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TMI Blog2019 (9) TMI 689X X X X Extracts X X X X X X X X Extracts X X X X ..... ceed to reopen their assessment in accordance with law, but sum received from share holders cannot be regarded as undisclosed income of the assessee. Assessee has discharged its initial onus to prove identity, genuineness of transactions and creditworthiness of the parties by filing various documents. AO, without carrying out further inquiries in order to ascertain the claim of the assessee, jumped into conclusion on the basis of financial statements of the subscribers that none of them had enough source of income to establish creditworthiness. AO and the CIT(A) erred in making additions towards share capital received from seven subscribers u/s. 68 of the I.T. Act, 1961. Hence, we direct the AO to delete the additions made towards share capital u/s. 68 Addition towards non-existing liability u/s. 41(1) - HELD THAT:- AO erred in making addition towards creditors u/s. 41(1) of the Act, unless he brought out any material to the effect that such liability has been in fact ceased to exist during the relevant financial year. However, it is not clear whether the details with regard to payment of such liabilities /written back in subsequent years were before the AO or not. Therefor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... along with application for allotment of equity shares, PAN, financial statements and the confirmations from the parties. The assessee has also filed valuation report for justifying issue of shares at premium. The Assessing Officer, in order to ascertain correctness of details filed by the assessee called upon the assessee to produce the persons for verification. Though, the Assessing Officer has given opportunity to the assessee to produce the parties, the assessee could not produce them. The Assessing Officer therefore, came to the conclusion that the assessee could not prove the identity of the parties, genuineness of the transactions and credit worthiness of the parties. Accordingly, after analyzing the financial position of each of the subscribers, the Assessing Officer came to the conclusion that none of the subscribers were in a position to invest in assessee company in shares issued at high premium, which is evident from the fact that although they have shown huge reserves and surplus in the balance sheet, but their net profit is either nil or negligible. The Assessing Officer further observed that although the assessee had issued shares at huge premium, on perusal of the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issions of the assessee and also on analyzing the facts brought out by the Assessing Officer in respect of each of the subscriber companies came to the conclusion that the assessee has failed to prove credit found in form of share capital with necessary evidence, more particularly on the aspect of credit worthiness of the subscriber, which is evident from the fact that all companies have declared either nil income or loss for the year under consideration, even though they have carried huge reserves and surplus in their financial statements. The CIT(A) further observed that the Assessing Officer has brought out facts in the light of bank statements that there are hardly any transactions except debit and credit on the date of transfer to the assessee company and, therefore, from the above it is clear that all investor companies appear to be shell companies. Therefore, the CIT(A) opined that the Assessing Officer was right in making additions towards share application money received from seven subscriber companies as unexplained credit within the meaning of section 68 of the Income tax Act, 1961. The CIT(A) further observed that the Assessing Officer has also rightly invoked provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee's version without affording any opportunity to the Assessing Officer to make the verification. In the alternative, the appellant authorities could have themselves verified the material placed before them with the records of the creditors. This has not been done. Accordingly, we are satisfied that the appellate authorities have not dealt with the matter properly. 2. The principle, as envisaged by the Hon. High Court in the above case, is one of absolutely liability, in which case the burden does not shift. Further, mere mention of income-tax file number of creditor will not suffice to discharge the onus as held in the case of CIT v. Korlay Trading Co. Ltd. [1998] 232 ITR 820 (Cal.), where in it was held that where, without filing confirmation letter from the creditor, the assessee merely mentioned the income-tax file number of the creditor (which was also not supported by any affidavit from the creditor), the genuineness of the cash credit cannot be said to have been proved by the assessee. 