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TMI Blog2018 (3) TMI 1189X X X X Extracts X X X X X X X X Extracts X X X X ..... t, consequently we also confirm her finding in deleting the disallowance of interest on the above loans. Addition with respect to loan taken by the assessee company from eight different private companies - Held that:- Addition u/s 68 cannot be made where despite complete information submitted by the assessee company no inquiry have been made by the ld AO. For the similar reasons we confirm the findings of the ld CIT (A) in deleting the above addition of ₹ 15.50 crores. Addition u/s 68 - Held that:- We find that except the change of the name of the lender, and amount involved there is no change in the facts of the case. As on the similar circumstances, we have confirmed the finding of the ld CIT (A) in deleting the addition made by the ld Assessing Officer u/s 68 of the Income Tax Act where the assessee has provided the complete details but he AO has not carried out any inquiry or investigation. Therefore, for the same reasons we confirm the finding of the ld CIT (A) in deleting the addition of ₹ 30 lacs u/s 68 of the Act with respect to non Kolkata Companies. - ITA No. 3223 & 3224 /Del/2016 And CO No. 249 & 250/Del/2016 - - - Dated:- 29-1-2018 - Shri Bhavnesh S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... act that the loans on which such interest paid are bogus. 8. The Ld. Commissioner of Income Tax (Appeal) has erred in law and on the facts in deleting the addition of ₹ 10,05,974/- made on account of interest paid without appreciating the fact that the loans on which such interest paid are bogus. 9. (a) the order of the CIT (Appeals) is erroneous and not tenable in law and on facts. 3. For AY 2012-13 The assessee has raised the following grounds of appeal in cross objection:- 1) That the Ld. CIT.(A) on the facts of the case and in law has rightly deleted the disallowance of ₹ 4,81,801/- made u/s. 14A of the Act r.w.r. 8D of the Rules and the same should be upheld. 2) That the Ld. CIT.(A) after considering that no exempt income was received during the year has, on facts and in law, rightly deleted the addition u/s. 14A r.w.r. 8D of the Rules by relying on several judicial pronouncements. 3) That the departmental appeal challenging deletion of additions of ₹ 22,92,00,000/- and ₹ 15,50,00,000/- u/s. 68 of the Act by the Ld. CIT.(A) is completely vague with ignoring the evidences placed and available on record by the respondent in d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loans on which such interest paid are bogus. 6. The Ld. Commissioner of Income Tax (Appeal) has erred in law and on the facts in deleting the addition of ₹ 3000000/- made by AO on account of unexplained cash credit u/s 68 of the IT Act, 1961 from non Kolkata based companies. 7. That the ld CIT (A) has erred in ignoring the facts as the assessee company failed to discharge the onus u/s 68 of the IT Act, 1961 to prove the identity, creditworthiness and genuineness of the transactions made by the investors. 9. (a) The order of the CIT (Appeals) is erroneous and not tenable in law and on facts. 5. For AY 2013-14 the Assessee has raised the following ground in its cross objection:-. 1) That the Ld. C.I.T.(A) on the facts of the case and in law has rightly deleted the disallowance of ₹ 579232/- made u/s. 14A of the Act r.w.r. 8D of the Rules and the same should be upheld. 2) That the Ld. CIT.(A) after considering that no exempt income was received during the year has, on facts and in law, rightly deleted the addition u/s. 14A r.w.r. 8D of the Rules by relying on several judicial pronouncements. 3) That the departmental appeal challenging de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 722730/ 8. Similar disallowances were made by the ld AO for AY 2013-14 which are as under :- i. disallowance under section 14A of ₹ 579232/ ii. unexplained cash credit under section 68 of ₹ 61500000/- iii. unexplained cash credit under section 68 of the act of ₹ 30,00,000/- iv. consequent disallowance of interest of ₹ 4890986/- 9. Assessee aggrieved with the order of the Ld. Assessing Officer preferred an appeal before the Ld. CIT (Appeals) 27, New Delhi, who as per order dated 22 03 2016 passed a composite order for Assessment Year 2011 12, 2012 13 and 2013 14 where she dealt with the above disallowances made by the Ld. assessing officer as under:- a. On disallowance under section 14 A of The Income Tax Act she noted that assessee has not earned any dividend or other exempt income during the year. Therefore, relying on the decision of the Hon ble Delhi High Court in case of Cheminvest Ltd versus CIT (ITA No 749/2014) dated 2/9/2015, she deleted the disallowance. b. Disallowance of ₹ 113193/ on account of Employees State Insurance Scheme, She restricted the disallowance to ₹ 99685/ because the assessee subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edit received by assessee as unsecured loans from 8 companies. She held that assessee has furnished name, address i.e. identity of the depositors, permanent account number detail, photocopy of income tax returns, photocopy of bank statements of the depositors, their balance sheets and profit and loss account and confirmation from the depositors. She further held that assessee has furnished the completed details about the investor. Therefore, for the reasons given by her for deletion of addition of ₹ 22,92,00,000/ , for the similar reasons, She deleted this addition too. Similarly, addition for AY 2013-14 was also deleted. e. With respect to the payment of interest on above two additions of loan under section 68 of the income tax act, The Ld. Assessing Officer disallowed interest expenditure paid to these companies on the above-unsecured loan, which were deleted by the Ld. CIT and therefore she deleted the interest expenditure disallowance made by the Ld. AO. Similarly, disallowance for AY 2013-14 was also deleted. 10. Revenue Aggrieved with the order of the Ld. CIT (A) has preferred these two appeals before us on all the disallowances/ additions deleted by the Ld. CIT ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied upon the decision of the Hon ble Delhi High Court in case of Cheminvest versus CIT (supra) and submitted that as assessee has not earned any exempt income during the year the disallowance under section 14 A cannot be made. He submitted that :- ISSUE OF DISALLOWANCE UNDER SECTION 14A OF THE INCOME TAX ACT, 1961 A.Y.2012-13 : ₹ 44,70,116/- : Grd 1 of Departmental Appeal Grds 1 2 of Assessee‟s Cross Objection A.Y.2013-14 :Rs.5,79,232/- :Grd 1 of Departmental Appeal :Grds 1 2 of Assessee‟s Cross Objection In this regard, disallowances were made as brought out in the chart attached above. In regard to said disallowance the undersigned would like to submit as under:- Brief facts of the case of the respondent-assessee as under:- Before the learned AO, the appellant had submitted that all the investments were made in earlier years out of the appellant company‟s own funds, and the appellant company did not make any efforts or devote time towards such investments in the previous year. As on the beginning and end of the relevant financial year the amount of investment was ₹ 1,00,000/-. In the relevant year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dend income and any dividend income, if any, arising therefrom is purely incidental in nature. The said investments are only for obtaining controlling interest in the said companies and to further the business interests of the assessee in the said company. Further it is submitted that the said strategic investments in group companies are long term investments and no expenses as such are incurred for maintaining the portfolio of these investments or for holding the same. The said investments in the case of the Assessee, as is evident from the Balance Sheet were all long term and were carried forward from earlier years and thus no expenses were incurred on the same. Thus it is submitted that no disallowance u/s 14Acan be made with respect to these investments. In this regard, it may kindly be noted that the case of the Assessee stands fully covered by the very recent decision dated 15/09/2017 passed in the case of a group concern of the Assessee by the Hon‟ble IT AT, B Bench, New Delhi, in the case of Sindhu Trade Links Ltd. which is one of the companies belonging to the Aryan Sainik Group of which the Assessee company is also a part. (Copy enclosed) On the id ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inst the Aryan Sainik Group (i.e. assessee‟s company group) was that it has routed its unaccounted money earned from application money issued at high premium through the various Kolkata based companies and the same has been brought into various companies of the group. Further, from the investigation/enquiry conducted by the Investigation Wing, it has been proved that the assessee group companies has received money through various Kolkata based companies and which in term have got money through another set of Kolkata based companies, whose business activities are suspicious and the entire circulation of money is through those companies which are indulging in entry operation and no business activities at all. Moreover, the details in respect of share application money/share premium/ unsecured loans received from the various Kolkata based companies have also been retrieved from the seized documents/hard disk seized/impounded during the search and seizure operation. From the perusal of P L A/c and the reply submitted by the assessee for the FY 2011-12, it was observed that an amount of ₹ 9,75,00,000/- was shown as unsecured loan as on 31.03.2012 from Kolkata ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R.No. 3A, Ashirwad Apptt. 