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TMI Blog2021 (6) TMI 486X X X X Extracts X X X X X X X X Extracts X X X X ..... ontended that shareholders possess sufficient capital and reserves out of which share subscription amounts were paid through account payee cheques. So according to assessee, it has discharged the burden of proof casted by section 68 of the Act in respect of share capital premium it collected. And according to assessee, without finding any infirmity in the documents produced by the assessee in respect of identity, creditworthiness and genuineness of the transaction, no addition u/s 68 of the Act was warranted and the Ld CIT(A) after considering and appreciating inter-alia these facts have deleted the addition. - Decided in favour of assessee. Disallowance u/s. 56(2) (viib) - difference of the book value and issue value - HELD THAT:- We note that the difference of the book value and issue value is meagre/negligible, therefore, we do not find any infirmity in the action of the Ld. CIT(A) in deleting the addition, so we confirm the same. Disallowance of excess depreciation of electrical installation - HELD THAT:- We note that the assessee has claimed depreciation on electrical installation @15% applicable for plant and machinery whereas the A.O has considered the rate of depreciation o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee in the earlier year cannot be taxed, in this assessment year. So the action of the Assessing Officer is per-se bad in law and therefore, we confirm the decision of the Ld. CIT(Appeals) in deleting the addition Interest expense claimed by assessee as paid to the lender parties which consists of parties from which loan as obtained, as well as from parties to whose opening/closing balance of loan was added back - HELD THAT:- As these loans were brought forward loans as on 01.04.2014 and which has been squared up /repaid by the assessee in this assessment year itself, which fact is evident by perusal of pages 178 to 188 of the paper book and it is noted that there was no fresh loan from these three parties and we note that the opening loan with interest due to them were repaid in this year through banking channel after duly deducting TDS. So the question of disallowing the interest given by the assessee to these three (3) parties also cannot be accepted and we are of the opinion that the Ld. CIT(Appeals) rightly deleted the same. Unexplained cash credit - HELD THAT:- Assessee has discharged its onus casted upon it to prima facie prove the identity, creditworthiness and gen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Revenue against the order of the Commissioner of Income Tax (Appeals)-4, Kolkata dated 21.10.2019 for AY 2014-15. Though the Revenue has raised 17 grounds, the sole issue is against the action of Ld. CIT(A) in deleting the addition of ₹ 7,69,71,990/- u/s 68 of the Income Tax Act, 1961 (hereinafter the Act ). 3. Brief facts of the case as noted by the AO are that the assessee company is engaged in the business of manufacturing of cotton yarn and trading of synthetics yarn and cotton yarn. The A.O noted that the assessee company has raised share capital to the tune of ₹ 2,79,34,200/- and share premium @₹ 590 totalling ₹ 16,48,11,780/- during the relevant assessment year (herein after in shortA.Y). In order to verify the identity, creditworthiness and genuineness of shareholders, the AO issued notice u/s. 133(6) of the Act to the shareholders. The AO noted that notices u/s. 133(6) in case of following six (6) shareholders i.e. (i) M/s Pragati Complex Advisory Pvt. Ltd. at 70, Nalini Seth Road, 1st Floor, Kollkata-700007, (ii) M/s Richfield Vintrade Pvt. Ltd. at 8, Lyons Range, Kolkata-700001, (iii) M/s Laxmiputra Tradecomm Pvt. Ltd. at 77, N.S. Road, 5th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... identity, genuineness of the shareholders, and since this action did not give any result about the existence of these companies in their given addresses, and since these share holders/subscribers could not place any credible evidence to prove that they were in genuine business activity by giving details of their establishment, the staff etc., he did not accept the share capital and premium supposed to have been given by them and made the addition of ₹ 7,69,71,990/-. According to the Ld. CIT-DR, the Ld. CIT(A) has mistakenly drawn inferences in favour of assessee which impugned action according to the Ld. CIT-DR was not based on relevant materials; and the Ld. CIT-DR pointed out that though the Ld. CIT(A) during appellate proceedings had directed the A.O to carry out investigation by issuing section 133(6) notice, pursuant to which, when the A.O had issued summons u/s 131of the Act, instead of notices u/s 133(6) as directed by him, the Ld. CIT(A) found fault with the action of the A.O and has given relief even by taking note that the share applicant companies directors had in fact presented themselves in the office of A.O pursuant to the summons, however the A.O was not prese ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in this assessment year. However, according to her, the A.O at the fag end when the assessment was going to get time barred, hurriedly issued notices u/s 133(6) of the Act only to fourteen (14) companies out of twenty two (22) share applicant companies from whom all the assessee had collected share capital premium; and out of which nine (9) notices could be served and since six (6) parties could not be served because of change of address, and the AO has drawn adverse inference against these six (6) share subscribers, without awaiting for their response from them.Moreover, according to the Ld. AR, the A.O while making the addition of ₹ 7.69 crores u/s 68 of the Act has not made any addition of the share capital received by the assessee from these six (6) companies[details will be discussed (infra) with the aid of charts]which means according to the Ld. AR, the A.O on one hand has accepted the share capital subscribed by these companies, however he did not accept the share premium subscribed by them and made addition u/s 68 of the Act, which action of AO according to the Ld. AR, is erroneous. According to Ld AR, the AO by accepting the share capital from these six (6) share su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etailers Pvt Ltd 12,60,000 74,34,000 86,94,000 TOTAL 2,79,34,200 16,48,11,780 19,27,45,980 8. According to the Ld. AR, as discussed supra, the assessee has received share capital money aggregating to ₹ 19,27,45,980/- from twenty two (22) private limited companies comprising share capital of ₹ 2,79,34,200/- and share premium of ₹ 16,48,11,780/- by issuing shares of face value of ₹ 100/- at a premium of ₹ 590/According to the Ld. AR, the A.O had issued notices u/s 133(6) to fourteen (14) companies which were served upon nine (9) companies, however it could not be served up on five (5) companies. However, he drew adverse inference against six (6) share applicant companies [ later on referred to as companies under Serial C] which are as under: Sl. no. Name of the Party Application Premium 1 Pragati Complex Advisory Pvt. Ltd 21,11,000 1,24,54,900 2 Richfield Vintrade Pvt. Ltd 26,20,000 1,54,58,000 3 LaxmiputraTradecomm Pvt. Ltd 26,97,000 1,59,12,300 4 Jintan Mercantile Pvt. Ltd 18,84,000 1,11,15,600 5 Newzone Vintrade Pvt. Ltd 18,84,100 1,11,16,190 6 Brijbhumi Commosale Pvt. Ltd 18,50,000 1,09,15,000 TOTAL 1,11,46,100 7,69,71,990 9. According to the Ld. AR, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vi) Waltaz Commodities Pvt. Ltd, vii) GMB Finvest Pvt. Ltd, viii Dharnidhar Trading Pvt. Ltd. 12. According to the Ld. AR, in the light of the above facts, the Ld. CIT(A) wondered as to when the assessee has filed all these details like balance sheet and audited account, income-tax return and bank statement of these share applicant companies also (i.e. six companies), then why the A.O after having accepted their identity, creditworthiness and genuineness in respect of share capital from these following six companies, didn t accept the premium from them and made the addition. These six companies are hereinafter referred to as companies under Serial C: Companies under (Serial C) i) Brijbhumi Commosale Pvt. Ltd ii) Newzone Vintrade Pvt. Ltd iii) Jintan Mercantile Pvt. Ltd iv) LaxmiputraTradecomm Pvt. Ltd v) Richfield Vintrade Pvt. Ltd vi) Pragati Complex Advisory Pvt. Ltd. 13. According to Ld. A.R, the Ld. CIT(A) after perusal of the remand report from the A.O noted that the only fault which the A.O could find against these companies under Serial Cwas that the field enquiry made by the Department could not trace out these companies at their respective addresses. According to the Ld. