TaxTMI 
TaxTMI 
2023 (3) TMI 904
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.... 2. On the facts and in the circumstances of the case the CIT(A) erred in overlooking the facts that the creditworthiness and the genuineness of the transactions has not been established by the appellant. There are evidence to the contrary produced by the department which establishes that the investors did not have the income earning apparatus and hence did not have creditworthiness. 3. On the facts and in the circumstances of the case the CIT(A) erred in deleting the additions of Rs.18488252/- made on account of suppression of production based on the lower yield declared by the assessee and hence corresponding unrecorded sale thereof. 4. On the facts and in the circumstances of the case the CIT(A) erred in overlooking the investigation of facts and evidences on record to establish suppression of production by the assessee. 5. The CIT (A) has erred in passing the appellate order wherein he has acted in a perverse manner while passing the order which has been made in haste without giving reasonable opportunity to the AO to give his submissions on the issues." On the other hand the assessee as a cross-objector has raised the following grounds:- ....
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....ssessee furnished details as were called for by the A.O. The A.O being of the view that the assessee company by placing on record supporting documentary evidences had duly discharged the onus that was cast upon it as regards the amount of Rs.1.50 crore that was received from its in-house company, viz. M/s Mahalaxmi Technocast Ltd., thus, accepted its claim to the said extent. However, the A.O was not inclined to accept the claim of the assessee that it had raised genuine amount of share application money of Rs.9.40 crore from M/s. Calidora Traders Pvt. Ltd. It was observed by the A.O that in the course of search and seizure proceedings the search officials had looked for documents in the form of statutory records of the assessee company, viz. minutes of meeting register, share holders register, counter foils of issued share-certificates etc. which were required to be maintained at the registered office of the assessee company, but neither of the said documents were found. Also, the persons who were present at the registered office premises of the assesssee company also could not provide satisfactory explanation as regards non-availability of the aforesaid documents/registers in the....
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.... the amount of Rs.9.40 crore received from M/s. Calidora Traders Pvt. Ltd may not be held as its unexplained cash credit u/s. 68 of the Act. In reply, it was submitted by the assessee that as it had placed on record complete details of the aforesaid share applicant a/w. supporting documentary evidences, viz. name and address, copy of PAN card, certificate of incorporation, memorandum of association, article of association, audited financial statement, income-tax return, bank statement (out of which share application money was paid), share application form and details of payment receipts, therefore, the primary onus that was cast upon it was duly discharged. However, the A.O was not inclined to accept the aforesaid explanation of the assessee. It was observed by the A.O that the aforesaid share applicant did not have its own profit-making apparatus and was not involved in any business activities but was merely involved in rotating of the money which was channelized through its banking accounts. The A.O, thus, was of the view that the bank accounts of the share applicant company did neither reveal its creditworthiness nor proved the genuineness of the transaction under consideration.....
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....ity. The A.O, thereafter, referred to the quantitative production details of the assessee company, as under: F.Y. Turnover (In lacs) Turnover (in MT) Total Production (in MT) Total Iron Ore consumed (in MT) Total power consumed (in Kwh) Iron Ore per unit of production Yield% Power consumed per unit of production (kwh/MT) 2005-06 993.55 9407.955 10205.945 16361.777 1130760 1.603 62.38 110.79 2006-07 1395.91 8111.000 7161.090 12552.437 1464586 1.753 57.05 204.52 2007-08 2233.18 12161.650 11905.710 24618.000 1733240 2.068 48.36 145.58 2008-09 2855.16 19275.940 19211.220 34092.025 2252064 1.775 56.35 117.23 2009-10 5055.75 34627.070 35719.110 59520.02 3026780 1.666 60.01 84.74 2010-11 7610.07 41312.930 42983.600 77831.978 4779000 1.811 55.23 111.18 Total 20143.62 127186.68 224976.24 1486430 The A.O holding a conviction that the quantitative production of sponge....
