TaxTMI 
TaxTMI 
2024 (12) TMI 1114
X X X X Extracts X X X X
X X X X Extracts X X X X
....t Year 2011-12 to 2015-16 & 2017- 18. 3. The facts relevant for the purpose of this appeal are as follows:- Upon a search and seizure as per Section 132 of the IT Act being conducted in the office premises of the respondent company as well as in the residence of family members and other business concerns etc., the Assessing Authority having doubted the sale transaction in respect of few companies, framed assessment under Section 153A/143 (3) of the IT Act and determined the assessed income of the respondent company for the annual year 2017-19. The Assessing Authority, doubted the genuineness of the transaction in respect of share capital received from M/s. Orchid Finlease Pvt. Ltd. amounting to Rs. 1,75,54,848/- and M/s. Shantidham Marketing Pvt. Ltd. amounting to Rs. 32,94,00,000/- and accordingly added Rs. 34,69,54,848/- to the income of the respondent company under Section 68 of the IT Act. Aggrieved by the aforesaid order of the Assessing Officer, the respondent preferred an appeal before the learned Commissioner of Income Tax (Appeals), Guwahati-2 (hereinafter referred to as the 'Appellate Authority') and the said Appellate Authority was pleased to delete the aforesaid a....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... (1) Karnataka Board of Wakf vs. Anjuman-E-Ismail Madris-Un-Niswan, reported in (1999) 6 SCC 343. (Apex Court) (2) Hamida & Ors. vs. Md. Khalil, reported in (2001) 5 SCC 30. (Apex Court) (3) Aradhna Oil Mills vs. Commissioner of Income Tax & Anr., reported in (2001) 252 ITR 607. (High Court of Madhya Pradesh) (4) Commissioner of Income Tax vs. Gom Industries Ltd., reported in (2007) 292 ITR 406. (High Court of Madhya Pradesh) (5) Commissioner of Income Tax vs. Antartica Investment Pvt. Ltd., reported in (2003) 262 ITR 493. (High Court of Delhi) (6) Principal Commissioner of Income Tax vs. Gaurav Bagaria, reported in (2023) 453 ITR 513. (High Court of Rajasthan) (7) Commissioner of Income Tax, New Delhi vs. Odeon Builders Pvt. Ltd., reported in (2020) 17 SCC 311. (Apex Court) (8) Commissioner of Income Tax, Orissa vs. Orissa Corporation (P) Ltd., reported in (1986) (Supp) SCC 110. (Apex Court) (9) Dhanalaxmi Steel Re-Rolling Mills vs. Commissioner of Income Tax, reported in (1997) 228 ITR 780. (High Court of Andhra Pradesh) (10) Commissioner of Income Tax vs. Baishnab Charan Mohanty, reported in (19....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d and may award such cost as it deems fit. (6) The High Court may determine any issue which- (a) has not been determined by the Appellate Tribunal; or (b) has been wrongly determined by the Appellate Tribunal, by reason of a decision on such question of law as is referred to in sub-section (1). (7) Save as otherwise provided in this Act, the provisions of the Code of Civil Procedure, 1908 (5 of 1908), relating to appeals to the High Court shall, as far as may be, apply in the case of appeals under this section." 8. Reading of the aforesaid provision, it is apparent that the appeal under Section 260A of the IT Act shall be maintainable only if it involves substantial question of law. It further appears that the provisions of second appeal as contained under Section 100 of Code of Civil Procedure, 1908 (hereinafter referred to as 'CPC'), is made applicable in respect of appeal filed under Section 260A of the IT Act. 9. Pertinent that this Court while admitting the appeal on 24.05.2023 formulated the following substantial questions of law:- (a) Whether the learned Tribunal erred in law in holding that assessee had discharged its burde....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lly covered by the decision of the highest court or if the general principles to be applied in determining the question are well settled and the only question was of applying those principles to be particular facts of the case it would not be a substantial question of law." This Court laid down the following test as proper test, for determining whether a question of law raised in the case is substantial" "The proper test for determining whether a question of law raised in the case is substantial would, in our opinion, be whether it is of general public importance or whether it directly and substantially affects the rights of the parties and if so whether it is either an open question in the sense that it is not finally settled by this Court or by the Privy Council or by the Federal Court or is not free from difficulty or calls for discussion of alternative views. If the question is settled by the highest court or the general principles to be applied in determining the question are well settled and there is a mere question of applying those principles or that the plea raised is palpably absurd the question would not be a substantial question of law." 22. In Dy. Com....