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notices u/s 133(6) of the Act to six (6) companies shown under Serial C (supra) namely (i) M/s Pragati Complex Advisory Pvt. Ltd., (ii) M/s Richfield Vintrade Pvt. Ltd., (iii) M/s LaxmiputraTradecomm Pvt. Ltd., (iv) M/s Jintan Mercantile Pvt. Ltd., (v) M/s Newzone Vintrade Pvt. Ltd. and (vi) M/s Brijbhumi Commosale Pvt. Ltd. According to the A.O, the notices were returned back by the postal authorities since it could not be served upon them. Further, according to the A.O, the field enquiry by the A.O to verify the genuineness of the company did not yield any result. So he showcaused the assessee as to why the share capital premium received from the aforesaid six(6) companies should not be added u/s 68 of the Act. Further according to the A.O, the certificate of incorporation of the company, document of bank channel etc. cannot be in all cases tantamount to satisfactorily discharge of onus of the assessee to prove the identity, creditworthiness and genuineness of the transactions, since in this case, neither notices u/s 133(6) of the Act could be served upon them nor the field enquiry could trace these companies in the given addresses,therefore, he drew adverse inference in respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aw adverse inference against them, when the assessee was able to bring material/evidence on record that these companies had changed to a new address and when they are able to adduce evidence to establish their existence by other evidences. Further we note that the Ld. CIT(A) had given direction to AO to issue notices u/s 133(6) to these companies at their new addresses while calling for remand report and the AO had issued summons u/s 131 to these companies in their new address to produce their respective Principal Officers, and pursuant to which (after summons being served upon them) they claim to have been produced, when the AO was not present in his office, which fact also the Ld. CIT(A) has taken note of in his order at page 16 27. [Though this averment of assessee has been contested by the AO, however the AO has not placed any material/evidence/affidavit to support his assertion, so we cannot discount the Ld CIT(A) observation on this. And AO has not commented adversely about serving of summons to these six (6) companies] so the inference drawn is that the summons u/s 131 of the Act were served upon these share subscribers. So in the light of the facts and circumstances discuss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 68 is clear. The Legislature has laid down that in the absence of a satisfactory explanation, the unexplained cash credit may be charged to income-tax as the income of the assessee of that previous year. In this case the legislative mandate is not in terms of the words shall becharged to income-tax as the income of the assessee of that previous year . TheHon ble Supreme Court while interpreting similar phraseology used in section 68 has held that in creating the legal fiction the phraseology employs the word may and not shall . Thus the un-satisfactoriness of the explanation does not and need not automatically result in deeming the amount credited in the books as the income of the assessee as held by the Supreme Court in the case of CIT v. Smt. P. K. Noorjahan [1999] 237 ITR 570. 20. The main plank on which the AO made the addition in the assessment proceedings was non-service of notice and in the remand proceedings was because the directors of the share subscribers did not turn up before him. In such a case the Hon'ble Apex Court in the case of Orissa Corpn. (P) Ltd. (supra) 159 ITR 78 and following the same, the Hon'ble Gujarat High Court, in the case of Dy. CIT v. Rohi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of section 106 of the Evidence Act which says that a person can be required to prove only such facts which are in his knowledge. The Hon'ble Court in the said case held that, once it is found that an assessee has actually taken money from depositor/lender who has been fully identified, the assessee/borrower cannot be called upon to explain, much less prove the affairs of such third party, which he is not even supposed to know or about which he cannot be held to be accredited with any knowledge. In this view, the Hon'ble Court has laid down that section 68 of Income-tax Act, should be read along with section 106 of Evidence Act. The relevant observations at page 260 to 262, 264 and 265 of the report are reproduced herein below:- While interpreting the meaning and scope of section 68, one has to bear in mind that normally, interpretation of a statute shall be general, in nature, subject only to such exceptions as may be logically permitted by the statute itself or by some other law connected therewith or relevant thereto. Keeping in view these fundamentals of interpretation of statutes, when we read carefully the provisions of section 68, we notice nothing in section 68 to sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, then the interpretation of section 68 has to be in such a way that it does not make section 106 redundant. Hence, the harmonious construction of section 106 of the Evidence Act and section 68 of the Income- tax Act will be that though apart from establishing the identity of the creditor, the assessee must establish the genuineness of the transaction as well as the creditworthiness of his creditor, the burden of the assessee to prove the genuineness of the transactions as well as the creditworthiness of the creditor must remain confined to the transactions, which have taken place between the assessee and the creditor. What follows, as a corollary, is that it is not the burden of the assessee to prove the genuineness of the transactions between his creditor and sub-creditors nor is it the burden of the assessee to prove that the sub-creditor had the creditworthiness to advance the cash credit to the creditor from whom the cash credit has been. eventually, received by the assessee. It, therefore, further logically follows that the creditor's creditworthiness has to be Judged vis-a-vis the transactions, which have taken place between the assessee and the creditor, and it is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been advanced by the sub-creditor to the creditor, had actually been received by the sub-creditor from the assessee . ********** Keeping in view the above position of law, when we turn to the factual matrix of the present case, we find that so far as the appellant is concerned, he has established the identity of the creditors, namely, Nemichand Nahata and Sons (HUF) and Pawan Kumar Agarwalla. The appellant had also shown, in accordance with the burden, which rested on him under section 106 of the Evidence Act, that the said amounts had been received by him by way of cheques from the creditors aforementioned. In fact the fact that the assessee had received the said amounts by way of cheques was not in dispute. Once the assessee had established that he had received the said amounts from the creditors aforementioned by way of cheques, the assessee must be taken to have proved that the creditor had the creditworthiness to advance the loans. Thereafter the burden had shifted to the Assessing Officer to prove the contrary. On mere failure on the part of the creditors to show that their subcreditors had creditworthiness to advance the said loan amounts to the assessee, such failure, as a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e law is equally settled that if the initial burden is discharged by the assessee by producing sufficient materials in support of the loan transaction, the onus shifts upon the Assessing Officer and after verification, he can call for further explanation from the assessee and in the process, the onus may again shift from the Assessing Officer to assessee. 16. In the case before us, the appellant by producing the loan-confirmation-certificates signed by the creditors, disclosing their permanent account numbers and address and further indicating that the loan was taken by account payee cheques, no doubt, prima facie, discharged the initial burden and those materials disclosed by the assessee prompted the Assessing Officer to enquire through the Inspector to verify the statements. 