any such evidence that the appellant has in reality obtained any accommodation entries, there is no direct specific mention of the appellant by the director or key persons of the investor company, there is no evidence of cash deposits linked to the investors, that the assessing officer did not bring specific incriminating evidence linking the investor to the appellant, the only link is that the investors have invested in appellant company, it is not shown that appellant has given cash to the investors in lieu of entry is merely a surmise but not demonstrated. I have considered above submissions/arguments and it is concluded as under Papers/ evidence found in the search action raises presumption but the same is available in the case of person searched but not in the case of third parties unless proved and corroborated, Similarly, retraction may he rejected as motivated, but the s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ad collected share premium to the extent of Rs. 6.69 crores. Consequently he called upon the respondent to justify the charging of share premium at Rs. 190/per share. The respondent furnished the list of its shareholders, copy of the share application form, copy of share certificate and Form no.2 filed with the Registrar of companies. The justification for charging share premium was on the basis of the future prospects of the business of the assessee. The Assessing Officer did not accept the explanation/justification of the respondent and invoked Section 68 of the Act to treat the amount of Rs. 7.53 crores i.e. the aggregate of the issue price and the premium on the shares issued as unexplained cash credit within the meaning of Section 68 of the Act. This addition was deleted by the CIT(A) and the Tribunal. Before the High Court, the department contended that the proviso to Section 68 of the Act which was introduced with effect from 1st April, 2023 would apply in the facts of the present case even for A. Y. 2008-09. The basis of the above submission was that the de hors the proviso also the requirements as set out therein would have to be satisfied. HELD by. the High Court....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d Industries Ltd and M/s Yash-V-Jewels Ltd. The operative portion of the decision is as under :- If the totality of facts and the judicial pronouncements, discussed hereinabove, are analyzed, we are of the considered opinion that the onus caste upon the assessee, as provided u/s 68 of the Act, has been duly discharged by the assessee as the identity of the share subscribers, creditworthiness and genuineness of the transaction is not in doubt or it can be said that the same has been proved/explained by the assessee. Now, The onus has reverted back upon the Revenue to prove otherwise. The Ld. Assessing Officer merely relied upon the information received from the investigation wing and did not made any independent enquiry. The Assessing Officer, was expected to disprove the claim of the assessee with the help of evidence, if any, received from the investigation wing, as has been claimed by the Revenue. The Revenue has nowhere proved that any malafide is done by the assessee. Failure to do so, vitiate the addition made under the set of facts. Reference can be made to the decision in CIT vs Orissa Corporation Pvt. Ltd. 158 ITR 78 (SC) and the ratio laid down in Khandelwal Const....
X X X X Extracts X X X X
X X X X Extracts X X X X
....humble opinion, the assessee has duly discharged the onus caste upon it, therefore, respectfully following the decisions from Hon'ble Apex Court, Hon'ble High Courts and Hon'ble jurisdictional High Court, we reverse the order of the Ld. Commissioner of Income Tax (Appeal), resultantly, this ground of the assessee is allowed. Finally, the appeal of the assessee is partly allowed. In view of the above factual and legal position it is established that when details of share application money and shareholders are provided during the course of assessment proceedings and the same have been brought on record, in such a case the same cannot be treated as unexplained cash credit in the hands of the receiver of such share application money. In view of the above facts and following the decisions by the Hon'ble jurisdictional ITAT which are applicable to the facts of the Appellants case the addition of Rs. 5,47,50,000/- made by the AC) u/s 68 in the case of the appellant is not justified. Therefore, the said addition is to be deleted. Grounds No.2&3 taken up by the appellant are accordingly allowed.‖ 6. Aggrieved with the above order revenue is in....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... who then transfers Rs. 75 Lakhs and Rs. 50 Lakhs to the assessee on the same day. d. Page 85 PB - Taj Impex deposits Rs. 57.30 Lakhs and Rs. 58.50 Lakhs into the a/c of Triangular Infocom Ltd on 21/10/2009; who then transfers Rs. 57.50 Lakhs and Rs. 60 Lakhs to the assessee on the same day. e. Page 122 PB - Seven Star Gems deposits Rs. 25 Lakhs into the a/c of Vangaurd Jewels Ltd on 09/10/2009; who then transfers it to the assessee on the same day. f. Page 122 PB - Taj Impex deposits Rs. 88 Lakhs into the a/c of Vangaurd Jewels Ltd on 16/10/2009; who then transfers Rs. 70 Lakhs to the assessee on same day. g. Page 157 PB - Ryan Intl deposits Rs. 20 Lakhs and Paras Gems deposits Rs. 2 Lakhs into the a/c of Alka Diamond Industries Ltd on 06/10/2009; who then transfers RS.30 Lakhs to the assessee on the same day. h. Page 216 PB - Vanguard Jewels deposits Rs. 27.8 Lakhs into the a/c of Ansh Merchandise Pvt Ltd on 07/10/2009; who then transfers Rs. 20 Lakhs to the assessee on the same day. i. The balances, before and after these transactions, are minimal. ii. Taj Impex and Paras Gems form part ofthe bank statements in all the 5 enti....
X X X X Extracts X X X X
X X X X Extracts X X X X
....submitted by the assessee and proceeded to make addition based on the information received from investigation wing - Mumbai. We further notice that the Ld CIT(A) considered the detailed submissions of the assessee and gave his findings by observing that assessee has provided all the details and supporting documents which proves that all the 3 ingredients of section 68 are satisfied. Ld CIT(A) observes that assessee has filed all the documents which proves the identity of the parties who had invested the share application money, the financial documents submitted by the assessee which proves that they have capacity to invest in the share capital of the assessee company. Further he observed that all the transactions were routed through the banking channel which proves that the transaction is genuine. Since assessee has submitted all the relevant document to prove the genuinity of the transaction which led him to come to the conclusion that assessee has discharged the initial onus cast upon him to establish the identity, creditworthiness and genuineness of the transactions. He observed that the onus now shifted to the AO. He noticed that assessing officer could have carried out inde....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... proved/explained by the assessee. Now, The onus has reverted back upon the Revenue to prove otherwise. The Ld. Assessing Officer merely relied upon the information received from the investigation wing and did not made any independent enquiry. The Assessing Officer was expected to disprove the claim of the assessee with the help of evidence, if any, received from the investigation wing, as has been claimed by the Revenue. The Revenue has nowhere proved that any malafide is done by the assessee. Failure to do so, vitiate the addition made under the set of facts. Reference can be made to the decision in CIT vs Orissa Corporation Pvt. Ltd. 158 1TR 78 (SC) and the ratio laid down in Khandelwal Construction vs CIT 227 ITR 900(Guw.). The satisfaction has to be derived from the relevant facts and that to on the basis of proper enquiry by the Assessing Officer and such enquiry must be reasonable and just. In the present case, the Assessing Officer has not brought any evidence on record that the amounts received from M/s Alka Diamond Industries Ltd. and M/s Yash- V-Jewels Ltd. are merely accommodation entries. As mentioned earlier, the Ld. Assessing Officer has acted merel....