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TMI Blog2018 (2) TMI 1754X X X X Extracts X X X X X X X X Extracts X X X X ..... the authorities below and delete the addition of 2.44 crores under section 68. The other grounds i.e., charging of interest under sections 234B and 234D of the I.T. Act, are consequential in nature. X X X X Extracts X X X X X X X X Extracts X X X X ..... provided to the assessee during the course of assessment proceedings. No adverse material was confronted to assessee and no explanation have been called. Therefore, there is no basis to make any addition against the assessee. The assessee relied upon the decision of Hon'ble Supreme Court in the case of Kishinchand Chellaram v. CIT [1980] 125 ITR 713/4 Taxman 29. The assessee received share capital from 15 companies and according to information of assessee, Shri Tarun Goel does not hold any position in any investor company. The assessee is a company and its accounts are duly audited. Assessee produced all the relevant documents before A.O. to prove the genuine credit in the matter which includes balance-sheet of the investors, confirmations, cheque nos, and date along with bank statements from where amounts have been received with their records of income tax department, certificate of incorporation of corporate subscribers. The assessee, therefore, produced all the documents before A.O. to prove the genuine credits in the matter. The initial onus upon assessee have been discharged. The A.O. made independent enquiries from these parties by issuing notice u/s 133(6) of the I.T. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the above assessee is not specific regarding the facts of the case. It appears that the case has been selected for the scrutiny based on the information received from the Investigation Wing after the search in the premises of Shri Tarun Goel, CA on 15.09.2008. You have made an addition of ₹ 2,44,00,000/- as unexplained share application money without specifying the section under which the above addition is made. It is not dear from the assessment order as to how many companies are involved and how many of these companies are connected with Shri Tarun Goel, CA. As per your assessment order 'Accordingly enquiry letters u/s 133(6) of the Act were issued to these parties. However, reply has been received from some of the parties'. It is not dear as to the number of parties you had issued enquiry letters u/s 133(6) or from number of parties from whom you have received replies. Therefore, you are requested to specifically intimate the names of the companies which have contributed the share capital of ₹ 2,44,00,000/-, the names of the companies out of the above which are connected with Shri Tarun Goel, CA, the companies from whom you have received the replies. Also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... MULTITECH SEMICONDUCTORS (P). LTD. 10,00,000 8. RIBBEL MANUFACTURES & EXPORTERS (P). 5,00,000 9. SHALINI HOLDING LTD. 10,00,000 10. SKYLINK SOFTWARES (P) LTD. 10,00,000 11. VIVEK GHAI 10,00,000 12. V.K. VERM A 2,00,000 13. ZENITH AUTOMOTIVE (P) LTD. 10,00,000 14. H.C. DUTTA (HUF) 30,00,000 15. MANISH SEXENA 5,00,000 AR of the assessee company filed confirmation from all the parties to prove the genuineness of the parties but could not produce parties even if providing adequate opportunities for confirmation and verification. Information was called from assessee on the basis of information received notices u/s 133(6) were issued in the following cases on test check basis. In response to notice u/s. 133(6), the following parties had sent their confirmation by post/courier and placed on records. Sr. No. PARTICULRAS AMOUNT 1. MULTITECH SEMICONDUCTORS (P). LTD. 10,00,000 2. MANISH SEXENA 5,00,000 3. RIBBEL MANUFACTURES & EXPORTERS (P). LTD. 5,00,000 4. ZENITH AUTOMOTIVE (P) LTD. 10,00,000 5. SHAUN 1 HOLDING LTD. 10,00,000 6. ANKUR KAPUR PROP. A. S. INTERNATIONAL 12,00,000 7. VIVEK GHAI 10,00,000 In the above cases it is not denied th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... withdrawal on 05.07.2007 of 10 lakhs. Again deposits of ₹ 9 lakhs, 2 lakhs, 3 lakhs and 3 lakhs on 05.07.2007 and withdrawal on 06.07.2007 of ₹ 10 lakhs. 8.12. In the case of Indlon Hosiery (P) Ltd. ₹ 5,00,000/- were invested. Return of income shows income of ₹ 1781. Copy of bank account has not been furnished. 8.13. In the case of Multitech Semiconductors (P) Ltd. ₹ 5,00,000/- was invested. Return of income shows income of ₹ 52,667/-. Copy of bank account is not legible. 8.14. In the case of Ribbel Manufactures & Exporters (P) Ltd. ₹ 5,00,000/- was invested. Return of income shows income of ₹ 55,495/-. Copy of bank account shows deposit of ₹ 4,95,000/- on 24.07.2007 and withdrawal of ₹ 5,00,000/- on 25.07.2007. 