24. In a case where the issue was whether the assessee availed cash credit as against future sale of product, the AO issued summons to the creditors who did not turn up before him, so AO disbelieved the existence of creditors and saddled the addition, which was overturned by Ld. CIT(A). However, the Tribunal reversed the decision of the Ld. CIT(A) and upheld the AO s decision, which action of Tribunal was ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... istence of the creditors or for that matter the creditworthiness. As rightly pointed out by the learned counsel that the Commissioner of Income-tax (Appeals) has taken the trouble of examining of all other materials and documents, viz., confirmatory statements, invoices, challans and vouchers showing supply of bidis as against the advance. Therefore, the attendance of the witnesses pursuant to the summons issued, in our view, is not important. The important is to prove as to whether the said cash credit was received as against the future sale of the product of the assessee or not. When it was found by the Commissioner of Income-tax (Appeals) on facts having examined the documents that the advance given by the creditors have been established the Tribunal should not have ignored this -fact finding. Indeed the Tribunal did not really touch the aforesaid fact finding of the Commissioner of Income-tax (Appeals) as rightly pointed out by the learned counsel. The Supreme Court has already stated as to what should be the duty of the learned Tribunal to decide in this situation. In the said judgment noted by us at page 464, the Supreme Court has observed as follows: The Income-tax Appellate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing officer should enquire from the Assessing Officer of the creditor as to the genuineness of the transaction and whether such transaction has been accepted by the Assessing officer of the creditor but instead of adopting such course, the Assessing officer himself could not enter into the return of the creditor and brand the same as unworthy of credence. So long it is not established that the return submitted by the creditor has been rejected by its Assessing Officer, the Assessing officer of the assessee is bound to accept the same as genuine when the identity of the creditor and the genuineness of transaction through account payee cheque has been established. We find that both the Commissioner of Income Tax (Appeal) and the Tribunal below followed the well-accepted principle which are required to be followed in considering the effect of Section 68 of the Act and we thus find no reason to interfere with the concurrent findings of fact recorded by both the authorities. 26. Our attention was also drawn to the decision of the Hon'bleSupreme Court while dismissing SLP in the case of Lovely Exports as has been reported as judgment delivered by the CTR at 216 CTR 295: Can the amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r hearing the learned counsel for the appellant and after going through the decision of the Supreme Court in the case of Cl. T. vs. M/s. Lovely Exports Pvt. Ltd. [supra], we are at one with the Tribunal below that the point involved in this appeal is covered by the said Supreme Court decision in favour of the assessee and thus, no substantial question of law is involved in this appeal. The appeal is devoid of any substance and is dismissed. 28. Our attention was drawn to the decision of the Hon'ble High Court, Calcutta in the case of Commissioner Of Income Tax vs M/s. Nishan Indo Commerce Ltd dated 2 December, 2013 in INCOME TAX APPEALNO.52 OF 2001 wherein the Court held as follows: The Assessing Officer was of the view that the increase in share capital by ₹ 52,03,500/- was nothing but the introduction of the assessee's own undisclosed funds/income into the books of accounts of the assessee company. The Assessing Officer accordingly treated the investment as unexplained credit under Section 68 of the Income Tax Act and added the same to the income of the assessee. Being aggrieved, the assessee filed an appeal before the Commissioner of Income Tax (Appeals) being the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd/or hearing. Learned Tribunal agreed with the factual findings of the learned Commissioner and accordingly the learned Tribunal dismissed the appeal of the Revenue and affirmed the decision of the learned Commissioner. Mr. Dutta appearing on behalf of the petitioners cited judgment of the Division Bench of this Court in Commissioner of Income Tax Vs. Ruby Traders and Exporters Limited reported in 236 (2003) ITR 3000 where a Division Bench of this Court held that when Section 68 is resorted to, it is incumbent on the assessee company to prove and establish the identity of the subscribers, their credit worthiness and the genuineness of the transaction. The aforesaid judgment was rendered in the context of the factual background of the aforesaid case where, despite several opportunities being given to the assessee, nothing was disclosed about the identity of the shareholders. In the instant case, the assessee disclosed the identity and address and particulars of share allocation of the shareholders. It was also found on the facts that all the shareholders were in existence. Only nine shareholders subscribing to about 900 shares out of 6, 12,000 shares were not found available at the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied in holding that after disclosure of the full particulars indicated above, the initial onus of the assessee was shifted and it was the duty of the Assessing Officer to enquire whether those particulars were correct or not and if the Assessing Officer was of the view that the particulars supplied were insufficient to detect the real share applicants, to ask for further particulars. The Assessing Officer has not adopted either of the aforesaid courses but has simply blamed the assessee for not producing those share applicants. In our view, in the case before us so long the Assessing Officer was unable to arrive at a finding that the particulars given by the assessee were false, there was no scope of adding those money under section 68 of the Income- tax Act and the Tribunal below rightly held that the onus was validly discharged. We, thus, find that both the authorities below, on consideration of the materials on record, rightly applied the correct law which are required to be applied in the facts of the present case and, thus, we do not find any reason to interfere with the concurrent findings of fact based on materials on record. The appeal is, thus, devoid of any substance and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hese facts have deleted the addition. 31. Further we note that the A.O had accepted the share capital subscribed by the six corporate entities at Serial C. The Ld. A.R in this context had drawn our attention to page 52 of the paper-book (supra) wherein the details of the share capital and premium received during this assessment year i.e. AY 2014-15 from twenty two (22) parties are given and the A.O had made only addition in respect of six (6) companies, so the implied inference is that he had accepted the share capital and premium from the rest of the share subscribers i.e. sixteen (16) companies itself, when the assessee has filed the very same documents of other share-subscribers. So according to Ld. A.R, this action of AO in drawing adverse inference against six(6) companies at Serial C is per-se is bad being arbitrary and irrational in nature when on the same set of documents, the AO accepted their share capital premium and did not accept that of companies at Serial C which according to Ld. A.R is bad. Be that as it may be, the main submission of the assessee is that the A.O had on one hand accepted the share capital from these six (6) companies at Serial C however did not acce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ote that a Proviso has been inserted by Finance Act 2012 w.e.f. 01.04.2013 in section 68 of the Act which is applicable for this relevant AYand for ready reference relevant and applicable in this case of section 68 of the Act with the aforesaid proviso is reproduced as under: Cash Credits Section 68. 