171/12, Roy Bahadur Road, Kolkata, West Bengal-34 AABCK9871F 50,00,000/- 9,75,00,000 Share application money Name of the party Address Amount in (Rs) Amanat Agencies Pvt. Ltd. 14, Weston Street, Kolkata, West Benqal-12 4,40,00,000 Skipper Vinmay Pvt. Ltd. 14, Weston Street, Kolkata, West Benqal-12 3,22,00,000 Oasis Commotrade Pvt. Ltd. 14, Weston Street, Kolkata, West Bengal-12 5,55,00,000 Total 13,17,00,000/- Further, from the details submitted by the assessee in respect of the above noted companies which have invested share capital in the assessee company, it is seen that the assessee has furnished the address of the following investors i.e. M/s Amanat Agencies Pvt. Ltd., ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provides as under : 68. Cash credits.-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. The various Courts including the Hon‟ble Supreme Court, while interpreting the provisions of Sec.68 has held that the initial burden is on the assessee to prove 3(three) things, viz., the identity of the creditors, the capacity (creditworthiness) of the creditor and the genuineness of the transactions. The observations of Hon Tile Supreme Court in the case of [2007] 161 TAXMAN 169 (SC), Commissioner of Income-tax vs. P. Mohanakala with regard to nature 8s scope of Sec.68 is very pertinent and the same is reproduced below: 14. The question is what is the true nature and scope of section 68 of the Act? When and in what circumstances section 68 of the Act would come into play? That-a bare reading of section 68 suggests that there has to be credit of amounts in the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ything more. This contention was not accepted by the Tribunal. On a reference, this court considered a number of decisions of the other High Courts and observed as follows: We find that by a series of decisions of different High Courts as well as of the Supreme Court it has been consistently laid down that when an assessee claims that he has borrowed money from a third party the initial onus lies on the assessee to establish, (a) the existence of the third party; (b) the ability of the third party to advance moneys; and (c) that prima facie the loan is a genuine one. The assessee by proving these facts discharges the onus upon him. But that does not prevent the authority concerned to probe 'further into the matter and investigate the case on materials available to the authority to come to an independent and unbiased finding as to the genuineness of the transaction. It is true that the tax authority is not entitled to reject the assessee's case summarily or arbitrarily or without sufficient reason. It is true that the authority's duty is to examine all the materials carefully and objectively. But if it is found that the authority concerned after careful considerati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Jagnath Commodities 15,20,00,000.00 3 Komal Tie Up Pvt. Ltd 2,40,00,000.00 4 Omkara Agencies Pvt. Ltd. 3,80,00,000.00 5 Sindhu Holdings Ltd. (UL) 4,60,00,000.00 6 Sindhu Trade Links Ltd. (UL) 9,00,00,000.00 Total 51,91,00,000.00 Details of ICD given as on 17.06.2010 SI. No. Particular Amount (Rs.) 1 Bhandari Consultancy Finance Ltd. (UL) 2,00,00,000.00 2 Hari Bhoomi Communication Pvt. Ltd. 2,50,00,000.00 Details of share application money SI No. Particular Amount (Rs.) 1 Sindhu Trade Links Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eply is discussed in detail in the below noted paragraphs:- Identity of the creditors Though the assessee has furnished the names, PAN, address and confirmations from the persons from whom unsecured loans was received however, from the enquires/physical inspection conducted at the' addresses provided by the assessee has been revealed that most of the companies are not existing at the addresses mentioned/provided by the assessee company. To conduct the physical enquiry, the Inspector of the office was deputed to conduct the physical enquiry in respect of the various companies which have provided unsecured loan/share application money and it has come to notice that most of the companies either are not existing at the address given and even the other occupants of such addresses are not aware of the whereabouts of some companies. For ready reference, the relevant extract /findings of the inspector‟s report in respect of some of these companies are as under: M/s Goodhope Vyapaar Pvt. Ltd.: Premise found closed. No name plate found at premise. Neighbors have no idea about business/nature of the shop, name or owner. M/s Jagannath Commodities Pvt. Ltd.: I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whom receipts have been shown are not doing any business being a paper company, therefore, you are required to explain why the receipts shown from these companies may not be treated as unexplained income of the company and additions in respective years may not be made while computing the income of the company for each year in addition to the other disallowance warranted against various head detailed above being inappropriate/ excessive/ inadmissible . From the perusal of records, it is seen that the assessee has not furnished any reasons in respect of the department‟s contention that the companies which have provided huge loans/share capital have not been found at the. addresses mentioned. Further, the assessee was again asked vide show cause notice dated 23.11.2015 for the block period (covering the current year also) and the relevant extract of the show cause notice is reproduced as under: It is also noticed, from the extract of hard disk of A-l, seized from BS-14, that there were details of unsecured loans, ICD given as on 17.06.2010 and details of share application money (emphasis supplied). The relevant details of the same are as under: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .27,71,00,000/- From the perusal of records, it is seen that all these companies are Kolkata based companies and found paper shell companies. In respect of these companies, the Inspector of this office was conducted inquires/investigation in respect of assessments made of group companies earlier and the address given were not found correct. The Investigation Wing also conducted enquires/ investigation in respect of these companies and it has given adverse finding in respect of these companies‟/identities. The above mentioned companies introduced huge share capital and share premium in the group companies of ACB namely M/s Garuda Imaging Diagnostic Pvt. Ltd. and M/s Sindhu Holdings Ltd. etc. Further, from the perusal of documents, it is again seen that the identity, creditworthiness is doubtful as has already held by my predecessor in his assessment orders in the case of M/s Garuda Imaging Diagnostic Pvt. Ltd. and M/s Sindhu Holdings Ltd for AY 2009-10 AY 2010-11 and concluded that genuineness of the transaction in respect of the above mentioned companies were not proved. Thus, it is once again requested to explain the same, otherwise advers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... flected is incorrect as the amounts reflected against each company have been jumbled You have further mentioned that, all these companies are Kolkata based companies and you have alleged that, these companies were found to be paper shell companies. You have also mentioned about alleged enquiries having been conducted by the inspector of your office in respect of assessment made in group companies namely Garuda Imaging Diagnostics Pvt Ltd and Sindhu Holdings Ltd. You have alleged that the identity/ credit worthiness has already been held as doubtful by your predecessor in his assessment order in the case of M/s Garuda Imaging Diagnostics Pvt Ltd and Sindhu Holdings Ltd, and it has been concluded that genuineness in respect of above mentioned companies were not proved. In this connection, we wish to draw your kind attention by producing extract of relevant submissions as Annexure:-16 . Further, the relevant documents filed in the case of above referred group companies are as under a. Name, Address identity of the Party b. PAN Details c. Copy of TTR d. Copy of Bank Statement e. Confirmation In view of the fact that, the assessee had submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... BBlock Kolkata AADCD6894K 2013-14 Return not submitted Pradhi Dealer 161/1, MG road 1st, Burra Bazaar, Kolkata AAGCP1423K 2013-14 2,22,300/- Thus, from the above, it is very difficult to understand how the companies which have very small income can give huge amounts as loan to some other persons. On perusal of the replies of the share applicants/loan givers, it reveals that they were not financially sound to invest such huge amounts in the assessee company. The bank Statement, wherever available, speaks that for one debit entry, there was credit entry of more or less identical amount and all the transactions had undergone within the same day or within the next day. The balances remaining in the account are found to be nominal. On perusal of the copies of accounts of the share applicants, it has been found that huge amount was claimed to have invested in the unquoted shares. It is therefore, evident that the share applicants/loan givers lack creditworthiness to advance such huge loans worth several crores. Further, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e capital to other companies of the group of theassessee‟s group and also to other assessees. Also the investigation wing from their enquiry gathered that these companies have got money from another set of Kolkata based companies whose business activities are suspicious and seems to be routed 'through entry operators. Further, it is also not out of place to mention that my predecessor has completed the assessment of Garuda Imaging8s Diagnostic Pvt. Ltd i.e. one of the assessee group company for AY 2010-11 where the facts of the case were almost same i.e. Garuda Imaging Diagnostic Pvt. Ltd had taken share application money of ₹ 10.74 Crs. from the four Kolkata based companies, the details of the same are under:- . 