3. In fact, the principle of onus, that the assessee is required to establish the identity, prove the genuineness of the transaction and e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce for ingredients of section 68 of the Act. Prima facie onus is always on the assessee to prove the cash credit entry found in the books of account of the assessee. In land mark cases like Kale Khan Mohammad Hanif v CIT[1963] 50 ITR 1 (SO. Roshan Di Hatti v CIT [1977] 107 ITR 107 (SC) it has been held that the law is well settled that the onus of proving the source of a sum of money found to have been received by an assessee, is on him. Where the nature and source thereof cannot be explained satisfactorily, it is open to the revenue to hold that it is the income of the assessee and no further burden is on the revenue to show that the income is from any particular source. In case of Shankar Ghosh v. ITO [J19851 13 IIP 440 (Cal.) the assessee failed to prove the capacity of the person from whom he had allegedly taken loan. Further, assessee could not explain the need for loan and the manner in which the loan amount was spent. The creditor had issued two letters demanding repayment but did nothing on non-compliance therewith. Such letters did not, therefore, carry any conviction about the explanation of the assessee. The burden n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 82 taxmann.com 12 (Calcutta) :- A coordinate bench of the Court in dealing with an almost identically worded over of the Commissioner in the case of Raimandir Estates (P.) Ltd, v. Pr, CIT [2016l 386 ITR 162/240 Taxman 306/70 taxmann.com 124. construed the provisions of section 68 as it was before the amendment being the law which prevailed in the relevant previous year in that proceeding, and held that 'the use of the words 'any sum found credited in the books' in section 68 indicates that the said section is very widely worded and an Income-tax Officer is not precluded from making an enquiry as to the true nature and source thereof even if the same is credited as receipt of share application money. Mere fact that the payment was received by cheque or that the applicants were companies, borne on the file of Registrar of Companies were held to be neutral facts and did not prove that the transaction was genuine. The ITO may even be justified in trying to ascertain the source of depositor'. Therefore, the submission that the source of source is not a relevant enquiry does not appear to be correct. The exercise of power under section 263 by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t benami transactions done with a view to evade identifying the real contributor of funds. However, such an interpretation, especially in the preamendment regime, has not been consistent. Any reliance on the dismissal of SLf by the Supreme Court in the case of CIT v. Lovely Exports (P) Ltd., [2008] 216 CTR 195, which is used as a tool to defend against the 'source of source' inquiry, is wrong. Therein the SC held: We find no merit in this special leave petition for the simple reason that if the share application money is received by the assessee-company from alleged bogus shareholders, whose names are given to the Assessing Officer, then the Department is free to proceed to reopen their individual assessments in accordance with law. Hence, we find no infirmity with the impugned judgment. It is to be noted that the verdict was passed in the pre-amendment regime on 11.01.2008. c) Hon'ble Delhi High Court in case of Nova Promoters Finlease 342 ITR 169 held : The decision in the case of C/Tv. Lovely Exports [2008] 216 CTR 195 (SCt was considered in C/Tv. Nova Promoters Finlease (P.) Ltd. [2012] 342 ITR 169/206 Taxman 207/18 taxm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aterial 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. d) The Hon ble Delhi High Court in CIT v. Navodaya Castles (P.) Ltd. [2014] 367 ITR 306/50 taxmann.com 110/226 Taxman 190 (Mag) following the principle laid down in Nova Promoters Finlease (P.) Ltd..(supra) has held that the share capital in case of a closely held company is required to be examined by the AO in terms of section 68 and the failure of the assessee to satisfy the AO, calls for addition u/s 68. It is useful to mention that the SLP filed by the assessee against this judgment has been dismissed by the Hon'ble Supreme Court which has been since reported as Navodaya Castles (P.) Ltd. v. CIT [2015] 230 Taxman 268/56 taxmann.com 18 (SC). e) The Hon'ble Calcutta High Court in CIT v. Active Traders (P) Ltd. [1995] 214 ITR 583/[1993] 69 Taxman 281 (Cal) has held that the Assessing Officer in the assessment of the company has jurisdiction to ask for the information from the shareholders regarding the source of investment made in the company. lt\ set aside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... challenged by the AO. There is no denial of the fact that the commercial decisions are to be made by the Board of Director of the company. However, these decisions can certainly be examined if the investments in the guise of share capital application money/premium are being recorded in the books of account from suspicious business entity. The business entities threadbare examined by the AO are characters of the shell company. 