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. [Provided that where the assessee is a company ( not being a company in which the public are substantially interested), and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee-company shall be deemed to be not satisfactory, unless - (a) The person, being a resident in whose name such credit is recorded in the books of such company also offers an explanation about the nature and source of such sum so credited ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th effect from 01.04.2013, while giving the explanation to the AO regarding the nature and source of such sum credited in its books, the share subscribors has to offer the proof of source of source of the share application money, share capital, share premium. So, we note that till AY 2012-13, the requirement of law as per section 68 of the Act was that when there is a credit entry in the books, then assessee was required to satisfy the AO in respect of the nature and source (i.e. First source from which it received) and that position of law remains in force till now also, except that after 01.04.2013 (i.e. AY 2013-14) onwards when an assessee company (not public company) if they collect share application money, share capital, share premium then an additional burden is imposed by the first proviso to bring to the notice of AO the source of source of the credit entry i.e. source of the share applicant which had been invested in the assessee company. In other words from AY 2013-14 onwards, in the event if an assessee company when called upon by the AO to explain the nature of the credit in its books claims that the credit entry is share application money, share capital and share premi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en note that the share premium of ₹ 590/- per share the A.O has accepted, because he has accepted that from the other sixteen (16) companies, therefore, valuation of the share (premium) of the assessee i.e, ₹ 590/- per share is not in dispute. In such a scenario, when the A.O is satisfied with the identity, creditworthiness and genuineness of the six companies at Serial C by his action of accepting the total share capital of ₹ 1,11,46,100/- subscribed by them, his action of not accepting the share premium from these very same six (6) companiesof ₹ 7,69,71,900/-, is not tenable/un-reasonable/irrational and on this score we concur with the view of the Ld. CIT(A). Therefore, we find no infirmity in the impugned order of the Ld. CIT(A) in giving relief to the assessee on this issue. However, for completeness, we would like to examine the identity, creditworthiness of the six (6) share subscribers shown at Serial C and genuineness of their share premium transaction against whom the AO has drawn adverse view and made addition u/s 68 of the Act to the tune of Rs ₹ 7,69,71,900/- 35. We also note that all the six (6) share subscribers/share holders shown at Ser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have brought to the notice of AO CIT(A) that they (share subscribers) have enough net worth to invest in the assessee company and moreover the share subscribers have also filed the source from which they subscribed to shares of assessee (bank statement, audited balance sheet etc). Thus the assessee had discharged the onus on it about the creditworthiness of the share- holders. So we note that the source of the investments i.e, source of source of share subscribers to subscribe for share premium in assessee s company as required by proviso to section 68 of the Actstands satisfied since it is clearly discernible from the bank statement confirmation filed in the PB filed. These bank statements revealed that the share capital and premium have been subscribed by them through banking channel (NEFT or cheque) which goes on to show that the assessee has discharged the onus in respect of genuineness of the transaction. And we note that revenue has not brought on record any material to challenge the veracity of the documents or the findings of fact recorded by Ld. CIT(A) as discussed supra. Moreover, before the AO could have branded these share subscribers as un-worthy of credit, the AO ough ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lakhs and on 26.02.2014 ₹ 14.55 lakhs through banking channel. From perusal of bank statement it is evident that there was no cash deposit. Thus the company has furnished the details of source of Funds and has duly filed its financial statements, so the requirement of source of source is satisfied and no adverse view against this share subscriber especially in respect of share premium is warranted. (ii) On perusal of the paper book, it reveals that the documents are placed at page 73 to 89 of share applicant M/s. Brijbhumi Commosale Pvt Ltd which is a Private Limited Company, and which has Permanent Account No. AAECB5701C and CIN U51909WB2011PTC163205 and its Net-worth as on 31.03.2014 (in total)- share capital reserve is to the tune of ₹ 10,20,58,974/- (PB page 78) and the investment made in the assessee-company including the share premium comes to ₹ 1,27,65,000/-. There is Share Application Form, Bank statement, ITR acknowledgement and financial statement available in the PB-page 73-89. This share applicant regularly filed Income Tax Return (ITR) and it has filed its Bank statement. Thus we note that the assessee had duly discharged its onus to prove the identit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... statement of M/s. Jintan Mercantile Pvt Ltd enclosed as page no 103-106 of paper book it is clear that the share subscriber has invested ₹ 1,29,99,600/- in the assesse company on various dates as follows : on 10.12.2013 ₹ 15 lakhs, on 14.12.2013 ₹ 25 lakhs, on 13.01.2014₹ 20 lakhs, on 14.01.2014 ₹ 5 lakhs, on 17.01.2014 ₹ 20 lakhs, on 21.01.2014 ₹ 20 lakhs and on 24.01.2014 ₹ 24.996 lakhs through banking channel. From perusal of bank statement it is evident that there was no cash deposit. Thus the company has furnished the details of source of Funds and has duly filed its financial statements, so the requirement of source of source is satisfied and no adverse view against this share subscriber especially in respect of share premium is warranted. (iv) On perusal of the paper book, it reveals that the documents are placed at page 109 to 128 of share applicant M/s. Laxmipurtra Tradecornm Pvt Ltd which is a Private Limited Company, and which has Permanent Account No. AACCL0187C and ON U51909WB2011 PTC 158663 and its Net-worth as on 31.03.2014 (in total)- share capital reserve is to the tune of ₹ 13,30,11,167/- (PB page 115) and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to prove the identity of the share applicants by adducing PAN as well as income-tax returns. The financial statement shows that the share applicant had enough funds to invest in the assessee-company and the transaction has happened through banking channel. Since the case pertains to AY 2014-15, the share subscribers has to show the source of its fund for subscribing to the share capital/premium of the assesse company. From the bank statement of M/s. Richifield Vintrade Pvt Ltdenclosed as page no 142-144 of paper book it is clear that the share subscriber has invested ₹ 1,80,78,000/- in the assesse company on various dates as follows : on 23.12.2013₹ 25 lakhs, on 21.02.2014 ₹ 44 lakhs, on 26.02.2014 ₹ 51.75 lakhs, on 27.02.2014 ₹ 30 lakhs and on 05.03.2014 ₹ 30 lakhs through banking channel. From perusal of bank statement it is evident that there was no cash deposit . Thus the company has furnished the details of source of Funds and has duly filed its financial statements, so the requirement of source of source is satisfied and no adverse view against this share subscriber especially in respect of share premium is warranted. (vi) On perusal of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0. Before we part, we note that the AO had raised many grounds of appeal, however the issue is only one, that is deletion of ₹ 7,69,71,990/- and a perusal of grounds shows that AO has assailed the faults pointed out by the Ld. CIT(A) inrespect of the enquiry conducted by AO during assessment proceedings as well as in the remand proceedings. However the Ld. CITDR could not place any material or even an affidavit of the AO so as to appreciate the same. If an affidavit wasat least filed by the AO, we could have deliberated on it. In the absence of any material / affidavit from AO, we are unable to look into the grounds, which is in defence of his enquiry, and is argumentative in nature i.e. whether the Ld. CIT(A) is correct in finding fault about sufficient opportunity to assessee ? Andwhether the Ld. CIT(A) on the basis of a letter from the A.R of the assessee can observein the impugned order that Principal Officers of share subscribing companies at serial C had appeared at the office of AO during the remand proceeding, however the AO says they didn t. This also is taken as a ground of appeal by Revenue. However, we note that these questions of fact can be ascertained only if t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ib) as mentioned above, the excess consideration on the issue of the shares as exceeds the book value comes to ₹ 39,664/- [4,95,800 x ₹ 0.08/-] ₹ 5,25,797/- [6,65,566 x ₹ 0.79/-] totalling to ₹ 5,65,461/- as explained above. 