1. M/s Omkara Agency Pvt. Ltd. Rs.5,97,00,000/- 2. M/s Komal Tie-Up Pvt. Ltd. ₹ 1,60,00,000/- 3. M/s Good Hope Vyapar Ltd. Rs.2,80,00,000/- 4. M/s Jagannath Commodities Pvt. Ltd ₹ 37.00.000/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplication Money. 4. These investors/lenders were engaged in the activity of providing accommodation entries and bank accounts formed only for routing the entries through banking channel. In these bank accounts it appears that no other business transactions were made excepted providing these entries. 5. These bank accounts clearly indicate that no business activities / transactions were made in these paper shell companies. Merely on the basis of filing the details of PAN, confirmation letters and bank statements, it doesn‟t prove the genuineness of the transaction. 6. From the beginning the assessee company‟s intention is not clear as it took loan at the initial stage and subsequently converted this money into share application money through journal entries which clearly indicates that these transactions are not genuine. 7. The assessee‟s company also failed to submit the documentary evidences in respect of share allotment made to these companies in its reply filed on 09.03.2015 (i.e. annexure in reply to point no. 20), which clearly indicates these transactions are sham and were made only for the routing the accommodation entries of investors/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustries vs. CIT [1978] 114 ITR 689 (Cal), while deciding on the similar issue has held as under : We would like to observe that the law on this point is now well settled. It is necessary for the assessee to prove prima facie the transaction which results in a cash credit in his books of account. Such proof includes proof of the identity of his creditor, the capacity of such creditor to advance the money and, lastly, the genuineness of the transaction. These things must be proved prima facie by the assessee and only after the assessee has adduced ei/idence to establish prima facie the aforesaid, the onus shifts on the department. In the instant case, it seems that the assessee established only the identity of the creditor and nothing more. Similar view was also expressed by the Hon‟ble Calcutta High Court in the case of United Commercial Industrial Company Pvt. Ltd. [1991] 56 TAXMAN 304 (CAL). The relevant extract of the Hon'ble High Court decision is reproduced below : 6. In our view, the assessee failed to discharge the primary onus which lay on it to prove the nature and source of the credits. It was necessary for the assessee to prove prima fade ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... credited in its books, then the receipt can be held in the nature of income of the assessee. The relevant extracts of the Hon‟ble Supreme Court‟s decision are furnished below : ' i) Commissioner of Income-tax vs. P. Mohanakala [2007] 161 Taxman 169 (SC) : 19. lt is true that even after rejecting the explanation given by the assessees if found unacceptable, the crucial aspect whether on the facts and circumstances of the case it should be inferred the sums credited in the books of the assessees constituted income of the previous year must receive the consideration of the authorities provided the assessees rebut the evidence and the inference drawn to reject the explanation offered as unsatisfactory. We are required to notice that section 68 of the Act itself promdes,‟ where any sum is found credited in the books of the assessees for any previous year the same may be charged to income-tax as the income of the assessees of the previous year if the explanation offered by the assessees about the nature and source of such sums found credited in the books of the assessees is in the opinion of the Assessing Officer not satisfactory. Such opinion found i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (i.e. the sum credited in its books i.e. ₹ 97500000/- as unsecured loans and amount of ₹ 131700000/- as share application money), is treated as income from undisclosed sources u/s 68 of the Income Tax Act, 1961, 1961. Addition: ₹ 229200000/-) The amount added at ₹ 2292000/- (Rs. 97500000/-)+ ₹ 131700000/-) amounts to concealment of income/furnishing of inaccurate particulars of income as per section 271(l)(c) and hence penalty proceedings u/s 271(l)(c) are being initiated separately. Interest payments on fresh unsecured loans of ₹ 1005974/- 7. From the perusal of the assessee‟s details of unsecured loans, it is seen that the assessee has paid the following interest (from the confirmations filed) on fresh unsecured loans of ₹ 48,90,986/- raised during the Financial Year 2012-13 (as discussed in detail in issue no.6). The details of interest payments are given below : sr. No. Name of the Party Amount received as unsecured loan Interest i Wellbuild Marketings Pvt. Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s further noticed that the assessee company has raised unsecured loans from several other companies whose details are given below: SI No. Party PAN Returned income Amount of loan/ICD Taken 1 Arya Marketing Pvt. Ltd. AAICA7684A 11440 40,000,000.00 2 Manisha Trades AAUFM0068Q 0 2000000.00 3 Raghav Power Steel (P) Ltd. AACCR9394K 0 5,000,000.00 4 Raghav Trade AANFR6166K 0 2,000,000.00 5 Yugantar Power Steel Pvt. Ltd. AAACY2290H 0 11,000,000.00 6 Shiv coal Beneficiation Power Pvt. Ltd. AAPCS7010N 0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... discussions conclusively prove that the assessee has failed to discharge the basic onus / burden cast upon it by the provisions of Sec.68 of the I. T. Act to prove the identity and capacity of the creditors and also the genuineness of the transactions and accordingly, the amount of ₹ 15,50,00,000/-, is treated as income from undisclosed sources u/s.68 of the I. T. Act, 1961. (Addition: ₹ 15,50,00,000/-) The amount added at ₹ 15,50,00,000/- amounts to concealment of income/furnishing of inaccurate particulars of income as per section 271(l)(c) and hence penalty proceedings u/s 271(l)(c) are being initiated separately. Interest payments on fresh Unsecured Loans of ₹ 7.22.730/- (Non.Kolkata based company) : 10. From the perusal of the assessee‟s details of unsecured loans, it is seen that the assessee has paid the following interest on fresh unsecured loans of ₹ 7,22,730/- raised during the Financial Year 2011- 12 (as discussed in detail in issue no,9). The details of interest payments are given below : SI. No. Name of the Party Amount received as unsecured loan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no Shares had been issued to these Companies till AY 2013-14 albeit, the Appellant had taken Unsecured Loans and Share Application Money from these Companies. Moreover, as argued by the Ld ARs, the AO is not clear about the nature of these credits. At times the AO refers to these Credits as Share Application Money while on other occasions the AO refers to them as Unsecured Loans. The Ld ARs have also pointed out that the AO had called for different requirements to be filed for Unsecured Loans and Share Application Money vide AO‟s letter dated 15.10.2015. (iii) The AO has relied upon the observation of Hon‟ble Supreme Court in the case of [2007] 161 TAXMAN 169 (SC), Commissioner of Income-tax vs. P. Mohanakala with regard to nature and scope of Sec. 68. The Appellant has therefore clearly distinguished the cited case from Appellant‟s case. (iv) Regarding the decision of the Hon‟ble Jurisdictional High Court of Calcutta in the case of Shankar Industries vs. CIT (1978) 114 ITR 689 (Cal), while discussing the unrcported decision of Hon‟ble Calcutta High Court in the case of Knitting Machineries Syndicate (India) Private Ltd. vs Commiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is merely a presumption of the AO that a company must show very high income in their ROI as against the Share Application Money. The companies can also invest out of their share capital or out of their borrowings. It is therefore not necessary for a company to show very high income in its ROI. Even a loss making company can make investments. The submissions of the Appellant are true. (xii) The investors are corporate entities. They are maintaining proper Books of accounts. These books of accounts are subjected to statutory Audit by Independent Auditors. The Audited Balance Sheet Profit and Loss accounts are duly filed with Income Tax Department and Registrar of Companies and are available in public domain. There is no allegation that cash was deposited in the Bank accounts of the Investors companies on dates immediately preceding the dates on which investment was made in the Appellant company. A perusal of Bank statements of Investors Companies reveal that the source of source was also explained and was through banking transaction. The Appellant has explained that It is not necessary for any investor to maintain very high bank balance. In the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inance Pvt. Ltd.