4.2.7 It has further been argued that the recent amended provision u/s.56 (2)(viib) and proviso to section 68 cannot have a retrospective application and thereby the share application money/premium , creditworthiness etc., cannot be examined under unamended provision. (iv) Share capital/ S.Application money/Share Premium/ Credit Worthiness/Source of Source can very well examined even under amended provision. Pee Aar Securities Ltd. 96 Taxmann. Com 602 (Delhi Tribunal) held : Before parting with the matter, we may briefly deal with the contention of the assessee that since amendment in Section 68, with respect to addition for unverified share capital subscription, was effective from 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dgment was given under a peculiars fact of the case which is not at all applicable in Private Company as specified by various High Courts. Reliance has been placed on the judgement of the Hon'ble Apex Court in case of Lovely Exports Ltd. (2008) 299 ITR 268, to claim that 'source of source' can't be asked to be proved. If the assessee is able to prove identity and genuineness of share investors, then revenue should examine share investor if there is any doubt, is its creditworthiness. Number of High Courts have examined the ratio of Lovely Exports Ltd. (supra) and has held inapplicable in private limited company. (a) Commissioner of Income-taxv. N.R. Portfolio (P.) Ltd. [2014] 42 taxmann.com 339 (Delhi) :- In Lovely Exports Ltd. (supra), a Division Bench examined two earlier decisions of this court in CIT v. Steller Investment Ltd. [1991] 192 ITR 287(Delhi) and CIT v. Sophia Finance Ltd. [1994] 205 ITR 98(Delhi) (FB). The decision in Steller Investment's case (supra) was affirmed by the Supreme court but, by observing that the conclusion was on the facts and no interference was called for. Lovely ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons carried out by the revenue authorities into the activities of such entry providers . The existence with the Assessing Officer of material showing that the share subscriptions were collected as part of a premeditated plan - a smokescreen -conceived and executed with the connivance or involvement of the assessee excludes the applicability of the ratio. In our understanding, the ratio is attracted to a case where it is a simple question of whether the assessee has discharged the burden placed upon him under sec. 68 fo prove 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. (C) In Mimec (India) (P.) Ltd. v. Dy. CIT [2013] 353 ITR 284/ also, the assessee relied on the ratio in the case of Lov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial statements without carrying out further enquiries either by issue of notice u/s. 133(6) or summons u/s 131 to ascertain true nature of transactions between the parties. On the other hand, the assessee has discharged its initial onus by filing enormous documents, including confirmation from the parties where they have categorically stated that investments in assessee company is genuine transaction and has been routed through banking channels. The assessee has also filed complete details about identity of the subscribers including their PAN, address etc. The assessee has also filed income tax acknowledgment of the subscribers along with financial statement and bank statements. The Assessing Officer never disputed the fact that the assessee has filed necessary documents in order to prove identity of the subscribers and genuineness of the transactions. Once, the assessee discharges initial burden placed upon him, then the onus shifts to the shoulder of the assessing officer to prove otherwise. In this case, the Assessing Officer neither carried out any further enquiries, nor called upon the assessee to explain the credit with further evidences. The Assessing Officer came to the con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pvt Ltd vs. ITO (2011) 354 ITR 282 (Del-High Court) q) CIT vs. Jay Dee Securities Finance Ltd 32 Taxmann.com 91 (All-High Court) r) Jaya Securities Ltd vs. CIT (2008) 166 Taxman 7 (All-High Court) (SLP filed by dept dismissed) 7. The learned DR, on the other hand, strongly supporting order of the CIT(A) submitted that the Assessing Officer as well as the CIT(A) has brought out clear fact to the effect that although the assessee has filed number of documents to prove identity of the creditors, remaining two aspects of the issue i.e. genuineness of the transaction and creditworthiness of the subscribers are in doubt. The DR further submitted that mere furnishing of documents to prove identity is not enough to come out of the shadow of provisions of section 68 of the I.T.Act, 1961. But, what is relevant is to discharge the onus by filing necessary evidence to prove true identity of the creditors, genuineness of the transactions and creditworthiness of the parties. In this case, although the assessee has filed number of documents to prove the identity, he could not produce creditors in person when called upon by the Assessing Officer, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O has examined each of the seven subscribers and narrated facts in the