7.3 In view of the above, the total disallowance u/s. 56 (2)(viib) comes to ₹ 5,65,461/-. The same is accordingly disallowed added back to the total income u/s. 562)(viib) of the Income Tax Act, 1961 for the A.Y. 2015-16. 45. On appeal by the assessee the Ld. CIT(A) has deleted the addition by holding as under: I have perused the Submissions of the Assessee and the Assessment Order. The Assessee has issued shares at a price of ₹ 72/- and ₹ 720/- as against the book value of shares of ₹ 71.92/- and ₹ 719.21/: respectively. The difference between the book value and issue value is negligible, therefore, the plea of the assessee had it had approximated the issue price to the nearest rupee is acceptable, in view of the fact that to issue shares at a discount, permission of Government is required. Even in the case of purchase of immovable property at rates below the stamp duty value courts have held that var ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #8377; 71.92/- and for Class-B is ₹ 719.21/- and as the assessee had issued the share prices at round figure of ₹ 72/- per share for Class-A equity shares, of ₹ 720/- for Class-B equity share because the assessee company could not have issued shares at a fraction of rupees, so it issued the shares at round figure. This explanation of the assessee was not accepted by the A.O who has taken the difference of ₹ 0.08/- per share multiplied by 495800 number of equity share of Class-A and ₹ 0.79/- per share multiplying by 665566 number of equity shares of Class-B and made the disallowance of ₹ 5,65,461/-. 48. From the aforesaid discussion we note that the difference of the book value and issue value is meagre/negligible, therefore, we do not find any infirmity in the action of the Ld. CIT(A) in deleting the addition, so we confirm the same. 49. Ground Nos.3 to 6 is against the action of the Ld. CIT(A) in deleting the disallowance of excess depreciation of electrical installation of ₹ 68,87,393/-. The A.O has disallowed the excess depreciation of ₹ 68,87,393/- by observing as under: 8.1. On perusal of the fixed assets schedule reported in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... escribed rate of depreciation is 10%. In the I.T. Rules, 1962 assets has been categorised under the head Plant Machinery, Furniture Fixture, Building etc. In every head, the name of the assets along with rate of depreciation is mentioned. In the head Plant Machinery, there is no mentioning asset Electrical Installation. As Electrical Installation is categorised under the head Furniture Fixture, the assessee company is not eligible for claiming the same under the head Plant Machinery with rate of depreciation @15%. Moreover, additional depreciation cannot be claimed on Electrical Installation as the aforesaid assets is not utilised for Manufacturing and production of article or things. 8.3 In view of the facts above, the excess depreciation of ₹ 68,87,393/- claimed by the assessee on electrical installation is now being disallowed and added back to the total income of the assessee company for the A.Y 2015-16. 50. The Ld. CIT(A) has deleted the addition by observing as under: The Schedule related to electrical installation given in Tax audit report is reproduced below - Sl. No. Particulars Date of put to use On or before 30.09.220 After 30.09.2014 Total Modvat Claimed Net Addit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the deduction claimed by the assessee in respect of employee s contribution to Provident Fund and ESIC to the tune of ₹ 8,99,406/- on the ground that the same was not remitted within the due date prescribed in the PF ESI Act. It is noted that the Ld. CIT(A) vacated the disallowance by following the decision of Hon'ble Calcutta High Court in the case of Commissioner of Income Tax, Circle - 1, Kolkata Vs Vijayashree Ltd. reported in (2014) (43 taxmann.com 396) (Cal) wherein it was held that no disallowance for employees contribution to PF ESI should be made under section 36(1)(va) read with section 2(24)(x) of the Act where the same is deposited within the time allowed for filing Income Tax return under section 139(1) of the Act. 54. We find that the assessee has deposited the PF ESIC amount within the time allowed for filing Income Tax return under section 139(1) of the Act,therefore theLd. CIT(A) has followed the order of the Hon ble jurisdictional High Court in the case of Vijayashree Ltd.(supra), therefore, no infirmity can be attributed to his impugned action and so we confirm the order and dismiss these grounds of appeal of the Revenue. 55. Ground Nos.10 to 12 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowing facts as under: 15.1. The reasons for making the addition by the AO are summarized as under: i) The nexus of three entry operators with three of such loan creditors,namely Mr. Manohar Lai Nangalia/ Mr. Arun Nangalia with BankaEnterrprises Pvt Ltd; Mr. Ashok Jha with Pitman Commodities Pvt Ltdand lastly Mr. Vijay Kumar Gupta with Sanwaria Marketing Pvt Ltd. ii) Reliance was placed on the statement(s) of entry operators obtained bythe income tax department. The statement of Mr. Ashok Jha taken underoath on 02.03.2015, Mr. Vijay Kumar Gupta on 03.08.2015 and Mr.Arun Nangalia on 17.09.2015. iii) Non- appearance of directors of 32 of such loan creditors inresponse to summons issued during the assessment proceedingsu/ s 131 of the Act. iv) Some of the sum monses sent by post were returned unserved. v) The loan creditors are having apparent signage of a JamaKharchi concerns that of no/negligible payment of taxes, no actualassets, having fake addresses and having dummy directors. 57. And the Ld CIT(A) deleted the addition of ₹ 12.95 crores ₹ 4.5 crores by holding as under: I have perused the Submissions of the AR, the Assessment Order and the case laws on this issue. An ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd advance to shree Guru Carbide Chemicals Pvt Ltd., Orissa Air Products Pvt Ltd. , Rishi Gases Pvt. Ltd. The company belongs ,to Asiatic Oxygen Group (Surajmull Nagarmull), The ICD for theassessee was arranged by renonwend corporate finance broker. Apparently this company can t be said to be a paper company during the assessment year. 4. R D Fans Ltd (4) - the Company is having investment in Quoted shares of ₹ 24 lakhs, interest in joint venture in real estate and immovable properties of ₹ 7.5 crore . During the year it gave loan, to Parekh. Aluminex Ltd another reputed Company. The company pays tax regularly in this year (FY 14-15) it paid tax of ₹ 21.29 Lac and in next year, it paid tax of ₹ 19.57 lac. The company belongs to Dhandania RD. Group. The ICD for the assessee was arranged by renowned corporate finance broker. In view of the above this company can t be said to be a paper company during the assessment year. 5. Park Complex Pvt Ltd (5) - The Company is having investment in Quoted shares and land. The company pays tax regularly in this year (FY 14-15) it paid tax of ₹ 3.65Lac and in next year, it paid tax of ₹ 3,571ac. The company is re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Cr. company keep balance of ₹ 107 lac in bank. The company belongs to Sarda Group having interest in jute trading and manufacturing.. The ICD for the assessee was arranged by renowned corporate finance broker. In view of the above this company can t be said to be a paper company during the assessment year. 10. Cresenthemum Vypaar Pvt.Ltd (10) - The Company is having Tangible Fixed Assets (₹ 10.40 lakhs) and fixed deposits with bank.. The company pays tax regularly in this year (FY 14-15) it paid tax of ₹ 11,23 Lac and in next year, it paid tax of Rs, 10.191ac. The company is regularly lending monies to large and established corporate house. The company belongs to Bohra Group Mumbai 85 Gujarat (Textile). Bohra group is a renowned group of Kolkata which run a charitable institution which runs a girls hostel in Kolkata. The ICD for the assessee was arranged by renowned corporate finance broker. In view of the above this company pant be said to be a paper company during the assessment year. 11. Disha Paints Pvt ltd (11) - The Company is having Fixed Deposits with bank(18.52 lakhs) and given substantial advance of ₹ 110 Lac to acquire properties. 