[1995]82-Taxmann31(Cal) . The ld ARs have demonstrated that the facts of the relied upon case are different from the present case. The AO also placed relianceon following cases: CIT Vs. Korley Trading Co. Ltd. [1998]232 ITR 820 Hon‟ble Calcutta High Court in Shankar Industries Ltd. Vs. CIT [1978] 114 ITR 689 (Cal) Hon‟ble Calcutta High Court in the case of United Commercial and Industrial Co. Pvt. Ltd. [1991] 56 Taxmann 304 (Cal) The Hon‟ble Supreme Court in the cases of SumatiDayal Vs. CIT and CIT Vs. P. Mohalkala The ld ARs have fully explained as to how and why the relied upon cases are neither relevant nor applicable in the case of Appellant. xvi)(2) The AO had also placed reliance on following cases. The Appellant has distinguished each case. The excerpts from Appellant‟s submissions are as under: (a) High Court of Gujarat in the case of Manoj Kumar Saraf Vs. ITO, OSD-II [2014] 45 Taxmann.com 63(Gujarat), In the cited case, despite of being specifically asked by the AO, the assessee failed to submit account confirmation, copy of acknowledgment of ITR and the bank statements of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lants jurisdiction it is respectfully submitted that no reliance should be placed on this case. (c) High Court of Delhi in the case of CIT-VI Vs. T.S. Kishan Co. Ltd. [2014] 50 Taxmann.com 368 (Delhi), In the cited case, it is seen the assessee could not produce the PAN Number, address and confirmation of Creditors. However, in the case under appeal, the appellant had already submitted PAN Number, address, account confirmation, copy of acknowledgment of ITR and the bank statements of the said Creditors. Thus, in the case under appeal, the identity and creditworthiness of the Creditors was fully established in the eyes of Law. The cited case is therefore distinguished from the case under appeal on bare facts. (d) High Court of Delhi in the case of CIT Vs. Empire Bulltech (P.) Ltd. [2014] 366 ITR 110 (Delhi), In the cited case, the assessee did not even submit the confirmation from the investor. The assessee had merely disclosed the address or identity of the individual investors‟ concerns. However, in the case under appeal, the appellant had already submitted PAN Number, address, account confirmation, copy of acknowledgment of ITR and the bank sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er books of accounts that were also subjected to statutory audit and their Balance sheets and P L A/c were duly filed with their return of income. Thus, in the case under appeal, the creditworthiness of the Creditors was fully established in the eyes of Law and there can be no preponderance of probabilities that these loans were in fact accommodation entries. Since the facts of the cited case are entirely distinguished from those the appellants case and since the cited case does not pertain to the appellants jurisdiction it is respectfully submitted that no reliance should be placed on this case. As in earlier years, the Appellant has relied upon Case Laws in support of Appellant‟s claim: - a. In the case of Kamdhenu Steel alloys Limited v. CIT [2012] 19 taxmann.com 26, (Delhi), it was held that, In conclusion, once adequate evidence/material is given, which would prima facie discharge the burden of the assessee in proving the identity of shareholders, genuineness of the transaction and creditworthiness of the shareholders, thereafter in case such evidence is to be discarded or it is proved that it is 'created' evidence, the revenue is suppo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Department to establish that revenue‟s case and in order to sustain the addition the revenue has to pursue the enquiry and to establish the lack of creditworthiness and mere noncompliance of summons issued by the Assessing Officer under section 131, by the alleged creditors will not be sufficient to draw an adverse inference against the assessee. In this case of six creditors who appeared before the Assessing Officer, they have admitted having advanced loans to the assessee by account payee cheques and in case the Assessing Officer was not satisfied with the cash amount deposited by those creditors in their bank accounts, the proper course would have been to make assessments in the cases of those creditors by treating the cash deposits in their bank accounts as unexplained investments of those creditors under section 69 Similar views were taken in many other cases. Few of them are as following:- Anant Shelters (P) Ltd v. Income Tax Officer 9(1), ITAT, [2012] 20 taxmann.com 153 (Mum.) Dwarkadhish Investment (P.) Ltd v. CIT-IV, High Court, [2010] 194 TAXMAN 43 (DELHI) iii. In the case of Lovely Exports Private Limited v. CIT [2008] 216 CTR 195 SC, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idered the law in Lovely Exports (P.) Ltd.'s case (supra) and in view of law laid down by the Apex Court, we find that the substantial questions framed in these appeals do not arise for our consideration. Accordingly, all these appeals are dismissed with no order as to costs. In fact, similar view has also been expressed in the following cases: i) 350 ITR 220 (All) CIT vs. Jay Dee Securities and Finance Ltd. ii) 350 ITR 222 (All) CIT vs. Misra Preservers (P) Ltd. ii) 361 ITR 220 (Del) CIT vs. Kamdhenu Steel and Alloys Ltd. iv) 320 ITR 619 Bhav Shakti Steel Mines (P) Ltd. vs. CIT v) ITA No. 1497/2010, 1518/2010 (Del) CIT vs. Derby Overseas (P) Ltd. vi) ITA No. 904/2010 (Del) CIT vs. Dhawan Jewellers (P) Ltd. vii) 329 ITR 110 (Del) Sarthak Securities Co. P. Ltd. vs. ITO viii) 205 ITR 98 (Del) CIT vs. Sophia Finance Ltd. Where, therefore, an assessee-company represents that it had issued shares on the receipt of share application money then the amount so received would be credited in the books of account of the company. The Income Tax Officer would be entitled, and it would indeed be his dutu to enquire whether the alleged share ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the enquiry in the Appellant‟s case and even otherwise these Companies were not appearing in the list of Companies that had been enquired into. There can be no reason to doubt the existence or identity of these companies since these had merged into Param Mitra Holdings Pvt Ltd vide order dated 09/ 11/2010 passed by the Hon‟ble High Court Delhi. The amount of investments from these companies had come through account payee cheques/ bank transfers. The same had not come through cash. As per the admission of the AO, no cash was deposited in the investor company‟s bank account on dates immediately proceedings the dates on the said cheques were issued. The statutory requirements u/s 68 till A.Y. 2012-13 was that the assessee was duty bound to explain the source . From A.Y. 2013-14 the scope of sec.68 was widened and the Appellant was made liable to explain the source‟s source. In the year under appeal the assessee had not only explained the source but had also explained the source‟s source. The case laws relied upon by the AO are not relevant, are distinguished on facts and cannot form the basis for making this addition. Each case has been de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d and respectfully following the judicial pronouncements of the Apex Court in the case of Lovely Exports Private Limited v. CIT [2008] 216 CTR 195 SC and CIT vs. Stellar Investment Ltd. reported in 251 ITR 263 and by the Jurisdictional High Court in the case of Kamdhenu Steel 8s alloys Limited v. CIT [2012] 19 taxmann.com 26, (Delhi) the addition of ₹ 22,92,00,000/- and ₹ 6,15,00,000/- made u/s 68 of the I T Act in assessment years 2012-138s 2013-14 respectively is hereby deleted. This ground of appeal is therefore allowed and the addition of ₹ 22,92,00,000/- and ₹ 6,15,00,000/-in A.Y. 2012-13 and 2013-14 respectively is hereby deleted. Ground raised in appeal is allowed. 