TaxTMI 
TaxTMI 
2026 (3) TMI 709
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.... (Appeals)-3 Bhopal (M.P.) (Annexure- A/2), for the assessment year 2014-15, which in turn arises out of order dated 28.12.2018 passed by the Assessing Officer (Annexure- A/3) (for short, 'the AO'). 3. This appeal was admitted for hearing vide order dated 17.04.2025 by a Co-ordinate Bench, on the following substantial question of laws : "Whether the ITAT is justified in setting aside the order of CIT (Appeals) by deleting addition of Rs. 6,40,50,000/- made by the AO by recording a finding which is perverse to the record ?" 4. The aforesaid substantial question of law has to be answered in the following factual backdrop: - 5. The respondent / assessee being a Pvt. Ltd. Company, derives income from business and profession. In this case, search and seizure operations were carried out under Section 132 of the Act at the factory and office premises of the respondent/assessee on 08.02.2017. Consequently, notice U/S 153A of the Act was issued on 21.02.2018 for AYs 2011-12 to 2016-17. The assessee, in reply, on 30.04.2018, filed returns of income for AYs 2011-12 to 2016-17. The brief details of returns of income filed for AY 2014- 15 are as under:- A.Y. Date of fili....
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....hrough banking channels cannot, by themselves, establish the genuineness of the investment, as repeatedly held by the Hon'ble Supreme Court and various High Courts. It is a settled proposition that the apparent is not real, and the Assessing Officer is empowered to lift the corporate veil to ascertain the true nature of the transaction. In view of the overwhelming evidences gathered during search, survey and post-search enquiries, coupled with the failure of the assessee to substantiate its claim, it stands conclusively established that the share capital and share premium credited in the books do not represent genuine investments but only accommodation entries. Accordingly, the amounts so credited are treated as unexplained cash credits representing the unaccounted income of the Satya Group, and are rightly chargeable to tax under section 68 of the Income Tax Act. 7. Feeling aggrieved and dissatisfied with the order of the AO making addition under Section 153A read with Section 143(3) of the IT Act, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals), but the CIT (Appeals), by order dated 27.11.2019, dismissed the appeal and upheld the addit....
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.... judgment of Hon'ble Kolkata High Court in the case of Rajmandir Estate Pvt. Ltd. (2016) reported in 70 Taxmann.com 124 (Cal) and the judgment of IT AT, 'D' Bench, Mumbai in ITA no.l835/Mum/2014 dated 24.8.2016 in the case of Royal Rich Developers Pvt. Ltd. are also relied upon. In view of above facts, I am of the considered view that this is not sufficient to discharge the onus cast on the appellant as contemplated u/s. 68 of the Act just giving addresses and PAN of the companies concerned when the AO has doubted the credit worthiness/capacity of the company having meager means and known sources of income to have invested huge amount in lending. The genuineness of the transactions was also doubted by the AO wherein the lenders did not have any business/project in hand and is merely a person of meager means, as it is brought on record that these lenders are persons of meager means declaring nominal income and his Balance Sheet/statement of affairs revealed that he has otherwise insignificant assets other than investment in the appellant. Section 68 of the Act cast onus on the appellant to satisfy the ingredients of Section 68 to establish the identity and creditworthine....
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....r was having nominal income. This company is having very insignificant amount of income for the period under consideration and hence their creditworthiness is also not established. The M.P. High Court held in the case of CIT v. Rathi Finlease Ltd wherein considering the judgment of Hon'ble Supreme Court in the case of CIT v Steller Investment and the judgment of Hon'ble Supreme Court in the case of Lovely Export Ltd., Hon'ble High Court has held that each and every transaction of share application money involving application of provisions of section 68 in matter of contribution of share application/share capital and whether this onus on the assessee has 'peen discharged or not has to be appreciated on totality of evidences available on record and surrounding facts and circumstances of the case. The creditworthiness or genuineness of transactions depends on whether the parties are related or known to each manner or mode by which parties' purpose for which payment/investment was made, etc. Certificate of incorporation of company, payment by banking channel, etc. cannot in all cases tantamount to satisfactory discharge of onus. The lender does not have creditw....