light of financial statements filed by the assessee to come to the conclusion that the subscriber companies are in fact paper companies without any credible business activity. The AO has also questioned share premium charged by the assessee in light of business activity and financial strength. According to the AO, although the assessee has filed valuation report in support of share price, such report has been prepared on the basis of future earnings of the assessee without any support from existing business activity and asset base. 9. The AO has made additions towards share capital u/s. 68 of the I.T.Act, 1961, on the ground that the assessee has failed to offer any explanation with regard to credit found in the nature of share capital. The provisions of section 68 deals with a case where any sum found credited in the books of account of the assessee in any previous year, for which the assessee offers no explanation about the nature and source thereof, or the explanations offered by the assessee in the opinion of the AO is not satisfactory, then sum so credited may be charged to income tax as inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ls. We further noted that the amount is paid through proper banking channels. In the bank statements of the subscriber companies there is no cash deposit either before the date of transfer of funds to the assessee or subsequent to the date of transfer. Further, the subscriber companies have enough reserves and surplus in their books of accounts. All these evidence go to prove beyond doubt that the assessee has discharged its onus of proving the genuineness of transactions and creditworthiness of the parties. Once the assessee has discharged its onus, then it is for the AO to ascertain correctness of claim of the assessee by carrying out further inquiries. In this case, the AO has failed to do so. Therefore, we are of the view that there is no merit in the findings recorded by the AO or the CIT(A) that the assessee has failed to discharge its onus of proving the three ingredients provided u/s. 68 of the I.T. Act, 1961. 11. Coming to the other aspect of the issue, the AO has invoked the provisions of section 56(2)(viib) of the I.T. Act, 1961. We find that the said provision has been inserted by Finance Act, 2012 w.e.f 10.04.2013, where it provides that where a closely ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, assuming for a moment that above provisions are applicable for the year under consideration, in order to apply said amended provisions, the AO has to prove that the assessee has not proved capacity of the investors and also not offered any justification for issue of shares at premium. In this case, from the facts on record, it is clear that the assessee has proved identity and genuineness of the transactions by filing necessary evidences. The assessee has filed valuation report from registered valuer as per which the share price of the company is over and above premium charged by the assessee. Therefore, we are of the considered view that provisions of section 56(2)(viib) has no application. 12. Coming to the case laws relied upon by the assessee. The assessee has relied upon plethora of judgements, including the decision of Hon ble Supreme Court in the case of CIT vs Lovely Exports Pvt Ltd (2008) 216 CTR 195 (SC). In the case laws relied upon by the assessee, the issue has been dealt as under:- CIT vs. Goa Sponge and Power Ltd (13/02/2012) Tax Appeal No. 16 of 2012 (High Court-Bombay) Once the authorities have got all the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance with law, but it cannot be regarded as undisclosed income of assessee company. CIT vs. Steller Investment Ltd (2001) 251 ITR 263 (SC) (civil appeal) That the increase in subscribed capital of the respondent company could not be a device of converting black money into white with the help of formation of an investment company, on the round that, even if it be assumed that the subscribers to the increased capital were not genuine, tinder no circumstances could the amount of share capital be regarded as un disclosed income, an appeal was taken by the Department to th e Supreme Court. The Supreme Court dismissed the appeal holding that the Tribunal had come to a conclusion on facts and no interference was called for. CIT vs. Nav Bharat Duolex Ltd (2013) 35 Taxmann.com289 (All-High Court) We have considered the arguments of the counsel for the parties. CIT(A) found that five companies subscribing the equity shares amounting to ₹ 25,00.000/- were identified and they had submitted their bank statements, cash extracts and returns filing receipts. As such identity of the share applicant companies and pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee had discharged the initial onus placed on it. In the event the Revenue still had a doubt with regard to the genuineness of the transactions in issue or as regards the creditworthiness of the creditors, it would have had to discharge the onus which had shifted on to it. A bald assertion by the Assessing Officer that the credits were a circular route adopted by