8.15. In the case of Shalini Holding Ltd. ₹ 5,00,000/- was invested. Return of income showing income of Nil. Copy of bank account shows deposit of ₹ 16,10,000/- on 24.04.2007 and withdrawal on 25.04.2007. 8.16. In the case of Skyline Softwares (P) Ltd. ₹ 10,00,000/- was invested. Return of income shows income of ₹ 58,795. Copy of bank account shows deposit of ₹ 5,00,000/- on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny explanation about the nature and source of the amount so credited or the explanation offered by the appellant is not satisfactory in the eyes of the AO, the sum so credited may be charged to income tax as income for that year. 8.25. Section 68 is very widely worded and the AO is not precluded from making an enquiry as to the nature and source of a sum credited in the books of account of the appellant company even if the same is credited as receipt of share application money. Where, therefore, an appellant company represents that it has issued shares on receipt of share application money, then the amount so received would be credited in the books of account of the appellant. In such a case, the AO would be entitled to enquire, and it would indeed be his duty to do so, whether the alleged shareholders do in fact exist or not. 8.26. The latest judgement of the Hon'ble Delhi High Court in the case of CIT v. Oasis Hospitalities Pvt. Ltd. dated 31st January, 2011 has dealt with the issue at length and after examining the various judgments has settled certain parameters to decide an issue like this. After analyzing the provisions of the Companies Act, Section 68 of the IT Act a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cceptable, the crucial aspect whether on the facts and circumstances of the case it should be inferred the sums credited in the books of the assessee constituted income of the previous year must receive the consideration of the authorities provided the assessee rebut the evidence and the inference drawn to reject the explanation offered as unsatisfactory. We are required to notice that Sec. 68 of the Act itself provides, where any sum is found credited in the books of the assessee for any previous year the same may be charged to income tax as the income of the assessee 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 AO not satisfactory. Such opinion found itself constitutes a prima facie evidence against the assessees, viz., the receipt of money, and if the assessees fail to rebut the said evidence the same can be used against the assessee by holding that it was a receipt of an income nature. In the case in hand the authorities concurrently found the explanation offered by the assessee unacceptable." 5. Indus/alley Promoters Ltd. v. CIT [2008] 305 I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not complied with by the assessee. The assessee later filed affidavits of the two individuals, R and M, in which both stated that the transactions with the assessee were genuine and the earlier statements recorded from them by the investigation wing were given under pressure. The Assessing Officer came to the conclusion that the independent enquiries carried out by him disclosed that the assessee was unable to prove the genuineness of the transactions with the companies and that it also proved that the assessee-company had introduced its own monies through non-existing companies using the banking channel in the shape of share application monies. He accordingly invoked section 68 of the Act and added the amount of ₹ 1,18,50,000 to the income of the assessee and a sum of ₹ 2,96,250 representing commission. On appeal the Commissioner (Appeals) rejected the assessee's contention against the validity of the reopening of the assessment but, taking note of the statement of the assessee that the affidavits from R and M, who were directors in the three companies as well as the affidavits of the directors in other companies which provided the share capital, were not considere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsactions of giving cheques to the assessee-company were genuine and that the cheques were issued to the assessee-company for share application money for allotment of shares and subsequently shares were also issued, both the Commissioner (Appeals) as well as the Tribunal had committed a serious error in appreciating the evidence. The Assessing Officer in his remand report stated that despite repeated opportunities the deponents of the affidavits were not produced before him for examination and that summons issued to all the deponents of the affidavits remained un-complied with and none of the persons attended before him. The assessee had nothing to say as to why the deponents of the affidavits, which were all in its favour, could not present themselves before the Assessing Officer for being examined on the affidavits. In the light of the facts, the evidentiary value of the affidavits was open to serious doubt. The affidavits retracting their earlier statements, filed by M and R were filed more than three years after they wrote letters admitting to their role as entry providers. A.O. reason had been advanced by the assessee for such long delay in retracting the earlier letters. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ise of subscription to share capital, for a consideration in the form of commission. The names of several companies which figured in the statements given by the above persons to the investigation wing also figured as share-applicants subscribing to the shares of the assessee-company. These constituted materials upon which one could reasonably come to the conclusion that the monies emanated from the coffers of the assessee-company." 8.29. The recent judgement of the Hon. ITAT Indore Bench in the case of M/s Agarwal Coal Corporation P. Ltd, Indore v. Addl. CIT, Range-5 states:- "The case of Lovely Exports will be applicable only after the identity of the share applicant is established. Since in the instant appeals before us the identity itself has not been established there is no justification to apply the ratio laid down by the Supreme court in the case of Lovely Exports." "Even if the cases relied upon by the Id. Counsel for the assessee, as mentioned/cited/discussed in the preceding paras of this order like Divine Leasing & Finance Limited, Dwarkadheesh Investment Private Limited, Gangor Investment Limited, K.C. Fibres Limited, Dolphin Canpack Limited, Sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 131. Under these circumstances, the inferences drawn by the AO were justified and warranted. The Appellate Commissioner and the Tribunal fell into error in directing their deletion.. For the above reasons, this Court is of opinion that the revenue's appeal has to succeed. The questions framed are answered in the affirmative, in favour of the revenue; the impugned order (and that of the Appellate Commissioner), are hereby set aside and the order of the AO is restored. The Appeal is therefore allowed." 8.31. Thus, the facts of this case clearly show that the appellant has not been able to prove the identity of the share applicants as the appellant failed to produce the persons. The credit worthiness of the said creditors with respect to the cash credits in question was also not proved. The persons giving the loans show meagre income and insufficient cash leading to doubts about their creditworthiness. In a lot of cases there is a deposit of the same amount as was invested and then withdrawal either on the same day on within a few days. Besides this deposit, the balance at any point of time is very negligible. The sources of income had not been given. Further, no evidence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TAT, Delhi Bench in the following cases deleted the addition on similar circumstances. (i) Prabhatam Investment (P.) Ltd. v. ACIT ITA.No.2523 to 2525/Del./2015, dated 17.04.2017 (ii) ACIT v. TRN Energy (P.) Ltd. ITA.No.453/Del./2016 dated 01.01.2018. 3.2. He has, therefore, prayed that addition may be deleted. 4. The Ld. D.R. on the other hand, relied upon the orders of the authorities below and referred to para-8 of the appellate order in which the Ld. CIT(A) has specifically noted low income shown by the investors. He has, therefore, submitted that the creditworthiness of the investors have not been proved. The Ld. D.R. relied upon the decision of the Hon'ble Delhi High Court in the case of CIT v. MAF Academy (P.) Ltd. [2014] 361 ITR 258/224 Taxman 212/42 taxmann.com 377 and Navodaya Castle (P.) Ltd. [2014] 367 ITR 306/226 Taxman 190 (Mag.)/50 taxmann.com 110 which is confirmed by the Hon'ble Supreme Court. 