19. Ld. CIT DR relying on the findings of the ld AO, submitted that in respect of Kolkata based companies the investigation directorate has categorically mentioned that these companies have invested in the assessee group in the form of shares capital where the business activities and creditworthiness of these Kolkata based companies are suspicious. She further referred to the enquiry conducted by the inspector of AO which shows that at the given address these companies do not exis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt and also prove the genuineness of the transaction. It is only when the assessee discharges this primary onus, that onus shifts to the Department. Merely establishing the identity of the creditor is not sufficient. This is the ratio laid out numerous decisions including Shankar Industries Vs. CIT (1978) 114 ITR 689(Cal);. The manner of payment by the account payee cheque is also not sacrosanct and this cannot make a bogus transaction as genuine one [(CIT VS. Precisions Finance Pvt. Ltd. (208 ITR 465, 470,471 (Cal). Cf. Nizam Wool Agency Vs. CIT, (1992) 193 ITR 318, 320 (All)). The Hon'ble Delhi High Court in the case of Commissioner Of Income -tax v. Nova Promoters and Finless (P) Ltd. reported in [2012] 342 ITR 169 has held that the finding that the share application monies had come through account payee cheques was, at best, neutral. It further observed that the of the Registrar of Companies was again a neutral fact and that these companies were complying with such formalities did not add any credibility or evidentiary value. It held that in any case, it did not ipso facto prove that the transactions were genuine. In the case of Independent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not satisfactory. Sumati Dayal Vs CIT (SC) 214 ITR 801 Vasantibai IM. Shah Vs CIT (Bom) 213 ITR 805 Sreelekha Banerjee Ors. Vs CIT (SC) 49 ITR 112 There is ample authority for the position that where an assessee fails to prove satisfactorily the source and nature of certain amount of cash received during the accounting year, the Income Tax Officer is entitled to draw the interference that the receipt are of an assessable nature. Govindarajulu Mudaliar 34 ITR 807 (SC) Sec. 68 does not confine to cash entries in books. V.I.S.P. (P) Ltd. Vs CIT (MP) 265 ITR 202 Sec. 68 applicable even to share application money. CIT Vs Sophia Finance Ltd. (Del) 205 ITR 98 CIT Vs Active Traders P. Ltd. (Cal) 214 ITR 583 CIT Vs. Nivedan Vanijyya Ltd (Cal) 263 ITR 623 CIT Vs Bhagwati Jewels Ltd. (Del) 201 ITR 461 CIT Vs Prateek Finance Investment Co. Ltd. (Del) 215 ITR 272 Credits in the name of third parties - Assessee must prove identity of credits. Shankar Industries Vs CIT (Cal) 114 ITR 689 Nanak Chandra Laxman Das Vs CIT (Cal) 140 ITR 151 Hari Chand Virender Paul Vs CIT (P8iH) 140 ITR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d their identity genuineness stands established, there were deposits of cash in the bank accounts prior to issue of cheque or pay orders, the same would raise suspicion and addition can be made on such account CIT Vs Navodava Castle Pvt Ltd T20141 367 ITR 306 (Del) (Copy Enclosed) where Hon'ble Delhi High Court accepted^that since the assessee was unable to produce the directors and the principal officers of the six shareholder companies and also that as per the information and details collected by the Assessing Officer from the concerned bank, the Assessing Officer had observed that there were genuine concerns about identity, creditworthiness of shareholders as well as genuineness of the transactions. Rick Lunsford Trade Investment Ltd Vs CIT T2016- TIOL-2Q7-SC-IT1 (Supreme Court) (Copy Enclosed) Where Hon'ble Supreme Court dismissed SLP upholding that it is open to the Revenue Department to make addition on account of alleged share capital u/s 68, where the assessee company has failed to show genuineness of its shareholders. taxmann.com 292, 214 Taxman 429. 350 ITR 407. CIT Vs Nipun Builders Developers (P.) Ltd (30 25 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eposits and immediate withdrawals of money from bank, impugned addition made under section 68 was to be confirmed. Om Logistics in ITA 4301/Pel/2014 for A.Y 2001-02 CIT Vs Focus Exports (P.) Ltd (51 taxmann.com 46 The above submissions and judgements may kindly be considered while adjudicating the case of the Revenue. Without prejudice to the arguments taken above it is submitted as under: [A] The provisions of section 153A are clear and do not mandate requirement of incriminating documents for purpose of finalizing assessment or reassessment under section 153A. 153A unambiguously states that 153(1) Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, in the case of a person where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A after the 31st day of May 2003, the Assessing Officer shall CIT Vs Focus Exports (P.) Ltd (51 taxmann.com 46 (Delhi)/r20151 228 Taxman 88) (Copy Enclosed) Where Hon'ble Delhi High Court held that where in respect of share application money, assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Name Amount WellbuildMarketings Pvt Ltd 3,00,00,000/- Concrete Credit Ltd 55,00,000/- Eagle Deal Trade Pvt Ltd 40,00,000/- Jagdhatri Commodities Pvt Ltd 1,75,00,000/- KailashpatiVincom Pvt Ltd 70,00,000/- Oscar Retailers Ltd 75,00,000/- Vidhan Sales Agencies Pvt Ltd 75,00,000/- Winner Commosales Pvt Ltd 60,00,000/- Jubilee Vincom Pvt Ltd 75,00,000/- KhetanTracon Pvt Ltd 50,00,000/- Total 9,75,00,0007- Further during AY 2012-13, the following amount was also received as share application money:- Name Amount Amanat Agencies Pvt Ltd 4,40,00,000/- Skipper Vinimay P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ured loans for AY 2009-10 2010-11 were already examined by the department and accepted vide their orders under section 143(3) of the Act. DISCUSSION ON MERITS Without prejudice to the above, the under-signed would also like to discuss the case on merits as under:- The discussion on merit is done under two heads as under:- a. AY 2009-10 2010-11 b. AY 2012-13 2013-14 The discussion is done as above, since there is one common CIT(A) order for the first two assessment years i.e., AY 2009- 10 2010-11 and again one common CIT(A) order for AY 2012-13 2013-14. Hence to address each and every issue the discussion is done under the afore-said two heads :- AY 2009-10 2010-11 A.Y.2009-10 : ₹ 4,50,00,000/- : Grds 2,3 4 of Departmental Appeal : Grds 2 3 of Assessee‟s Cross Objection A.Y.2010-11 : ₹ 33,81,00,000/- : Grds 2,3 4 of Departmental Appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ws relied upon the by the Ld AO. In regards to the above the under-signed would like to submit as under:- In the first place attention is sought to the evidences placed on record by the respondent assesse before the lower authorities to prove the identity, credit-worthiness and genuineness of the transactions. These were as under:- Name and address of the subscriber Confirmations from parties indicating the PAN and ward/circle of the loan creditor. PAN Income Tax Jurisdictional details Bank statements In this regard, attention is sought to the decision of the LdCIT(A) for AY 2007-08 to 2010-11 page 97 wherein he has held that section 68 casts the initial onus on the assesse to establish the identity and credit-worthiness of the investor and to prove the genuineness of the transaction. In the instant case it is observed that the appellant has discharged the initial onus by furnishing the Name, Address, PAN, Copy of ITR, Copy of Bank statement and Confirmation from the Investor/Creditor The allegation of the department that the group has routed its unaccounted money earned from suppression/underreporting of profits into the business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ducted upon the said two companies, the summons were served with notices u/s 131 in the name of the post-merger entity i.e., Paramitra Holdings Pvt Ltd and Paramitra had duly complied by giving the PAN, confirmations, bank statements, copies of P/L A/c and Balance Sheets to the Investigation Wing as well as the AO. Further the fact that the said companies had merged with Paramitra Holdings Pvt Ltd., is a matter of knowledge of public domain on Government portals like MCA. c. As regards the allegation that the said companies had no income or less income it was submitted that there is no rule that loans can be made from earnings only. The said companies had enough capital to advance the said funds. d. As regards the fact that there were debits just before credits in the bank accounts of the said companies it was explained that it is the decision of the companies whether or not to keep the said amounts in current account. Further there were no cash deposits in the said accounts. In case of M/s Garuda Imaging after hearing the aforesaid arguments the LdCIT(A) dropped the additions made. Aggrieved by the said order, the department has filed an appeal before Hon‟b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd 3,00,00,000/- Concrete Credit Ltd 55,00,000/- Eagle Deal Trade Pvt Ltd 40,00,000/- Jagdhatri Commodities Pvt Ltd 1,75,00,000/- KailashpatiVincom Pvt Ltd 70,00,000/- Oscar Retailers Ltd 75,00,000/- Vidhan Sales Agencies Pvt Ltd 75,00,000/- Winner Commosales Pvt Ltd 60,00,000/- Jubilee Vincom Pvt Ltd 75,00,000/- KhetanTracon Pvt Ltd 50,00,000/- Total 9,75,00,0007- Further during AY 2012-13, the following amount was also received as share application money:- Name Amount Amanat Agencies Pvt Ltd 4,40,00,000/- Skipper Vinimay Pvt Ltd 3,22,00,000/- Oasis Commotrade Pvt Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Weston