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TMI Blog2015 (4) TMI 1278X X X X Extracts X X X X X X X X Extracts X X X X ..... course of search proceedings. Admission was made on 9.9.2010 and retracted by the Director on the very next day i.e. 10.9.2010. Further, the addition is based on the surmises that assessee was taking bogus purchase bills and the cash was reintroduced in the form of share capital. However, there is no demonstrative evidence brought on record which could justify the additions made by the AO. We set aside the order of the Ld. CIT(A) and direct the AO to delete the additions made u/s. 68 - Decided in favour of assessee Bogus purchases through accommodation bills - whether assessee s case falls in the first category or second category? - HELD THAT:- n all probability the assessee s case falls in the first category i.e. goods have been purchased from one party and bills have been taken from another party and there is physical movement of goods - there is no adverse inference in so far as sales are concerned. If the assessee had not purchased goods, then how it has effected the sales - because the assessee is trading in pharmaceutical products which have batch Nos. embedded on it and it cannot be sold without performing the formalities of FDA and other relevant laws relating to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... addition. We, therefore direct the AO to delete the addition on this account. - I.T.A. No. 6356/Mum/2014, 305/Mum/2015, 6357/Mum/2014, 306/Mum/2015, 6358/Mum/2014, 307/Mum/2015, 6359/Mum/2014, 308/Mum/2015, 6360/Mum/2014, 309/Mum/2015, 6361/Mum/2014, 310/Mum/2015, 6362/Mum/2014, 311/Mum/2015 - - - Dated:- 17-4-2015 - SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER For the Appellant : Shri Kishan Vyas For the Responden : Shri Rajiv Khandelwal, Shri Neelkanth Khandelwal ORDER PER BENCH: ITA Nos. 6356 to 6362/M/2014 and ITA Nos. 305 to 311/M/2015 are cross appeals by the assessee and the Revenue for Assessment years 2005-06 to 2011-12. This bunch of appeals were heard together and are disposed of by this common order for the sake of convenience. 2. Before going into the grievance of the rival parties, it would be pertinent to understand the facts of the case first. 3. A survey was conducted at the office premises of M/s. Globe Pharma on 1.09,2009 by the Investigation wing of the Income tax department. During the course of survey proceedings, it came to the notice of the Investigating Officer that M/s. Globe Pharma was is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... axes on the additional income disclosed during the course of search operation. 3.3. Notice u/s. 153A of the Act was issued and served upon the assessee. The return of income in compliance to notice issued was filed declaring income respectively for A.Y. 2005-06 to A.Y. 2011-12. The assessment u/s. 143(3) r.w. Sec. 153A was completed by the AO after making additions under the following head: i) Addition on account of introduction of share capital treated as unexplained cash credit u/s. 68 of the Act. ii) Addition on account of unproved and bogus purchases u/s. 37(1) and 69C of the Act. iii) Addition on account of commission @ 2% paid for purchasing accommodation bills, treated as unexplained expenditure within the meaning of Sec. 69C. iv) Addition on account of cash discount @ 5% on account of cash purchases taxed as undisclosed income of the assessee. 4. The additions were seriously contested before the Ld. CIT(A). The Ld. CIT(A) confirmed the additions made u/s. 68 of the Act. In respect of addition on account of commission and cash discount, the Ld. CIT(A) gave relief in so far as the commission related to the share capital of the assessee and the cash discount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y evidence suggesting that the objective was to attract genuine investors by pegging the premium at a realistic level and bring in large amounts of funds in the form of share premium; j) The Central Government had notified the Unlisted Public companies (Preferential Allotment) Rules, 2003 which apply to issue of shares on preferential basis and/ or through private placement by a company in pursuance of a resolution passed under sub-section (1 A) of Section 81 of the Companies Act, 1956 and to the issue of shares to promoters and their relatives either in public issue or otherwise. Please state whether in compliance with the provisions of the Rules, that an explanatory statement was placed before the shareholders at the AGM held if any and any indicators as to the basis or the date on the basis of which the pricing was arrived at; furnish the documentary evidences in support of your claims. k) Furnish a copy of the Resolution authorizing the issuance of shares under Section. 81 (lA) of the Companies Act, 1956 and intimation given to the Registrar of Companies. l) Complete documentary support with regard to fulfillment and compliance to provisions of section 78 of Companies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1) to prove the genuineness of allocation of shares and receipts of share investments in to the company. You were requested to prove the genuineness of these transactions by producing the parties who have claimed to have invested alongwith all the necessary documentary evidences showing the identity and credit worthiness of the investors and genuineness of the transactions. However, you have not complied to the requirements of the notices. No investor was produce for verification. In view of your failure to prove the genuineness of receipts of share capital you are hereby requested to show your cause as to why the entire share application money / share investment claimed to have been received from various parties should not be treated as none genuine and therefore why the same should not be treated as your unexplained investment u/ s. 68 of the Income Tax Act, 1961 in the respective years of receipt . 