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....ngth to lend such huge sum and if there is no explanation a sto their relationship with the assessee, no collateral security and no agreement the transactions have to be treated as bogus unexplained credits. 4. Share Capital and Loan - Assessee not able to establish identity of investor - Merely filing PAN, IT returns, Certificate of incorporation, Balance Sheet etc. do not establish the identity - Share Capital and Loan - "HCL" and "OTIL" had subscribed in shares of assessee company - In some cases, "HCL" and "OTIL" had given loans to assessee company - AO required assessee to prove transaction - Assessee furnished various documents to prove the transaction - On inquiry, the companies were found to be non-existent - Noticed issued to them were returned unserved - HELD - Assessee is not able to establish identity of investors - Merely filing PAN, IT returns, Certification of incorporation, Balance Sheet etc. do not establish the identity of subscribers or produce them - Addition u/s. 68 shall be made. Agrawal Coal Corporation P. Ltd. v. Addl. :CIT (2011) 18ITJ 717 (Trib. - Indore) : (2012) 135 ITD 270: (2011)142 TTJ 409: (2012) 13ITR(T) 531. 5. The facts of the ca....
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....O, in the course of proceedings under section 153A read with section 143(3), had carried out detailed and independent enquiries, including analysis of bank statements, field verifications, survey actions, and recording of statements of key individuals such as Shri Binod Agarwal and Shri Rupesh Garg. These investigations revealed that the alleged investor, M/s Artline Fiscal Services Pvt. Ltd., was nothing but a paper/shell company having no real business, no infrastructure, no employees, and only meagre income, which, by no stretch of imagination could justify advancing loans or subscribing to share capital of crores of rupees. He further submitted that the AO has brought on record the entire money trail showing how funds were first generated within the Satya Group, routed through a complex web of layering transactions involving accommodation entry operators, and then reintroduced into the assessee's books in the guise of share capital and premium. The fact that the investor Companies were not traceable at their registered addresses, their Directors were mere name-lenders, and that the investor itself admitted to being controlled by the Satya Group, further demonstrates that these ....
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....of the investor, furnishing ITRs, computation of income, audited accounts, bank statements, assessment orders, as well as compliance under VSVS wherein the investor has already paid due taxes on disclosed income. He further submitted that the funds were initially advanced as interest-bearing unsecured loans, on which TDS was duly deducted and interest paid, and only later converted into share capital in AY 2015-16, thereby substantiating the genuineness of the transaction. He also submitted that it is settled law, as laid down by the Hon'ble Supreme Court in CIT v. Lovely Exports (P) Ltd. (2008) 216 CTR 195 (SC), that once the identity of the investor is established, the Department is free to proceed against such investor in accordance with law but the same cannot be taxed in the hands of the assessee. Further reliance is placed on the recent judgment of the Hon'ble Delhi High Court in PCIT v. Surya Agrotech Infrastructure Ltd. 2023 SCC OnLine Del 5530, wherein it was held that once the assessee furnishes all primary documents and the investor is assessed to tax, the onus shifts to the Revenue to make further enquiries. In the present case, since the assessee has produced overwhelm....
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.... creditors to advance money; and * Genuineness of transaction This Court in the land mark case of Kale Khan Mohammed Hanif v. CIT [1963] 50 ITR 1 (SC) and Roshan Di Hatti v. CIT [1977] 107 ITR 938 (SC) laid down that the onus of proving the source of a sum of money found to have been received by an assessee, is on the assessee. Once the assessee has submitted the documents relating to identity, genuineness of the transaction, and creditworthiness, then the AO must conduct an inquiry, and call for more details before invoking Section 68. If the Assessee is not able to provide a satisfactory explanation of the nature and source, of the investments made, it is open to the Revenue to hold that it is the income of the assessee, and there would be no further burden on the revenue to show that the income is from any particular source. 8.3 With respect to the issue of genuineness of transaction, it is for the assessee to prove by cogent and credible evidence, that the investments made in share capital are genuine borrowings, since the facts are exclusively within the assessee's knowledge. The Delhi High Court in CIT v. Oasis Hospitalities (P.) Ltd. [2011] 9 t....
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....liance on formal compliance documents such as incorporation certificates, PAN details, ITRs, and particularly on the fact that the investor had settled tax disputes under the "Vivad Se Vishwas Scheme" (VSVS). In our view, the approach of the ITAT is wholly unsustainable. It failed to consider that accommodation entry operators also routinely obtain PAN, file ITRs, and maintain bank accounts, which are used precisely to give a facade of legitimacy to sham transactions. Such superficial compliance cannot, by itself, prove creditworthiness or genuineness. 18. The reliance placed by learned counsel appearing for the respondent/assessee on Lovely Exports (P) Ltd. (supra) is misplaced. That judgment cannot be read to mean that once identity is shown, the enquiry ends. Subsequent decisions, particularly NRA Iron & Steel (supra), clarify that the assessee must prove not merely identity but also capacity and genuineness. In the present case, the capacity of the investor is conspicuously absent, as it had negligible income and no independent financial strength. Similarly, genuineness is disproved by the positive evidence of money trail showing circulation of assessee's own unaccounted fun....