Street, Kolkata, West Bengal-12. Their PAN also bore Kolkata based addresses as under:- Name of the party PAN Jurisdiction Address Amanat Agencies Pvt Ltd AAGCA4515M ITO, Ward-6(3), Kolkata 4th Floor R.No. 109 5/1 Clive Row Kolkata ........... Skipper Vinimay Pvt Ltd AAMS1544G ITO, Ward-1(3), Kolkata 7/1 A, Grant Lane, Kolkata Oasis Commotrade Pvt Ltd AABCO0636Q ITO, Ward-1(2), Kolkata 14, Weston Street, Kolkata Hence the respondent assesse has wrongly shown Delhi address when the said companies are Kolkata based. Therefore the said companies must have been acquired by the assesse group, the details of which are not disclosed with the department. Further the said companies were not found at the said Kolkata addresses. Further the companies showing to have advanced unsecured loans did not have much income. The bank statements ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e on assumptions and presumptions needs to be dropped. DISALLOWANCE IN RESPECT OF INTEREST A.Y.2010-11 :Rs. 1,99,52,894/- :Grd 5 of Departmental Appeal : Grd 4 of Assessee‟s Cross Objection A.Y.2012-13 : ₹ 10,05,974/- : Grds 5,7 8 of Departmental Appeal ₹ 7,22,730/- : Grd 5 of Assessee‟s Cross Objection A.Y.2013-14 : ₹ 48,90,986/- : Grd 5 of Departmental Appeal : Grd 5 of Assessee‟s Cross Objection The said disallowance was a consequential to alleged bogus loans [as discussed above]. The AO made this disallowance because the interest was paid on the unsecured loans that were held to be bogus and were treated as unexplained cash credits u/s 68 of the IT Act. The said loans, being genuine, as apparent from afore-said discussion, the question of this disallowance does not arise. 23. He further submitted a paper book wherein details of all the companies such as their confirmation, photocopies of income tax returns and bank statements, balance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the several letter addressed to the assessing officer which are placed at page No. 192 218 of the paper book submitted where in assessee has established the identity , credit worthiness of these investors/ lenders and also the genuineness of the transaction of loan as well as the share application money. 24. He further referred to page No. 219 of his paper book wherein the detailed inspector s report is given. He submitted that whole addition has been made by the ld AO based on one inspector s report which is not at all correct report. He firstly submitted that inspector s report is pertaining in case of M/s Garuda imaging private limited and not in case of the assessee. He further submitted that vide column number 4 of inspector reports refers to examination of the companies namely, (1) Galore suppliers private limited, (2) Elgin sales promotion private limited, (3) Simpro vanijya Private limited, (4) Echolac Vinimay Private Ltd and (5) Oleander manufacturers Credit private Limited . He therefore submitted that the companies which are been enquired by the inspector are not at all related with the impugned assessment years issue. He therefore submitted that inspector s r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t there did not have the sources of the funds and they are not credit worthy. He referred to the bank account of the investor/ lender companies where in the accounts are normal and no cash are deposited. He further referred to the balance sheet of some of the companies where the huge shareholders funds was shown, which is much more than the investment and loan given to the assessee. He submitted that whole addition has been made by the Ld. AO on conjectures, surmises and guesswork. 25. He further submitted that all these companies were also lenders in the Assessee Company in AY 2009-10 and 2010-11 where the ld AO after detailed examination u/s 143(3) of the act has accepted about the identity, creditworthiness and genuineness of these investor / lender companies. Therefore, now the assessing officer without any rhymes and reasons cannot say that they do not exist at all. 26. In the end, he relied upon the plethora of judicial precedents and the last one being the decision of the Hon ble Delhi High Court in ITA No. 169/2017 in case of The Principal Commissioner Of Income Tax 5 Vs. Laxman Industrial Resources Ltd dated 14/3/2017. He particularly referred to page No. 8 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... details of the income tax assessment and in the present case, the AO has not issued any summons or enquiry letter to those assessee, as even not enquired correctly, relied upon the wrong name in inspector s report, overlooked the decision of the Hon ble high court of merger of those companies. He also referred to para no 34 of the Decision of Honourable Delhi high court which is relied up on by the revenue, in case of Nova Promoters Limited relied up on by the revenue to say that when the assessee submits the complete details then, in absence of any inquiry by the ld AO proving the details submitted by the assessee as false, no addition can be made u/s 68 of the act. He further stated that the Ld. assessing officer has failed to verify the details submitted then assessee could not have done anything further. In view of this, he submitted that addition deleted by the Ld. as CIT (A) may be upheld. 27. On the issue of arguments of the ld CIT DR to set aside the whole issue back to the file of the ld AO , he vehemently objected to the same. He submitted that identical request was made by revenue in similar circumstances in case before honorable Delhi High court in Laxman Industr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Credits Ltd. and (3) Lovely Exports P. Ltd. [2008] 299 ITR 268 (Delhi). In that case, the share capital subscription was received through banking channels and complete records were maintained by Divine Leasing and Finance Ltd. The Assessing Officer issued summons under section 131 and thereafter impounded the shareholders' register, share application forms and share transfer register. It was contended by the assessee in that case that because of the action of the Assessing Officer, it was not able to furnish any details about the share subscribers. The Tribunal found that the allotment of shares was made as per the relevant rules of the Securities Contracts (Regulation) Act, 1956, as well as those of the Delhi Stock Exchange. No evidence had been brought on record by the Assessing Officer to indicate that the shareholders were either benamidars of the assessee-company or fictitious or that the share application monies were the unaccounted income of the assessee-company. The Tribunal accordingly held that the onus that lay on the assessee under section 68 stood discharged. 35. In respect of the other assessee, namely, General Exports and Credits Ltd., the monies were rece ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nto the Income-tax records of the persons who had given their file numbers in order to ascertain whether they were existent or not. He neither controverted nor disapproved the material filed by the assessee. Further, the assessee had specifically invited the Assessing Officer to carry out an enquiry and examine the assessment records of the share applicants whose Income-tax file numbers were given. Though the Assessing Officer had sufficient time to carry out the examination, he did not do so, but put forth an excuse that the assessee was taking several adjournments. This court observed that it is for the Assessing Officer to manage his schedule and he should have ensured that because of the adjournments he did not run out of time for discharging the duties cast on him by law. It was held that when details were furnished by the assessee, the burden shifted to the Assessing Officer to investigate into the creditworthiness of the share applicants which he was unable to discharge. Thus, the order of the Tribunal deleting the addition was held not giving rise to any question of law, much less any substantial question of law. 37. It is not only relevant to note the above facts, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nished to the Department along with copies of the shareholders register, share application forms, share transfer register, etc., it would constitute acceptable proof or acceptable explanation by the assessee ; (5) The Department would not be justified in drawing an adverse inference only because the creditor/subscriber fails or neglects to respond to its notices ; (6) the onus would not stand discharged if the creditor/subscriber denies or repudiates the transaction set up by the assessee nor should the Assessing Officer take such repudiation at face value and construe it, without more, against the assessee ; and (7) The Assessing Officer is duty-bound to investigate the creditworthiness of the creditor/ subscriber the genuineness of the transaction and the veracity of the repudiation. 