9. The assessee filed a detailed reply vide letter dt. 28.2.2013 which was a common submission for assessment years 2005-06 to 2010-11. The reply filed by the assessee read as under: We are in receipt of your letter dated 25. 2, 20 13. In connection with the same we have to st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before investing by cheques. f) The assessee company has no means to produce the shareholders physically. 6. We have the Assessee Company has prima facie established the genuineness of the Share application money received by it. The initial onus of proving existence of the subscribers and the fact that the subscribers had infact contributed Share application money has been established on the basis of the various legitimate documents submitted during the course of the assessment proceedings. 7. At this stage we submit that in case of Share application money received one has to establish the identity of the persons and there is no further requirement. In the case of ACIT V/ s. Anima Investment Ltd. 73ITD 125 (Delhi)(TM) it is held that addition on account of share application money cannot be made if identity of shareholders is established and no further enquiry has to be made. 8. In the case of Allen Bradley India Ltd. V / s. Dy. CIT, 80 ITD 43 (Delhi) it is held that :- In the case of limited companies the jurisdiction of the Assessing Officer would be limited only to see whether the identity of the shareholders is established and whether they exist or not. Once the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hence, we uphold the order of the first appellate authority and dismiss this ground raised by the assessee 10. The explanation and the detailed submissions made by the assessee did not find any favour from the AO. The AO proceeded by dismissing the submissions made by the assessee and treating the introduction of the share capital as unexplained cash credit u/s. 68 of the Act. REASONS FOR NOT ACCEPTING ASSESSEE S CONTENTION; a) The assessee has been found to have taking accommodation bills on account of purchases which mean that the assessee was making payment for the purchases and receiving the cash back. The cash so received is reintroduced in the company in the form of share capital. b) The summons issued to the alleged share holders were returned back unserved. c) The assessee has not discharged the onus cast upon it by virtue of Sec. 68 of the Act. d) Since the assessee failed to discharge the burden of proof, the addition u/s. 68 is justified. 11. Now let us see the relevant portion of the submissions made by the assessee to see whether the assessee has successfully discharged the onus cast upon it by Sec. 68 of the Act. In its letter dt. 28.1.2013 f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bench in the case of Srajan Buildtech Pvt. Ltd. in ITA No. 4748/Del/2009 and Delhi Bench in the case of M/s. Jansampark Advertising Marketing Pvt. Ltd. In ITA No. 4839/Del/2009. 16. In the case of Orissa Corpn. Pvt. Ltd (supra), the Hon ble Supreme Court has held that in this case the respondent had given the names and addresses of the alleged creditors. It was in the knowledge of the Revenue that the said creditors were income-tax assesses. Their index numbers were in the file of the Revenue. The Revenue, apart from issuing notices under section 131 at the instance of the respondent, did not pursue the matter further. The Revenue did not examine the source of income of the said alleged creditors to find out whether they were creditworthy. There was no effort made to pursue the so-called alleged creditors. In those circumstances, the respondent could not do anything further. In the premises, if the Tribunal came to the conclusion that the respondent had discharged the burden that lay on it, then it would not be said that such a conclusion was unreasonable or perverse or based on no evidence. If the conclusion was based on some evidence on which the conclusion could be arrived ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered on 21.01.2013. On careful consideration of the above submissions of both the parties and ratio of the judgment cited before us in the light of facts and circumstances of the case, at the outset, we observe that DR has not disputed the point that the assessee company had submitted confirmation from all the seven private limited companies situated at Delhi along with their PAN Nos., addresses and copies of the bank statement. The DR has also not disputed the point that share application money was routed through banking channels. From the assessment order, we observe that the Assessing Officer issued notices u/s 133(6) of the Act to all the seven companies out of which notices in respect of four companies were received back unserved and remaining three companies did not reply to the Assessing Officer. Subsequently, the Assessing Officer asked various details, documents and evidence from the assessee and the assessee complied with the same. From a bare reading of the assessment order, we are unable to see any action from the Assessing Officer which shows that the Assessing Officer ever tried to verify the details, documents and evidence submitted by the assessee except an act o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l added under section 68, the ratio of Lovely Exports (supra) is attracted, irrespective of the facts, evidence and material. Further in the case of Gangeshwari Metal Pvt. Ltd.(supra), the Hon ble Jurisdictional High Court of Delhi considered the ratio of the judgment of Hon ble Apex Court in the case of Commissioner of Income Tax vs Lovely Export (P) Ltd. 319 ITR (ST) 5(SC) and its own judgment in the case of Commissioner of Income Tax vs Nova promoters Finlease (P) Ltd.