the assessee to plough back its own undisclosed income into its accounts, could be of n o avail. The Revenue was required to prove this allegation. An allegation by itself which is based on assumption will not pass muster in law. The Revenue would be required to bridge the gap between the suspicions and proof in order to bring home this allegation. The Tribunal without adverting to the principle laid stress on the fact that despite opportunities, the assessee and/or the creditors had not proved the genuineness of the transaction. Based on this it construed the intentions of the assessee as being mala fide. The Tribunal ought to have analysed the material rather than be burdened by the fact that some of the creditors had chosen not to make a personal appearance before the Assessing Officer. If the Assessing Officer had any d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee had received subscriptions to the public or rights issue through banking channels and furnished complete details of the shareholders, no addition could be made tinder section 68 of the Income-tax Act, 1961, in the absence of any positive material or evidence to indicate that the shareholders were benamidars or fictitious persons or that any part o f the share capital represented the company's own income from undisclosed sources. It was nobody's case that the non resident Indian company was a bogus or non-existent company or that the amount subscribed by the company by way of share subscription was in fact the money of the assessee. The assessee had established the identity of the investor who had provided the share subscription an d that the transaction was genuine. Though the assessee's contention was that the creditworthiness of the creditor was also established, in this case, the establishment of the identity of the investor alone was to be seen. Thus, the addition was rightly deleted. CIT vs. Shree Rama Multi Tech Ltd (2013) 34 Taxmann.com177 (Guj- HC) It is noted that Commissioner (Appeals) as well as the Tribunal hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before the IT authorities. The decision of the Tribunal deleting the addition cannot befaulted. 13. Coming to the case laws relied upon by the learned DR. The DR, has relied upon the decision of the Hon ble Supreme Court in the case of DCIT vs. NRA Iron Steel Pvt. Ltd. (supra). We find that co-ordinate Bench of ITAT vide its order dated 03.05.2019 in the case of Shree Laxmi Estate Pvt. Ltd. in ITA No. 6557/Mum2017 for A.Y. 2013-14 had considered the decision of Hon ble Supreme Court in the case of NRA Iron Steel P. Ltd. and held that the facts of the case before the Hon ble Supreme Court are entirely different, where on the basis of facts of that case Hon ble Supreme Court came to the conclusion that mere furnishing of certain documents is not sufficient enough and what is relevant is all three ingredients, i.e. identity, genuineness of transactions and creditworthiness of the parties should be proved beyond doubt. We find that in the case before the Hon ble Supreme Court the parties never responded to 133(6) notices. The AO has carried out inquiries by issuing notices u/s. 133(6), for which none of the companies have replied. None of the companies produced b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts and other requisite details called for by the ld AO in the notice u/s 133(6) of the Act. In case if the ld AO had any doubt on the veracity of the documents submitted by the loan creditors, the same could have been confronted on the said loan creditors by issuing summons u/s 131 of the Act and examine them on oath or correspondingly verify the same through the Assessing Offficers of the concerned loan creditors through the internal source of the department. The ld AO did not do either of these in the instant case and merely disregarded the evidences submitted on record before him both by the assessee as well as by the loan creditors directly to him. The written submissions filed by the ld DR in this regard is repetition of various contentions already available on record by the lower authorities, apart from placing reliance on certain decisions. We find that both the aforesaid loan additions were confirmed by the ld CITA by placing reliance on the decision taken by his predecessor in Asst Year 2012-13. We find that this tribunal in assessee s own case for the Asst Year 2012-13 in ITA No. 5954/Mum/2016 dated 29.12.2017 in respect of loan transactions of entities controlled by Shr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... about the nature and source thereof or the explanation offered by him is not, in the opinion of the AO, satisfactory, then sum so credited may be charged to income-tax as the income of the assessee of that previous year. A plain reading M/s Shree Laxmi Developers of section 68 makes it clear that the initial burden of proof lies on the assessee. It is well settled legal position that the assessee has to discharge 3 main ingredients in order to discharge the initial burden of proof, i.e. the identity of the creditor, the genuineness of transaction and