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....nd lowest consumption of iron ore and coal per unit of production of sponge iron for the block period, as under: FY Iron Ore Coal Highest yield Lowest yield Highest coal consumption per unit of production Lowest coal consumption per unit of production Month Yield Month Yield Month Consumption Month Consumption 2006-07 June 0.57 May 0.56 Sep 0.72 Nov 0.70 2007-08 Dec 0.52 Mar 0.39 Jan 0.64 Feb 0.61 2008-09 Apr 0.64 Jan 0.41 Jul 0.64 Nov 0.47 2009-10 Mar 0.62 Aug 0.56 Feb 0.74 Sep 0.53 2010-11 Apr 0.61 May 0.54 Jun 0.64 Oct 0.48 It was, thus, observed by the A.O that consumption of Iron Ore per unit of production was as high as 64% in April, 2008 and as low as 41% in January, 2009. Similarly, the consumption of coal was very high in February 2010 i.e. 0.74 and as low as 0.47 in the month of November, 2009. It was observed by the A.O that yield shown in different years under consideration also ....
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.... observed by the CIT(Appeals) that there was no uniformity in the yield declared by different assessee's. Also, it was observed by him that the yield of the assessee company was more than the average yield in the iron ore industry. Accordingly, the CIT(Appeals) on the basis of his exhaustive deliberations vacated the adverse inferences and the consequential addition of Rs.1,84,88,252/- that was made by the A.O towards low/suppressed yield of Iron ore. 7. As regards the addition that was made by the A.O with respect to the share application money of Rs.9.40 crore that was received by the assessee company from M/s. Calidora Traders Pvt. Ltd., it was observed by the CIT(Appeals) that though it was alleged by the A.O that during the course of search proceeding the statutory records of the assessee company, viz. minutes of meeting register, shareholders register, counter foils of issued share certificates etc. were not found at the registered office of the assessee company, but a perusal of the statements recorded u/s.132(4) of the Act, nowhere revealed that any official of the search team had in the course of the said proceedings had visited the registered office of the assessee com....
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....eserves of the aforesaid share applicant, viz. M/s. Calidora Traders Pvt. Ltd. had accepted the same and not drawn any adverse inferences. Apart from that, it was observed by him that the financial statements of the aforesaid share applicant company further substantiated its creditworthiness. Considering the aforesaid facts, the CIT(Appeals) was of the view that there was no justification on the part of the A.O in drawing any adverse inferences as regards the identity and creditworthiness of the aforesaid share applicant company, viz. M/s Calidora Traders Pvt. Ltd. whose share capital and reserves i.e. net worth was accepted in the course of scrutiny assessment that was framed in its case u/s 143(3) of the Act. Accordingly, the CIT(Appeals) was of the view that the assessee company had not only explained the source of receipt of share application/capital money but had also explained the source of source by placing on record assessment order in the case of its subscriber company, viz. M/s. Calidora Traders Pvt. Ltd. The CIT(Appeals) further observed that as the assessee in order to substantiate the authenticity of the aforesaid transaction of receipt of share application money from ....
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....nfirmation of the share applicant, PAN details, certificate of incorporation of the subscriber company, records of the Registrars of the Companies (ROC) (generated from website), affidavit filed in support of the fact of advancing share applications money received by the assessee company through banking channels. Noticing that the share applicant company in question, viz. M/s. Calidora Traders Pvt. Ltd. was active as per the website of the Ministry of Corporate Affairs and was duly registered with the ROC, the CIT(Appeals) was of the view that the said facts further dispelled the doubts as were raised as regards the authenticity of the transaction in question. It was observed by the CIT(Appeals) that the A.O had not placed on record any material which would dislodge the authenticity of the assessee's claim of receiving aforesaid amount of share application money. Also, it was noticed by him that contents of the affidavit filed by the share subscriber company had also not been disputed by the A.O. Accordingly, the CIT(Appeals) found favour with the claim of the assessee company that now when the identity, creditworthiness of the share applicant, and also the genuineness of the trans....