(2012) 342 ITR 169 (Del) and held as under:- Mr. Sabharwal, appearing on behalf of the revenue/ appellant sought to place reliance on a Division Bench decision of this Court in CIT v. Nova Promoters and Finlease (P) Ltd.: (2012) 342 ITR 169 (Del.). However, ongoing through the said decision in Nova Promoters and Finlease (P) Ltd.(supra) we find that the facts are clearly distinguishable. In fact, in Nova Promoters and Finlease (P) Ltd. (supra) itself this Court has observed, in the context of Lovely Exports (P) Ltd. (supra), as under: - The ratio of a decision is to be understood and appreciated in thebackground of the facts of that case. So understood, it will be seen that where the complete particulars ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have been indicated. One in which the assessing officer carries out the exercise which is required in law and the other in which the assessing officer sits back with folded hands till the assessee exhausts all the evidence or material in his possession and then comes forward to merely reject the same on the presumptions. The present case falls in the latter category. Here the assessing officer, after noting the facts, merely rejected the same. This would be apparent from the observations of the assessing officer in the assessment order to the following effect: - Investigation made by the Investigation Wing of the Department clearly showed that this was nothing but a sham transaction of accommodation entry. The assessee was asked to explain as to why the said amount of ₹ 1,11,50,000/- may not be added to its income. In response, the assessee has submitted that there is no such credit in the books of the assessee. Rather, the assessee company has received the share application money for allotment of its share. It was stated that the actual amount received was ₹ 55,50,000/- and not ₹ 1,11,50,000/- as mentioned in the notice. The assessee has furnished details ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tory provisions and that is why Hon ble Apex Court decided the case in favour of the revenue. However, the facts of the present case are clearly distinguishable and fall in the second category where the Assessing Officer sits back with folded hands till the assessee exhausts all its exercise by submitting required details, evidence and documentary material in its possession related to the disputed issue and then Assessing Officer comes forward to merely reject the submissions, details, documents and evidence submitted by the assessee merely on presumption, surmises and conjectures without making any further inquiry or verification of the same. In the present case, the Assessing Officer simply issued notice u/s 133(6) of the Act to the share applicant s private limited company situated at Delhi and subsequently the Assessing Officer asked various particulars and details from the assessee and the assessee company submitted written confirmations including PAN No., bank statement and other details to establish the genuineness of the transaction. We also observe that the DR has not disputed the point that the share application money was received by the assessee through banking channe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s produced by the assessee, we set aside the order of the Ld. CIT(A) and direct the AO to delete the additions made u/s. 68 of the Act for all the assessment years under this appeal. 22. Now let us consider the additions made on account of bogus purchases through accommodation bills. Initially survey was conducted at the premises of M/s. Globe Pharma wherein the Inspecting Wing found M/s. Globe Pharma giving accommodation bills. Pursuant to this information, a search action was conducted at the premise of the assessee. Initially one of the directors admitted and offered additional income on account of bogus purchases, however on the very next day, the same Director retracted from his statement. At this juncture, we are not going into the merits or otherwise of the admission and retraction. 22.1. Let us see the facts of the case. The Revenue has alleged the assessee of taking bogus purchases and accommodation bills on account of such purchased. In our considered opinion this refers to two possibilities. 1) A person is purchasing goods from another person without any bill and then taking purchase bills from a third person to show the quantities purchased. Under this category ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of bogus purchases cannot be sustained on the facts of the present case and accordingly we have deleted the same, there remains no reason why the addition on account of alleged 2% commission should be sustained. We, therefore direct the AO to delete the addition made on account of alleged 2% commission in entirety for all the years under this appeal. 26. The next addition is @5% of alleged cash discount which the assessee might have earned on making cash payment on account of purchases. 27. This addition has been made on the premise that when a person makes purchases by making cash payments, the seller invariably gives certain discount to the person. Since the AO presumed that the assessee is making purchases on down payment, the assessee must have earned 5% discount on cash purchases. This entire presumption of facts in itself show that the entire addition has been made on conjectures/assumption. There is no demonstrative material evidence on record to show that the assessee has been made cash purchases and has earned cash discount. We, therefore, direct the AO to delete the additions made on this account from all the assessment years under this appeal. 28. The additional ..... X X X X Extracts X X X X X X X X Extracts X X X X
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