X X X X Extracts X X X X
X X X X Extracts X X X X
....m binding precedents, and, involves a debatable legal issue. A substantial question of law will also arise in a contrary situation, where the legal position is clear, either on account of express provisions of law or binding precedents, but the court below has decided the matter, either ignoring or acting contrary to such legal principle. In the second type of cases, the substantial question of law arises not because the law is still debatable, but because the decision rendered on a material question, violates the settled position of law. (iii) The general rule is that High Court will not interfere with concurrent findings of the Courts below. But it is not an absolute rule. Some of the well recognized exceptions are where (i) the courts below have ignored material evidence or acted on no evidence; (ii) the courts have drawn wrong inferences from proved facts by applying the law erroneously; or (iii) the courts have wrongly cast the burden of proof. When we refer to 'decision based on no evidence', it not only refers to cases where there is a total dearth of evidence, but also refers to any case, where the evidence, taken as a whole, is not reasonably capable of supporting....
X X X X Extracts X X X X
X X X X Extracts X X X X
....dy reference:- "11.13 Having regard to the above legal position, we now proceed to examine the facts of the case on hand. We note that the assessee, when called upon by the AO to explain the nature and source of the credit entries for the respective AYs, has discharged its burden by furnishing the necessary details inter alia including the name, PAN, address of the share subscribers, details of share application monies received, shares allotted along with bank statements evidencing that all payments were received through banking channel. After going through the details submitted the AO had made verification/enquiries u/s 133(6) of the Act from the shareholders, who in response had filed copies of their Income-tax Acknowledgments, financial statements, bank statements, explanation regarding source of their funds, copies of assessment orders etc. in support of their identity, creditworthiness and genuineness of these transactions. Thus, the inference that flows from the aforesaid facts is that the initial burden imposed under section 68 of the Act stood discharged. The details filed by the assessee were cross verified by the AO from the shareholder and no infirmity was point....
X X X X Extracts X X X X
X X X X Extracts X X X X
....roceeds of Rs.1,95,50,000/- received on sale of investment holdings in M/S VRC Technologies Pvt. and M/s Parasmani Planning & Development Pvt. Ltd. to M/s Darkwell Dealers Pvt. Ltd., details of which along with copies of sale bills are found placed at Pages 1074- 1080 of the paperbook. (ii) In the relevant FY 2016-17, M/s Orchid Finlease Pvt. Ltd. did not pay any fresh sum to the assessee company. From the documents available on record, it is noted that the assessee vide Board Resolution dated 04-05-2016 had exercised their right available under the loan agreement to convert the unsecured loan into equity shares. Having regard to the fair market value of the shares determined in accordance with Rule 11UA, the company allotted 4,04,761 equity shares at Rs.63 per share to this shareholder. Copy of the allotment letters issued by the assessee are found placed at Pages 1063 & 1064 of the Paperbook. Having regard to these facts, we therefore note that there was no fresh credit received by the assessee in the relevant AY 2017-18 from M/s Orchid Finlease Pvt. Ltd. It was a case where the unsecured loan has been converted into equity capital by way of journal entry. In absence of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ity, creditworthiness and genuineness of the transaction with M/s Orchid Finlease Pvt Ltd. and also the source of source of funds. (J) Shantidham Marketing Pvt. Ltd. (AY 2017-18 - Rs.32.94,00,000) (i) We note from pages 1145-1266 of the paper book, the details of M/s. Shantidham Marketing Pvt. Ltd. are set out. It is observed that the AO had issued notice u/s 133(6) dated 27.11.2019 upon this shareholder requisitioning several details and inter alia requiring it to substantiate its source of funds out of which it paid the share application monies to the assessee. Perusal of their response reveals that the shareholder belongs to the UFM Group of companies (promoter of the assessee) and is engaged in the business of promoting and marketing of cement and trading of poly weave bags. The shareholder AAOCS2874F and CIN: a GST registered entity having PAN U51909 AS2010PTC012266, which regularly filed its return of income and is assessed under the jurisdiction of ITO, Ward 2(1), Kolkata. The shareholder had explained the strategic business objective behind infusion of share capital into the assessee company, for the reason that it was in the last leg of completion and com....