creditworthiness of the creditors. Once the assessee discharges initial burden placed upon him, then the burden todis prove the said claim shifts upon the AO. In this case, the assessee has discharged his onus cast u/s 68 by filing identity of the creditors, genuineness of transactions and creditworthiness of the parties which is evident from the fact that the assessee has furnished financial statements of the creditors wherein the said transaction has been disclosed in the relevant financial years. We further notice that the assessee also filed financial statements of the creditors which are enclosed in paper book filed. On perusal of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly from 1-42013 was its normal meaning. The Parliament did not introduced to proviso of section 68, with retrospective effect nor does the proviso to introduced states that it was introduced 'for removal of doubts' or that it is 'declaratory'. Therefore, it is not open to give it retrospective effect, by proceeding the basis that the addition of the proviso to section 68is M/s Shree Laxmi Developers immaterial and does not change the interpretation of section 68 both before and after the adding of the proviso. In view of the matter the three essential tests while confirming the section 68 laid down by the Court namely the genuineness of the transaction, identity and the capacity of the investor have all been examined by the impugned order of the Tribunal and on fact it was found satisfied. Further it was a submission on behalf of the Revenue that such large amount of share premium gives rise to suspicion on the genuineness (identity) of the shareholders, i.e., they are bogus. The Apex Court in a case in this context to the pre- amended section 68 has held that where the revenue urges that the amount of share application money has been received from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9;ble Delhi High Court in the case of Principal CIT vs Bikram Singh in ITA No.55/Del/2017 dated 25-03- 2017. We have gone through the case law relied by the Ld.DR in the light of facts of the present case and find that the facts of case before Hon'ble Delhi High Court are entirely different from facts of the present case. The Hon'ble Delhi High Court, has considered the fact that the individuals, who advanced loans had no financial strength to lend such huge sum of money to the assessee, that too, without any collateral security without interest and without a lender agreement. Under these facts, the Hon'ble Court held that mere establishing of their identity and the fact that the amounts have been transferred through cheque payment does not by itself mean that the transactions are genuine. In this case, the assessee has furnished all evidences and also the parties personally responded to the notices M/s Shree Laxmi Developers issued by the AO u/s 133(6) by filing various details, therefore, case law relied upon by the Ld.DR cannot be applicable to the facts of the present case. 11. In this view of the matter and considering the ratio of the case laws d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rect address ; c) Notice could not be served on some of the investor companies ; d) Some of the investor companies replied to notice u/s 133(6) of the Act wherein they had confirmed having made investment in share application money in NRA Iron Steel Pvt Ltd but had limited income as per their income tax returns which in turn resulted in doubting of creditworthiness ; e) Most of the investor companies though confirmed the fact of having made investment in share application money in NRA Iron Steel Pvt Ltd, but had not filed their bank statements to prove the immediate source of credit available to them for making the said investment. 8.1.1. In the instant case before us, the ld AO did not issue any summons u/s 131 of the Act or make further enquiries to examine the veracity of the evidences filed on record before him by the assessee as well as by the loan creditors in response to notice u/s 133(6) of the Act. Moreover, all the loan creditors had duly furnished their respective bank statements proving the immediate source of credit for them to justify that they had sufficient creditworthiness to advance loan t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the assessee company vis a vis the facts before the Hon ble Supreme Court, we hold that the reliance placed by the ld DR on the decision of Hon ble Supreme Court supra does not come to the rescue of the revenue. 