5. We have considered the rival submissions. It is not in dispute that assessee at the assessment stage produced sufficient evidences before A.O. in support of the explanation to have received genuine share capital money from 15 parties, which are, certificate o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d creditworthiness of the investors and that they have not been produced by the assessee for their statements. The A.O. in the assessment order noted that vide order sheet dated 16th December, 2010 and also on 20th December, 2010 assessee was asked to produce the investors. The Learned Counsel for the Assessee referred to PB-22 which is reply filed before A.O. on dated 20th December, 2010 in which the assessee explained before A.O. that requisite information have already been furnished and time given for production of the parties was very short and these parties are not under the control of the assessee. A request was made to the A.O. to exercise his powers to call them in order to record their statements. It was, therefore, proved that assessee has made a request to the A.O. on 20th December, 2010 that the investors may be summoned under section 131 of the I.T. Act for their production for recording their statements at assessment stage in order to verify genuineness of the transaction in the matter. However, the A.O. did not issued any summons under section 131 of the I.T. Act on the request of the assessee and the A.O. passed the assessment order on next day i.e., on 21st Decembe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be read in evidence against the assessee. We, rely upon the decision of the Hon'ble Supreme Court in the case of Kishinchand Chellaram (supra). The Ld. CIT(A) in his findings rejected the explanation of assessee with regard to creditworthiness of the creditors because the income shown by the investors were low. However, the A.O. has not undertaken any investigation of the veracity of the documents filed by the assessee to verify the creditworthiness of the creditors from their bank statements and the balance sheet filed on record particularly when all the documentary evidences in all the cases were filed and most of them also confirmed investment in assessee-company through replies in response to notice under section 133(6) of the I.T. Act. The Hon'ble Delhi High Court in the case of CIT v. Vrindavan Farms (P.) Ltd. etc., in ITA.No.71 of 2015 dated 12th August, 2015 held as under : "The sole basis for the Revenue to doubt their creditworthiness was the low income as reflected in their return of income. It was observed by the ITAT that the AO had not undertaken any investigation of the veracity of the documents submitted by the assessee, the departmental appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he above findings noted that the assessee had provided several documents that could have showed light into whether truly the transactions were genuine. The assessee provided details of share applicants i.e. copy of the PAN, Assessment particulars, mode of amount invested through banking channel, copy of resolution and copies of the balance sheet. The AO failed to conduct any scrutiny of the document, the departmental appeal was accordingly dismissed." 5.6. Decision of Hon'ble Delhi High Court in the case of CIT v. (i) Dwarakadhish Investment (P.) Ltd., and (ii) Dwarkadhish Capital (P.) Ltd. [2011] 330 ITR 298/[2010] 194 Taxman 43, in which it was held as under : "In any matter, the onus of proof is not a static one. Though in section 68 of the Income Tax Act, 1961, the initial burden of proof lies on the assesses yet once he proves the identity of the creditors/share applicants by either furnishing their PAN number or income-tax assessment number and shows the genuineness of transaction by showing money in his books either by account payee cheque or by draft or by any other mode, then the onus of proof would shift to the Revenue. Just because the creditors/share ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the share applications had changed their addresses or had stopped functioning. Therefore, the Commissioner (Appeals) and the Tribunal were justified in holding that the genuineness of the transactions had been duly established by the assessee." 5.8. Decision of Hon'ble Delhi High Court in the case of CIT v. Value Capital Services (P.) Ltd. [2008] 307 ITR 334 (Del.) (HC), in which it was held as under : "Dismissing the appeal, that the additional burden was on the Department to show that even if the share applicants did not have the means to make the investment, the investment made by them actually emanated from the coffers of the assessee so as to enable it to be treated as the undisclosed income of the assessee. No substantial question of law arose." 5.9. Considering the facts of the case in the light of material on record, it is clear that assessee-company produced sufficient documentary evidences before A.O. to prove ingredients of Section 68 of the I.T. Act. The assessee also allotted shares to the investors. The A.O. did not make proper enquiry on the evidences filed by the assessee-company on record. Whatever enquiry was made under section 133(6) of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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