X X X X Extracts X X X X
X X X X Extracts X X X X
....er have been made through proper banking channels. The details of source of source of funds received by the assessee were also provided by the shareholder, in the manner as prescribed in the notice u/s 133(6) of the Act, which is found placed at Page 1157 to 1160 & 1245 to 1254 of the Paper book. It is noted that the source of funds of the shareholder was primarily deposits from channel partners and/or sale of investment holdings, details of which along with name, PAN & address are found placed at Pages 1245 to 1254 of the paperbook. (iv) Shri Dudhewewala pointed out that M/s Shantidham MarketingPvt Ltd was an associate concern and that the director of the said shareholder company and the assessee were common. He invited our attention to the details of the directors of the shareholder, which is available at Page 1155 of the paper book, from which it is noted that Shri Vishal Jain, who is also the director of the assessee. Perusal of the statement of Shri Vishal Jain, which was recorded under oath by the AO on 28-11-2019, shows that the director had also affirmed the transactions between M/s Shantidham Marketing Pvt Ltd and the assessee and nothing adverse came out from his....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Rs.17.60 crores in all from nineteen parties (six from Mumbai, eleven from Kolkata and two from Guwahati). The shares had a face value of Rs.10/- and were subscribed by the investor-companies at a premium of Rs. 190 per share. The AO made the addition of Rs. 17,60 crores after carrying out various inquiries as under- (i) To verify the veracity of the transactions, the notices were served on three investor- companies namely Clifton Securities Pvt. Ltd.- Mumbai, Lexus Infotech Ltd.-Mumbai, Nicco Securities Pvt. Ltd. Mumbai but no reply was received. (ii) The address with respect to a company namely Real Gold Trading Co. Pvt. Ltd.- Mumbai was not correct. (iii) The notice could not be served on two investor-companies, namely Hema Trading Co. Pvt. Ltd.-Mumbai,Eternity Multi Trade Pvt. Ltd.- Mumbai. (iv) Submissions from nine companies were received (Neha Cassetes Pvt. Ltd.-Kolkata, Warner Multimedia Ltd. Kolkata, Gopikar Supply Pvt. Ltd. Kolkata, Gromore Fund Management Ltd. Kolkata, Bayanwala Brothers Pvt. Ltd. Kolkata, Shivlaxmi Export Ltd. Kolkata, Natraj Vinimay Pvt. Ltd. Kolkata, Neelkanth Commodities Pvt. Ltd. Kolkata, Prominent Vyappar Pvt. L....