'The' c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... khs . The company pays tax regularly. The.company belongs to JAYA Biscuits Group. The ICD for the assessee was arranged by renowned corporate finance broker. 17. Monet Securities Pvt Ltd (17) - The Company is having investment in Quoted shares of 49.30 crores . During the year FY 14-15, it gave ICD to Kashipur Holding Ltd, Williamson Magor Co Ltd, SKP Steel Industries Pvt Ltd, Bihanji Construction Ltd, Elder Healthcare Ltd and so on.The company belongs to Bubna Group. It is a share broking company. The ICD for the assessee was arranged by renowned corporate finance broker. 18. Narmada Trexim Pvt Ltd (18) - The company has merged with PingleCommotrade Pvt ltd. It has lent money to many business groups of Kolkata like Ajmer Mineral Grinding corporation, Vikram India Ltd,, Suiyaprabha Tea services pvt ltd. etc. The ICD for, the assessee-Was arranged by renowned corporate finance broker. 19. Navin;Constriiction . credit Pvt Ltd 1,(19} - The .Company is having investment in Quoted shares(₹ 67.19 lakhs) and Mutual funds (₹ 6 crores in next year); The company pays tax regularly in this year (FY 14-15) it paid tax of ₹ 11.02 Lac and innext year, it paid tax of ₹ 97. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The company belongs to Sarda Jute Group. The ICD for the assessee was arranged by renonwend corporate finance broker. 26. Richimen Barter Pvt Ltd (26) - The Company is having investment in Quoted shares of 59 lakhs. The company is regularly lendering monies to large and established corporate house. The company belongs to Beekay Group. The ICD for the assessee was arranged by renowned corporate finance broker. 27. Ritesh Roadlinks Pvt. Ltd (27) - The Company is having fixed deposit with bank of ₹ 42 lakhs. Fixed asset is of 23.75 lakhs. The company is engaged in Transport and logistic service industry. The ICD for the assessee was arranged by renowned corporate finance broker. 28. S K Dudhoria Holding Pvt. Ltd (28) - The Company is having investment in Mutual funds (₹ 30 lakhs) and FD of ₹ 20 lakhs. The company pays tax regularly in this year (FY 14-15) it paid tax of ₹ 1.5 Lac and in next year, it paid tax of ₹ 67.051ac. During the year FY 14-15, it gave ICD to Videocon Industries Ltd, Uma Plastic Ltd, Uflex Ltd, Snowtex Investment Ltd, Shrimaa Polyfab Ltd, Sahul Finance Ltd, National Plasto Products Pvt Ltd, MBL Infrastructure Ltd, Mani Square Ltd, M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, M.adura Wood Craft Engineering Industries Ltd-,Saifco India Co., Williamson Magor Co Ltd, Willowood Chemicals Pvt Ltd, VOC International, Trade India Corporation and so on.The company belongs to industrial Group engaged in Civil Engineering and Construction . The ICD for the assesses was arranged by renowned corporate finance broker 15.5. Following salient features emerge on this issue of unsecured loan- i) It can be seen that most of the lender companies have substantial assets lying with them. ii) These companies are controlled by reputed business houses of Kolkata, therefore, it is difficult to level them as shell companies. iii) Further, most of the lender companies have filed details before the AO in response to summons u/s. 131. Only the Directors did not appear before the AO but the AO should have issued personal summons to the Directors and could have enforced their attendance which he did not do. Therefore, the assessee cannot be blamed regarding origin of some of these companies from entry operators since all these companies are controlled by genuine business groups during A.Y. 2015-16, therefore, the assessee could not have been penalized. iv) If these companies have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rred in deleting the same. According to Ld. CIT-DR, the statement of entry operators obtained by the department and who controlled these lender companies are part and parcel of the assessment order and since these companies (lender) are controlled by entry operators and have failed to bring cogent evidence to establish identity, creditworthiness genuineness of the lender companies before A.O, the A.O has rightly drawn adverse inference against the assessee. The Ld. CIT-DR in this context pointed out the nexus of three (3) entry operators with three (3) such loan creditors viz.(i) Mr. Arun Nangalia s statement which was recorded on oath on 17.09.2015 with M/s Banka Enterprises Pvt. Ltd; (ii) Mr. Ashok Jha s statement which was recorded on oath on 02.03.2015in respect of M/s Ritman Commodities Pvt Ltd and (iii) Mr. Vijay Kumar Gupta s statement was recorded on oath on 03.08.2015in respect of M/s Sanwaria Marketing Pvt Ltd. 60. The Ld. CIT-DR pointed out that despite giving opportunity and issuance of summons u/s 131 of the Act, none of the directors of twenty two (22) loan creditors did not bother to appear before the A.O. According to Ld. CIT-DR, some of the summons got returned un- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commodities Pvt Ltd and (3) M/s Sanwaria Marketing Pvt Ltd. The Ld. A.R. took pains by drawing our attention to pages 3 to 18 of assessment order [ where the AO has reproduced statements of three (3) entry operators with three (3) such loan creditors viz. (i) Mr. Arun Nangalia s statement recorded on 17.09.2015 with M/s Banka Enterprises Pvt. Ltd; (ii) Mr. Ashok Jha s statement recorded on 02.03.2015 in respect of M/s Ritman Commodities Pvt Ltd and (iii) Mr. Vijay Kumar Gupta s statement recorded on 03.08.2015 in respect of M/s Sanwaria Marketing Pvt Ltd. ] to bring out this fact of non-connection/nexus of these three (3) entry operators with the afore-said lender companies, which we find to be correct and will discuss in detail (infra). Andaccording to Ld AR, the Ld.CIT(A) being satisfied with these facts has recorded finding of fact by dwelling upon each lender companies which has not been challenged by the Revenue. Thereafter the Ld. AR drew our attention to the impugned order of Ld. CIT(A) wherein the Ld. CIT(A) has discussed about all the twenty two (22) lenders and other eleven (11) lender companies which is given (supra). According to Ld. AR, the Ld. CIT(A) has given factual ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... giving relief to the assessee, noted that the assessee in order to prove the genuineness of the loan transaction from these 22 Companies had filed bank statement which reflected that assessee received loan/advance through proper banking channel and these lenders had earned substantial interest income not only from assessee, but from other borrowers too and the interest on the loans were credited in the lenders account after deduction of TDS and all these lender companies have filed their respective Income TaxReturns and that they were duly assessed by the department. And the Ld CIT(A) noted that the lender companies had substantial assets to grant loans. And the Loans have been eventually repaid also through banking channel, so he deleted the addition. Against this impugned action of the Ld. CIT(Appeals), the Revenue has preferred this appeal before the Tribunal. So the action of the Ld. CIT(Appeals) in deleting the addition of ₹ 12.95 crores needs to be examined. 64. We note that in the assessment year under consideration, the assessee has taken loan of ₹ 12.95 crores from the following twenty-two (22) parties, which is evident from the chart given below. S.No. NAME OF ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by AO and 1 party accepted by Ld. CIT(A)] no loan was accepted by AO in AY 2016-17. 