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....e identity, creditworthiness of the share applicant, and also the genuineness of the transaction in question. However, we find that the A.O without rebutting the aforesaid documentary evidence that was filed by the assessee by placing on record any material proving to the contrary, had in all his wisdom on the basis of generalized observations, and without refuting the assessee's claim on any concrete basis, had most arbitrarily drawn adverse inferences and held the aforesaid amount of Rs.9.40 crore as an unexplained cash credit u/s.68 of the Act. 14. On a perusal of the assessment order it transpires that the A.O on the basis of a consolidated order for AY 2006-07 to AY 2012-13 had made generalized unsubstantiated observations as regards the financial statements of the various share holders of the assessee company, and without dealing with the facts involved in the respective cases had drawn adverse inferences by alleging that the inflow of the share application money in the hands of the assessee company was to be viewed in the perspective of money laundering through share capital route in which unaccounted money was being routed back to its books of account without payment of ....
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...., viz. M/s. Calidora Traders Pvt. Ltd. had filed before the A.O the assessment order that was passed in its case, wherein its share capital and share premium reserves of Rs.45 lacs and 10.51 crore (approx.) as on 31.03.2006 were accepted by the A.O after carrying out necessary enquiries, therefore, the same proved to hilt the source of source of the investment under consideration. In our considered view, there is substance in the claim of the assessee that now when the genuineness of the addition which was made to the share capital and reserves of the aforesaid share applicant, viz. M/s. Calidora Traders Pvt. Ltd. after necessary vetting had been accepted by the ITO, Ward-1(1), Kolkata, therefore, no adverse inferences as regards the investment made by the latter in the assessee company out of the said source which had duly been accepted by the department could have been drawn. Also, we concur with the view taken by the CIT(Appeals) that now when the assessee had duly discharged the onus that was cast upon it as regards proving the nature and source of the credit appearing in its books of account, i.e. share application money of Rs. 9.40 crore that was received from the investor co....
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....IT(Appeals) on the basis of his aforesaid observation had vacated the adverse inferences that were drawn by the A.O on the ground that the assessee had failed to maintain the statutory records at its registered office. 16. Nothing is discernible from the records before us which would reveal that the aforesaid observations of the CIT(Appeals) are either perverse or contrary to the facts available on record. Also, the ld. D.R during the course of hearing of the appeal had failed to rebut the aforesaid observation of the CIT(Appeals). Considering the aforesaid facts we have no hesitation in concurring with the view taken by the CIT(Appeals) that the adverse inferences and the consequential addition made in the hands of the assessee cannot be sustained on the basis of the aforesaid unsubstantiated allegation of the A.O. In fact the claim of the assessee that Ms. Jaswinder Kaur Mission (supra) had in her statement recorded u/s.132(4) on 21.06.2011 specifically shown the members register, share certificates and counter foils of the assessee company to the search officials fortifies the aforesaid claim of the ld. A.R that the requisite documents/registers were duly maintained by the as....
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....he had o the said count at Page 38 of the assessment order made an addition of Rs.1,84,88,252/-. On a careful perusal of the assessment order it transpires that the impugned addition of Rs.1,84,88,252/- pertains to the impugned suppressed yield in the case of the assessee for the preceding year i.e. AY 2009-10 and does not pertain to the year under consideration. Considering the aforesaid facts we are unable to comprehend as to on what basis the impugned addition has been made by the A.O while framing the assessment in the case of the assessee company for the year under consideration i.e AY 2010-11. Also, we may herein observe that during the course of hearing of the appeal neither of the parties had brought to our notice the aforesaid serious infirmity which in fact goes to the very root of the controversy in hand, i.e., the impugned suppression of yield of sponge iron production for the year under consideration. 20. Be that as it may, we are of the considered view that now when the A.O himself had worked out the sponge iron yield in the case of the assessee at 60.02% i.e. higher than the average yield in the iron ore industry of 60% which was adopted by him as a yardstick, and....