8.3. At the cost of repetition, we would like to state that the ld CIT(A) had merely placed reliance on the decision taken by his predecessor in Asst Year 2012-13 in assessee s own case in similar set of facts. We find that this decision for Asst Year 2012-13 in assessee s own case has been reversed by this tribunal vide its order dated 29.12.2017 referred to supra. In view of our aforesaid findings in the facts and circumstances of the case and respectfully following the decision of this tribunal in assessee s own case for Asst Year 2012-13, we hold that the assessee company had duly proved the nature and source of credit in the form of unsecured loan and had duly satisfied the three necessary ingredients of section 68 of the Act viz, the identity of the loan creditors , creditworthiness of loan creditors and genuineness of loan transactions. Hence we direct the ld AO to delete the addition made in the sums of ₹ 50 lacs and ₹ 25 lacs towa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... officer on account of share capital money received of ₹ 12,35,00,000/- u/s 68 of the Income Tax Act 1961, without considering the facts of the case. 2. On the facts and circumstances of the case and in law, the learned CIT (A) erred in confirming the addition made by the learned Assessing officer on account of non-existing liability of ₹ 1,76,72,533/- u/s 41(1) of the Income Tax Act 1961, without considering the facts of the case. 3. On the facts and circumstances of the case and in law, the learned CIT (A) erred in confirming the addition made by the learned Assessing officer on account of non-existing liability of ₹ 1,29,16,133/- u/s 41(1) of the Income Tax Act 1961, without considering the facts of the case. 18. The first issue that come up for consideration from Ground No.1 is addition towards share application money of ₹ 12,35,00,000/- u/s. 68 of the I.T. Act, 1961. Similar issue has been considered by us in the preceding paragraphs while disposing of the appeal in ITA No. 607/Mum/2019. The issue has been discussed in the light of facts brought out by the Assessing Officer and submissions of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee vide letter dated 27.03.2015 has admitted that out of the creditors of ₹ 2,90,22,124/- shown In the letter dated. 23.03.2014, 1,76,72,533/- is yet to be paid. Thus these payments are outstanding for over 5 years and the assessee has not paid them till date. It is merely stated in the letter that there is a dispute. No evidence in support of the dispute is furnished. It has been admitted by the AR vide order sheet entry dated. 27.03.2015 that, he does not have any evidence in support of the dispute relating to the creditors of ₹ 1,76.72,533/-. Thus it is obvious that genuinellability does not exists in this case. Therefore ₹ 1,76,72,533/- is treated as income of the assessee. Therefore penal proceedings u/s. 271(1)(c) is seperately initiated. 5.1 Besides this there was a payable of ₹ 1,29,16,133/-- to M/s. B.C. Biyaril Projects Pvt Ltd. The assessee was also asked to give its say on these payabies. In response the AR vide letter dated. 27.03.2015 has admitted that the payment is outstanding since F. Y. 2007-08. The AR has contended that there is a dispute. However no documentary evidence relating to the dispute has been produced. V ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee has in fact derived benefit out of cessation/remission of liability. In this case, the AO has made additions purely on suspicion and surmises by invoking deeming friction to section 41(1) of the Act. In this regard, he relied upon the decision of ITAT H Bench in the case of National Building Corporation vs. Additional CIT (2017) 84 taxmann.com 235 and that of A Bench of the Tribunal in the case of Lotus Investments Ltd. vs. ACIT in ITA NO. 1417/Mum/2014. 22. The learned DR, on the other hand, strongly supporting order of CIT(A) submitted that the AO has brought out clear facts to the effect that liabilities are continuing in the books of account for more than two years without there being any business activity. Further, the assessee has neither paid the amount to the creditor nor written off in the books of account. Therefore, merely for the reason that liability is continued in the books of account, it cannot be considered as liability fastens on the assessee, unless the assessee proves that these are genuine creditors, who were paid in the subsequent financial years. 23. We have heard both the parties, considered their submissions and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as been paid in subsequent year and also written off in subsequent financial years and offered to tax. Therefore, we are of the considered view that once it has been proved that liability has been continuing in the books of account for the year under consideration, the AO was incorrect in making additions towards liabilities u/s. 41(1) of the Act. 24. The assessee has relied on the decision of ITAT, Mumbai Bench H in the case of National Building Corporation (supra), whereby the co-ordinate Bench has considered identical issue in the light of the provisions of section 41(1) of the Act and held as under: Following conditions must be fulfilled before section 41(1) of the Act could be held as applicable: (i) In the assessment of an assessee, an allowance or deduction has been made in respect of any loss, expenditure or trading liability incurred by him. (ii) (a)Any amount is obtained in respect of such loss or expenditure, or (b)Any benefit is obtained in respect of such trading liability by way of remission or cessation thereof. (iii) Such amount or benefit is obtained by the as ..... 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