X X X X Extracts X X X X
X X X X Extracts X X X X
....In the ordinary course, what we have stated above would have sufficed for the disposal of this appeal. However, the approach of the High Court in this case has been in total contravention of the law laid down by this Court in a catena of decisions. 12. This Court had repeatedly held that the power of the High Court to interfere in second appeal under Section 100 CPC is limited solely to decide a substantial question of law, if at all the same arises in the case. It has deprecated the practice of the High Court routinely interfering in pure findings of fact reached by the courts below without coming to the conclusion that the said finding of fact is either perverse or not based on material on record. 13. In Ramanuja Naidu v. V. Kanniah Naidu this Court held: (SCC Headnote) 'It is now well settled that concurrent findings of fact of trial court and first appellate court cannot be interfered with by the High Court in exercise of its jurisdiction under Section 100 of Civil Procedure Code. The Single Judge of the High Court totally misconceived his jurisdiction in deciding the second appeal under Section 100 of the Code in the way he did.' 14. In Nava....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... The sons of the plaintiff for whose requirement the plaintiff sought eviction, have not been examined. The nephew of the plaintiff was examined as a witness who supported the case of the plaintiff. The plaintiff has also not led any evidence to the effect that the house property where the plaintiff resides, is not sufficient for their own use and occupation. There is also no evidence to the effect that suitable alternative accommodation is not available to the plaintiff for meeting the requirement. I am, therefore, of the view that the finding recorded by the appellate court on the issue of personal necessity cannot be sustained in law for want of sufficient evidence.' As can be seen from the para extracted above, the High Court thought that it could reappreciate the evidence and scrutinize the findings recorded by the first appellate court under Section 100 CPC. This approach is plainly erroneous and against law. The High Court was also wrong in saying that the plaintiff did not lead sufficient evidence to establish his bona fide requirement. As observed by the first appellate court and noted above already, there is evidence of the plaintiff, his nephew and the nei....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f the transactions in question, recorded a finding of genuineness of transaction. In other words, the Tribunal was satisfied on the facts that the transaction in question is not bogus but genuine. It could be entered into in the circumstances appearing and there is a reason for its entering by the assessee for their business with the company. 7. In our opinion, the aforesaid finding being a finding of fact, this court cannot upset such finding of fact in this appeal filed under section 260A ibid. As a matter of fact, the question whether a particular transaction entered into by the assessee with a particular person is genuine essentially a question of fact and, therefore, once any finding on either way is recorded by the Tribunal, then the same is not liable to be interfered with by the High Court unless an error of law as contemplated under section 260A ibid, is pointed out. No such error is either pointed out or noticed. 8. In our opinion, thus, the appeal really does not involve any substantial question of law within the meaning of section 260A ibid. As observed supra, there is no question framed so as to enable this court to examine the entire transaction in q....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o a correct conclusion upon a matter of fact. 9. In the present case, as noticed above, the Tribunal's finding, which is essentially factual, is based on cogent material highlighted by the Commissioner of income-tax (Appeals). The Commissioner of Income-tax (Appeals) had even gone to the extent of examining the bank account of the two companies from where the cheques in question were issued and had found that there were numerous transactions of deposits and withdrawals and whenever the cheques in favour of the assessee were issued, there was sufficient balance available. It is pertinent to note that it was not the case of the Assessing Officer that any amount found credited in the account of the two companies, has direct or indirect nexus with the assessee-company." 24. Reference is also made to the decision of the Division Bench of the Rajasthan High Court, Jaipur Bench in the case of Principal Commissioner of Income Tax (supra) wherein also the Division Bench has taken a similar view as that of the other High Courts as extracted herein above. Paragraph 4 of the said judgment is reproduced hereunder for ready reference: "4. We are of the view that the pres....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... question of law whether the learned Tribunal erred in law in holding that the assessee had discharged its burden of substantiation of the identity, creditworthiness and genuineness of the transaction involving receipt of share application money being essentially a question of fact is not a substantial question of law. Similarly, the second substantial question of law that whether the learned Tribunal was justified in deleting the addition under Section 68 of IT Act of share application money received from M/s. Shantidham Marketing Pvt. Ltd and M/s. Orchid Finlease Pvt. Ltd. is also essentially a question of fact and is not a substantial question of law. 28. Furthermore, as noted above, both the Appellate Authority and the Second Appellate Tribunal has recorded findings in respect of the genuineness of the transaction in question and the creditworthiness of the shareholders concerned based on evidences and materials placed by the assessee and hence, such finding once recorded by both the authorities on the basis of evidence, the same is not liable to be interfered with by the Third Appellate Court, unless an error of law as contemplated under Section 260A of the IT Act is made o....