67. Be that as it may be, we note that in order to prove the identity of these twenty two (22) lender companies, the assessee had produced the documents, from which the CIN and PAN details and the fact of them filing ITR s are discernable from the following chart and a perusal of the next chart will reveal their creditworthiness as under;- Sl No. Name of Company CIN PAN ITR filed for AY 2015-16 1 RITMAN COMMODITIES PVT LTD U74999WB2012PTC175248 AAFCR732ID Yes 2 R.D. FAN LTD U29303WB1982PLC035578 AABCR6106L Yes 3 PARK COMPLEX PVT LTD U70109WB1994PTC065616 AABCK1563C Yes 4 PAWAN PUTRA SECURITIES PVT LTD U51109WB1993PTC060129 AABCK1563C Yes 5 MOHIT BAKERS PVT.LTD. U15410WB2009PTC134482 AAFCM9864J Yes 6. KUKU MERCANTILE PVT LTD. U70109WB1995PTC071706 AABCK3311L Yes 7 JAGADHATRI FOOD LTD U51909WB1981PLC033866 AAACJ6899F Yes 8 GULMOHAR MERCANTILE PVT. LTD U51909WB2006PTC108134 AACCG5361R Yes 9 CRESCENTHEMUM VYAPAAR PVT LTD U51109WB2007PTC114264 AADCC0224E Yes 10 BANKA ENTERPRISES PVT.LTD. U70200WB1995PTC069399 AABCB2996A Yes 11 RITESH ROAD LINKS PVT.LTD. U63090WB1990PTC050172 AABCR2234H Yes 12 S K DUDHORI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der companies have filed their audited financial statements. From a perusal of the same, it is noted that the capital reserves of all these 22 companies are much more than the loan given to the assessee, which is visible from the facts noted in the form of chart given above under the heading creditworthiness . Moreover, it has also been brought to our notice that the Assessing Officer in the next assessment year i.e. A.Y. 2016-17 has accepted thirteen (13) parties out of this twenty-two (22) parties as genuine lender companies (supra) and thereafter it was brought to our notice that the Ld. CIT(Appeals) has accepted the loan obtained from one party, i.e. M/s. Sanwaria Marketing Pvt. Limited for A.Y. 2016-17 (which we will examine separately). We note that while adjudicating this issue, the Ld. CIT(Appeals) has gone through the Master Data relating to the lender companies, which were available in the ROC Websites and the Ld. CIT(Appeals) has acknowledged the fact that he has crosschecked the facts regarding the identity, creditworthiness and genuineness of the loan transaction, which fact is evident from his finding at para 15.3 (Page 18) of his impugned order; and it is noted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed for taking loan from these companies. According to us, in the facts of this case, there was no necessity to make the aforesaid general observations. We find that the AO s case as per the assessment order for AY 2015-16 is concerned, the AO aftertaking note that the assessee has taken unsecured loan from so many lender companies, called for the details from the assessee; and from the list of the creditors/lender companies, he found that three (3) parties were controlled by entry operators. According to the AO, (1) M/s. Banka Enterprises Pvt. Ltd. was the concern of entry operator Shri Monoharlal Nangalia/Arun Nangalia. (2) M/s. Ritman Commodities Pvt. Ltd. was the concern of the entry operator Shri Ashok Kumar Jha and (3) M/s. Sanwaria Marketing Pvt. Ltd. was the concern of entry operator Shri Vijay Kumar Gupta and thereafter he reproduced their respective statements which were recorded on oath u/s. 131 of the Act by Investigation Wing [Refer pages 3 to 18 of the assessment order]. According to AO, since these three (3) lender companies are the concerns of the entry operators, he issued summons and insisted on the personal appearance of the Directors of the lender companies and f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. Ltd. 71. Coming to the next statement of Shri Vijay Kumar Gupta recorded from page Nos. 7 to 10 of the assessment order, we note that his statement was recorded on 03.08.2015 by the DDIT, Investigation Wing Unit. In the assessment order the AO has alleged that the entry operator Mr. Vijay Kumar Gupta s concern is M/s. Sanwaria Marketing Pvt. Ltd. It is noted from the statement of Mr. Gupta that nowhere in the statement he has named M/s. Sanwaria Marketing Pvt. Ltd. as his company for providing accommodation entries. In answer to question no. 5, Mr. Gupta has enlisted the names of various persons who were his relatives and in answer to question no. 7 he had given the names of two (2) persons who were his employees. On perusal of the information pertaining to M/s. Sanwaria Marketing Pvt. Ltd. extracted from the master data it is noted that the registered office of the creditor company was situated at 176, Jamuna Lal Bajaj Street, Kolkata-700 007 and the said company also declared that the company s books of account and other papers were maintained at 10/3, Acropolis, 1858/1, Rajdanga Main Road, Kolkata700107 and as per the company master data Shri Siddharth Kumar Podder, Shri Sanj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i Aloke Agarwal from 11.10.2010 onwards. These names also do not figure in the statement of Shri Nangalia. On perusal of the statement of Shri Nangalia it reveals that the Investigation Wing was questioning him in respect of the survey conducted on M/s. Happy Bengal Promoters Ltd. and M/s. Mangalthan Properties Pvt. Ltd. It is also noted that this was in continuation to the statement recorded during the survey of Shri Sushil Kumar Podder who has stated about fifteen (15) companies created by Mr. Pramod Agarwal which has been transferred to Mr. Arun Nangalia. However, Shri Arun Nangalia has stated that Mr. Promod Agarwal has transferred only twelve (12) companies not fifteen (15) companies to him, details are given at page nos. 15 and 16 of the assessment order. From the statements of Shri Arun Nangalia, we note that nowhere the name of M/s. Banka Enterprises Pvt. Ltd. or its director s name or their relatives are found. Therefore, we wonder as to how the AO has connected Shri Nangalia with M/s. Banka Enterprises Pvt. Ltd., Therefore, the finding of the AO that M/s. Banka Enterprises Pvt. ltd. was the concern of the entry operator Shri Monoharlal Nangalia/Shri Arun Nangalia are perv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d could not have been relied by the AO for drawing adverse inference against the lender companies, therefore, the Ld. CIT(A) has rightly overturned the decision of AO on this issue. Further, before us, the details of the unsecured loans taken by the assessee; and the interest given to them by the assessee can be seen as well as the fact that assessee company has squared up/ repaid the loan which facts are discernable from the chart below. 73. From a perusal of the chart (infra)we can see the list of lenders( total 33), their respective PAN, , loan amount, interest per annum, TDS deducted while interest is paid to lenders, loan repaid/closed F.Y, supporting documents filed etc: 74. From a perusal of the chart (supra) we note that out of the total thirty-three (33) lender companies, which had given loans to the assessee, other than the loan taken from M/s. Richmen Barter Limited shown at item number 29, all other loan amounts have been repaid which is evident from the chart. Thus we note that all the lender companies from which all the assessee has taken loan this year and also carry forwarded loan except ₹ 20,00,000/- of M/s. Richmen Barter Pvt. Limited [which does not pertain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the aforesaid eight (8) parties. And opening balance of these loan as on 01.04.2014 was ₹ 5.5 crores and ₹ 1 crores was repaid in this assessment year, so the AO added back the closing balance of these loan parties to the tune of ₹ 4.5 crores. Further details of these lender companies can be seen from the chart below; 78. According to Ld AR, the opening balance of loan as on 01.04.2014 except for ₹ 1 crore repaid in this AY 2015-16 was through banking channel on 03.04.2014 (Refer Page 93 of Paperbook 2) , has been added back by AO. According to Ld AR, since the loan was accepted in previous year, no addition was made in this regard in previous AY 2014-15, so such addition of ₹ 4.5 crores is legally un-tenable and is bad in law. Further according to Ld AR, it is evident from Paperbook 2, that said Companies have reflected the interest income from loan and the TDS in respect thereof was duly accounted for and deposited and the parties have filed Income Tax Returns and have been duly assessed, so no addition was warranted. 