38. The judgment of this court in the above three cases was carried in appeal to the Supreme Court by the Revenue which filed S. L. P. No. 11993 of 2007. The petition for leave to appeal was dismissed by the Supreme Court observing as below : Delay condoned. Can the amount of share money be regarded as undisclosed income under section 68 of the Income-tax Act, 1961 ? We find no merit in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ove and establish the identity and creditworthiness of the share applicant and the genuineness of the transaction. In such a case, the Assessing Officer cannot sit back with folded hands till the assessee exhausts all the evidence or material in his possession and then come forward to merely reject the same, without carrying out any verification or enquiry into the material placed before him. The case before us does not fall under this category and it would be a travesty of truth and justice to express a view to the contrary. 40. The case of CIT v. Orissa Corporation [1986] 159 ITR 78 (SC) exemplifies the category of cases where no action is taken by the Assessing Officer to verify or conduct an enquiry into the particulars about the creditors furnished by the assessee, including their Income-tax file numbers. In the same category fall cases decided by this court in CIT v. Dolphin Canpack [2006] 283 ITR 190 (Delhi), CIT v. Makhni and Tyagi P. Ltd. [2004] 267 ITR 433 (Delhi), CIT v. Antartica Investment P. Ltd. [2003] 262 ITR 493 (Delhi) and CIT v. Achal Investment Ltd. [2004] 268 ITR 211 (Delhi). To put it simply, in these cases the decision was based on the fundamental rule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee or does not make any further enquiry on these details, then addition under section 68 cannot be made. The above principles are culled out from the various decisions of Hon ble High Courts. d. In case of a private limited company if the assessee furnishes all the details as mentioned in above para and the assessing officer makes any enquiry on the submission of the above details, then in such case, the assessing officer should give an opportunity to the assessee confronting the materials or findings of his enquiry. In such cases, the onus once again shifts to the assessee who must, to avoid the addition under section 68 of the act, satisfy the assessing officer about the identity, creditworthiness, and genuineness of the transaction of share application or loan meeting the results of inquiry of the ld AO. If the assessee fails to do so to the satisfaction of the assessing officer, it may result into addition under section 68 of the act. e. In case of a private limited company, if there is any evidence available before the assessing officer that assessee has obtained such loan or share capital from fictitious persons, or from accommodation entry providers, or lenders/ de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he complete details showing the bank account of the investors. Vide letter dated 02.11.2015 assessee further submitted copy of the bank statement of the investors along with the details regarding the source of the funds of the investor. Further, vide letter dated 26.11.2015 assessee submitted the year wise details appearing in the books of account of all the lenders and also furnished reconciliation of the same with the books of account of the assessee as at 17.06.2010 and 31.03.2010. Further, by that letter it is mentioned by the assessee that ld AO has mentioned all the companies are Kolkata based companies and are shell companies is incorrect. It was further submitted that enquiry has not been made in the case of Assessee Company through Inspector. Further, the explanation with respect to the enquiry of the Inspector in case of other group companies was also submitted to be not relevant, as the impugned companies are not mentioned there. Vide letter dated 27.11.2015 the assessee has objected to the action of the ld Assessing Officer stating that AO had pointed out based on the alleged findings of an Inspector s report obtained by the predecessor of the AO certain additions were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se it does not apply in the facts before us. b. Ld AO also referred to seized material for making addition. From the seized documents, which were provided to us in a pen drive, books of the assessee company itself as well as the ledger account of investor s company were found. These are the regular books of the assessee company. Therefore, neither ld AO mentioned any seized material in his assessment order with respect to the above transaction, which shows that the entries of loan as well as share capital are not genuine, nor no such material was produced by before us. Therefore, the reliance on seized material by ld AO for making this addition is baseless. c. None of the query letters by the dl AO , wherein the names of the these companies appeared or shown as shell companies or , entry operator companies etc were shown to us which suggests that the assessee has obtained accommodation entries. There were no statements or inquiries available before us about the directors of the companies of loan or share applicants. Further, no evidences were laid in assessment orders or before us to show that these companies are shell companies or are bogus companies. d. With respect to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompanies about the amalgamation. Further, in para No. 3.2, 3.3 and 3.4 of the Company petition the complete details with respect to the companies were furnished. It was also noted therein, that in case of Oasis Comotrade Pvt Ltd the registered office was changed from Kolkata to New Delhi on 01.10.2012, in case of Skipper Vinimay Pvt. Ltd such change was also on 01.10.2012 whereas, in case of Amanat Agencies Pvt. Ltd such change took place on 05.07.2012. Further, the net worth of this company was ascertained through report of the valuer mentioned in para No. 13 of the petition and based on which the shares were issued to the three companies of Parammitra Investment Pvt. Ltd. Furthermore, the schedule of properties of the Oasis Comotrade Pvt. Ltd as at 31.12.2013 shows that ₹ 17.25 crores, in case of Vinimay Pvt. Ltd ₹ 16.31 crores and in case of Amanat Agencies Pvt. Ltd ₹ 8 crores. Therefore, in merger proceedings, the Regional Director and official Liquidator and the Income Tax Dept has not filed any objection about the merger of these companies. Further where their net worth is certified by an independent valuer and approved by the Hon'ble High Court. Henc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this, the ld Assessing Officer did not have any Inspector s report with respect to above lender companies. f. Lesser-returned income of the lender companies was also one of the reasons for making addition of loans. The ld Assessing Officer has stated that all these 10 companies have lesserreturned income to prove the creditworthiness of those companies. It is correct that these companies have returned the lesser income then amount advanced by them. However, it is also important to note that these companies filed their return of income with the income tax department and regularly assessed to income tax act. Hon'ble Delhi High Court in case of CIT Vs. Vrindavan Farm Pvt. Ltd ITA No.71/2015 dated 12.08.2015 (Delhi) has held that merely the low income reflected in the return of income cannot be the basis for making the addition. It was held that where the assessee has provided the complete details of the permanent account No., confirmations, bank statement, balance sheets, and profit and loss account of those companies. Therefore, the above ground for making the addition by the ld Assessing Officer in absence of any inquiry cannot be made. The Assessing Officer has not at all l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s genuine for that reason only. There cannot be any quarrel on this issue as Hon'ble Delhi High Court in Nova Promoters has already held so. In fact, accommodation entries are carried out through banking channel only. l. No statement of the directors of the company or the investor and lenders companies was recorded by the ld AO or investigation wing. Despite specific request by the assessee, no summons u/s 131 or inquiry letters u/s 133 (6) were issued by the ld AO to the above companies. m. Further, the ld Assessing Officer has made distinction between the companies registered in a particular jurisdiction of the country i.e. Kolkata compared with companies registered in another jurisdiction. To say bluntly that the AO laid the parameters that the companies registered in Kolkata region will have different parameters of testing their identity, creditworthiness, and genuineness of the transaction. We do not agree with the classification made by the ld Assessing Officer merely based on the companies registered in a particular geographical location. Our view is that each lender or investor needs to be tested on its own facts and circumstances as far as testing the criteria of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No inspector report with respect to the investor/ lender company was obtained or available with AO. f. Investigation wing report was not mentioned or shown about the assessee 35. In fact, ld Assessing Officer should have either obtained the complete details from the MCA Website or should have issued 133(6) query letter to the Registrar of Companies for obtaining the annual reports, annual returns under the Companies Act and share holders director s details since beginning of those companies. He should have further obtained the DIN (Director s Identification no) of the directors of the companies which is linked with the Permanent Account No or any identification details of the directors. The details from bankers should also have been obtained with respect to the unusual transactions in the account of the investors as per F U Ind wing as ld AO has alleged that the investors have high value transactions. The Directors, persons operating the accounts of those companies should have been examined by vast powers with the Assessing Officer under the Income Tax Act as well as under the other acts. The ld AO should have also intimated and coordinated with the assessing officer o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y evidence collected by the ld AO, they do not advance the case of the revenue , still, we deal with them as under:- a) Ld. CIT DR heavily relied up on the decision of Hon ble Delhi High Court in CIT Vs. Nipun builders ltd 350 ITR 407 ( Delhi) wherein addition under section 68 was made with respect to the share capital received from several companies. The assessing officer issued summons to the subscriber companies which were returned unserved with remark that no such company exist. The inspectors were also sent for verification of the address of the above companies who also confirmed the same. Moreover, the assessee failed to produce principal officers of the subscribers of the company who could explain the source of such shares of the subscription in that circumstances the addition was confirmed. In the present case there is no enquiry made by the Ld. Assessing officer by issue summons under section 131 of the Income Tax Act or issuing enquiry letter under section 133 (6) of the Income Tax Act. In view of this, the reliance on this decision does not help the case of the revenue. b) The decision of the Hon ble Delhi High Court in case of CIT versus Nova promoters and Finl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ortfolio Pvt. Ltd Vs. CIT 29 Taxmann.com 211 (Delhi) wherein case of a private ltd company where specific summons were issued to the shareholders of the company who did not attend investigation proceedings before the Ld. Assessing Officer and the notices were received unserved. The Hon'ble Delhi High Court has held that the duties of assessee in case of receipt of cash from investor when the assessee submits the complete details with respect to those investors then onus are discharged. It was further held that if on verification or during the proceedings the AO cannot contact the share applicants or information becomes unverifiable or there are further doubts then onus shifts back to the assessee at that stage assessee falters then, the consequence would be an addition u/s 68 of the Act. In fact, in the present case no enquiry has been conducted by the assessing officer with respect to the above sum of loan as well as investment by the companies in share application money. d) In the case of CIT Vs. Empire Builder Private Limited 43 Taxmann.com 269 (Delhi), which was relied upon by the Ld. CIT DR the fact showing that the summons or the enquiry letters were issued under se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also deposited regularly in the accounts of the share holders and then cheques were issued to the assessee. The assessee also expressed its inability to produce the share holders stating that they were not share holders later on. There was also an allegation that the company was under the control one Mr. Mahesh Garg who was an entry operator. In those circumstances the addition were made. In the present case before us neither summons were issued nor was assessee asked to produce anybody. There was no allegation about any entry operator also. Therefore, reliance on the decision of Hon'ble Delhi High Court is misplaced. 37. Further, the Hon'ble Delhi High Court in case of CIT Vs. Laxman Industrial Resources ITA No. 169/2017 dated 14.03.2017 after discussing the several decisions of the Hon'ble Delhi High Court has held that when assessee has provided several documents that could have showed light into whether truly transactions are genuine. That was not the case where the share applicant have merely provided the confirmation but have also provided their assessment particulars, mode of payment, bank statement showing cheque no and transfer of funds to the assessee as w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uine. It was not a case where the share applicants are merely provided confirmation letters. They had provided their particulars, PAN details, assessment particulars, mode of payment for share application money, i.e. through banks, bank statements, cheque numbers in question, copies of minutes of resolutions authorizing the applications, copies of balance sheets, profit and loss accounts for the year under consideration and even bank statements showing the source of payments made by the companies to the assessee as well as their master debt with ROC particulars. The AO strangely failed to conduct any scrutiny of documents and rested content by placing reliance merely on a report of the Investigation Wing. This reveals spectacular disregard to an AO‟s duties in the remand proceedings which the Revenue seeks to inflict upon the assessee in this case. No substantial question of law arises. The appeal is dismissed. [underline supplied by us] 39. We have given our careful thought to the request of the ld DR. we have also compared facts of the case of the assessee with the facts of the case before the Hon'ble Delhi High Court. We found that in the case b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /11/2017 ( Raj) 42. As in the present case the assessee has given complete details with respect to the addition of ₹ 22,92,00,000/- and the ld AO has failed to make any inquiry we confirm the finding of the ld CIT(A) in deleting the above addition. Consequently ground No. 2, 3, and 4 of the appeal for AY 2012-13 are dismissed. 43. The ground No. 5 of the appeal is with respect to disallowance of interest with respect to loans as discussed in ground No. 2 to 4 of the appeal of the assessee. As we have confirmed the finding of the ld CIT (A) in deleting the addition u/s 68 of the Act, consequently we also confirm her finding in deleting the disallowance of interest on the above loans. Consequently, ground No. 5 of the appeal is dismissed. 44. Ground No. 6 of the appeal is with respect to the addition of ₹ 15.50 crores with respect to the loan taken by the company from 8 private limited companies where the assessee has furnished their name, address, their bank statements, and their return of income and confirmation letter. However, the ld Assessing Officer has made the addition only stating that these companies have low returned income and further, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly cannot be considered as unexplained cash credits u/s 68 of the Act. The addition of ₹ 15,50,00,000/- and ₹ 30,00,000/- in A.Y. 2012-13 and 2013-14 respectively is hereby deleted. This ground of appeal is therefore allowed and the addition of ₹ 15,50,00,000/- and ₹ 30,00,000/-in A.Y. 2012-13 and 2013-14 respectively is hereby deleted. Ground raised in appeal is allowed.‖ 46. We have given our detailed reasons wherein, addition u/s 68 cannot be made where despite complete information submitted by the assessee company no inquiry have been made by the ld AO. For the similar reasons we confirm the findings of the ld CIT (A) in deleting the above addition of ₹ 15.50 crores. Consequently, ground No. 6 of the appeal of the revenue is dismissed. 47. Ground No. 7 is with respect to interest disallowance on the addition considered in loan as discussed in ground No. 6. As we have confirmed the finding of the ld CIT(A) in ground No. 6 deleting the addition u/s 68 of the Act we also confirm her finding with respect to the disallowance of interest expenditure of ₹ 722730/-. Consequently, ground No. 7 of the appeal of the revenue is dismisse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted that their arguments are similar to their submissions made in ground No. 2 to 5 of the appeal of the revenue in case of this assessee for Assessment Year 2012- 13. It was further stated that reasons given by the AO for making addition and by the ld CIT (A) for deleting the addition are identical. They further stated that except the name of the lenders and the amount involved there is no difference in the facts of the case. 58. We have carefully considered the rival contentions and perused the orders of the lower authorities. The facts of the case, reasons for making an addition and deleting the same as well as the arguments of the parties are also same, we also for the reasons given in ground No. 2 to 5 of the appeal of the revenue in case of the assessee for AY 2012-13, confirmed the finding of the ld CIT (A) in deleting the above addition. Consequently, we also confirm her finding in deleting the disallowance of interest of ₹ 4890986/-. Consequently, ground No. 2 to 5 of the appeal are dismissed. 59. Ground No. 6 of the appeal relates to addition of ₹ 90 lacs made by the ld Assessing Officer on account of the above received from a company titled as Non ..... X X X X Extracts X X X X X X X X Extracts X X X X
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