79. We have heard both the parties and we note that AO made an addition of ₹ 4.5 crores andwe note that the addition of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that AO had added back interest of ₹ 1,10,22,742/- paid to following parties: Sl. No. Name of company Interest (Rs.) TDS (Rs.) 1 RITMAN COMMODITIES PVT LTD 83,288 8,329 2. R.D.FANLTD 3,96,712 39,671 3. PARK COMPLEX PVT.LTD. 2,83,068 28,307 4. PAWAN PUTRA SECURITIES PVT.LTD 14,384 1,438 5. MOHIT BAKERS PYT.LTD 1,19,178 11,918 6. KUKU MERCANTILE PYT.LTD 1,66,028 16,602 7. JAGADHATRI FOOD LTD. 4,20,549 42,056 8. GULMOHAR MERCANTILE PVT. LTD. 3,86,302 38,630 9. CRESCENTHEMUM VYAPAAR PVT.LTD. 18,904 1,890 10. BANKA ENTERPRISES PVT.LTD 1,02,329 10,233 11. RITESH ROAD LINKS PVT.LTD. 55,479 5,548 12. S K DUDHORIA HOLDINGS PYT.LTD. 31233 3123 13. SHROFF CHEMICALS PVT. LTD 1,02,329 10,233 14. SWARAN FINANCIAL PVT.LTD. 3,42,329 34,233 15. REGO CHEMICALS PVT. LTD 62,137 6,214 16. NAVIN CONSTRUCTION CREDIT PVT.LTD. 4,93,288 49,329 17. JAINCO PROJECTS (INDIA) LTD. 24,932 2,493 18. GIRDHAR TRACOM PVT.LTD. 8,08,768 80,877 19. DISHA PAINT PVT. LTD. 73,973 7,397 20. BLACKCHERRY COMMOSALE PVT. LTD. 2,18,959 21,890 21. OLYMPIA CREDIT MERCANTIE PYT.LTD. 6,00,000 6,000 22. NIRMAL DEEP RESOURCES LTD. 8,00,000 80,000 23. AMEXCO INVESTMENTS PVT.LTD. 31,99,999 3,20,000 24. SADHANA TRADE CREDIT PVT.LT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties Pvt. Limited from which lender companies the assessee has taken loans of ₹ 1,00,00,000/-, ₹ 50,00,000/- and ₹ 1,00,00,000/- respectively and we find that these loans were brought forward loans as on 01.04.2014 and which has been squared up /repaid by the assessee in this assessment year itself, which fact is evident by perusal of pages 178 to 188 of the paper book and it is noted that there was no fresh loan from these three parties and we note that the opening loan with interest due to them were repaid in this year through banking channel after duly deducting TDS. So the question of disallowing the interest given by the assessee to these three (3) parties also cannot be accepted and we are of the opinion that the Ld. CIT(Appeals) rightly deleted the same. 84. Therefore, in the facts and circumstances discussed (supra) the Ld. CIT(Appeals) has rightly deleted the addition of interest expenditure of ₹ 1,10,22,742/- which does not require any interference. Therefore, we confirm the action of the Ld. CIT(Appeals) and dismiss the appeal of the Revenue. 85. In the light of the aforesaid discussion, we dismiss the Revenue s appeal for AY 2015-16. ITA 2191/Kol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied with the summons and appeared before him. And since remaining fourteen (14) parties/directors did not comply, the AO issued the Show Cause Notice (herein after SCN). According to AO, the reply of the assessee to SCN was not satisfactory and since assessee failed to discharge the onus casted upon it u/s. 68 of the Act, the AO was of the opinionthat the sum of ₹ 8,94,96,000/- received from the aforesaid fourteen (14) share allottee concerns on account of share capital and premium needs to be treated as unexplained cash credit u/s 68 of the Act and he added the same. 88. Aggrieved the assessee preferred an appeal before the Ld. CIT(A) who was pleased to confirm the same. The Ld. CIT(A) while confirming the order of the A.O observed as under: 17.1 Following facts emerges from the Order of the AO- (a)The AO has made addition in respect of share capital raised from 14 entities. (b) Most of these entities were appearing in the share subscriber list for A.Y. 2014-15 where the summons sent to these parties Return unserved, c) None of these parties were found to be existing at the addresses given in the field enquiry made by the Department. d) Even in A.Y. 2015-16 the AO had issued ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee through shell company. 17.3 Analysis of case laws on the issue- 1. In the case of Nova Promoters and Fin Lease Pvt. Ltd 342 ITR 169 Delhi, The allottee company had availed entries from professional name lenders, there was no response to Summons issued to the subscribers. The addition made was upheld. 2. In the case of Sophia Finance Ltd. [1994] 205 ITR 98/70 Taxman 69 (Delhi), hon. Court opined that section 68 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. 3. Hon'ble Apex Court in the case of Navodaya Castle (P) Ltd vs CIT reported in (2015) 56 taxmann.com 18 (SC) has held that mere filing of certificate of incorporation, PAN were not sufficient for the purpose of identification of subscriber company especially when there was material to show that subscriber was a paper company and not a genuine investor. 4. Hon. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scious of a view taken in some of the previous decisions that the assessee cannot be faulted if the share applicants do not respond to summons, and that the state or revenue authorities have the wherewithal to compel anyone to attend legal proceedings. However, that is merely one aspect. An assessee's duty to establish that the amounts which the AO proposes to add back, under Section 68 are properly sourced, does not cease by merely furnishing the names, addresses and PAN particulars, or relying on entries in a Registrar of Companies website. One must remember that in all such cases, more often than not, the company is a private one, and share applicants are known to it, since they are issued on private placement, or even request basis. If the assessee has access to the share applicant's PAN particulars, or bank account statement, surely its relationship is closer than arm's length. Its request to such concerns to participate in income tax proceedings, would, viewed from a pragmatic perspective, be quite strong, because the next possible step for the tax administrators could well be re-opening or such investor's proceedings. That apart, the concept of shifting onus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onded to summons by appearing before him. But fourteen (14) companies directors did not appear. So, he made addition of ₹ 8,94,96,000/- . It was brought to our notice that the assessee has filed before the A.O the following documents in respect of all these nineteen (19) companies (i) copies of acknowledgement of ITR, (ii) audited financial statement, (iii) bank statement, (iv) copy of return of share allotment filed to the ROC, (v) share application form and (vi) copy of Board Resolution of subscriber companies. However, according to the Ld. A.R, during the assessment proceeding for AY 2015-16, the AO could not find any fault or infirmity whatsoever in respect of the documents filed before him to establish the identity, creditworthiness and genuineness of the share capital and premium received from these concerns by the assessee company. However, the AO has simply toed the line of the predecessor AO for AY 2014-15 and has reproduced the order of his predecessor AO for AY 2014-15 in respect of share capital and premium collected from six (6) shareholders for AY 2014-15 and thereafter, AO issued summons u/s. 131 of the Act to all nineteen (19) companies to produce their direct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Party Face value @ 100/- Premium @ 620/- Total Amount received 1. KA Vanijya Pvt Ltd 3,57,500/- 22,16,500/- 25,74,000/- 2. Ontime Securities Pvt Ltd 1,07,100/- 6,64,020/ 7,71,120/- 3. Blue Sky Sales Pvt Ltd 5,35,700/- 33,21,340/- 38,57,040/- Total 10,00,3000 62,01,860/- 72,02,160/- 93. According to Ld. AR, in respect of the above three (3) subscriber companies' addition was made by the assessing Officer solely on the ground that similar addition were made in respect of share capital receipt from these companies in the assessment Year 2014-15. And in the Assessment year 2014-15 since no addition was made in the assessment order in respect of the aforesaid three Companies, according to Ld AR, the addition was made merely on erroneous assumption of fact and therefore, such arbitrary addition cannot be sustained since assessee has discharged the burden of proof to prima facie prove the identity, creditworthiness and genuineness of the share transaction. 94. From the following chart it can be discerned that out of the fourteen (14) share subscribing entities, from which the assessee received share subscription the AO/CIT(A) has not accepted their identity, creditworthiness an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the share capital and premium have been subscribed by them through banking channel (NEFT or cheque) which goes on to show that the assessee has discharged the onus in respect of genuineness of the transaction since no cash deposits can be seen from the bank statements. In such a scenario, the view of the lower authorities based on the documents referred to supra is not tenable and is not in consonance with judicial precedents (supra). However we would like to discuss/ examine about each share subscribers totalling Fourteen (14) as follows especially the source of source: (i) On perusal of the paper book, it reveals that the documents are placed at page 170 to 190 of share applicant M/s. BrijbhumiCommosale Pvt Ltd which is a Private Limited Company, and which has Permanent Account No. AAECB5701C and CIN U51909WB2011PTC163205 and its Net-worth as on 31.03.2015 (in total)- share capital reserve is to the tune of ₹ 10,21,11,470/- and the investment made in the assessee-company including the share premium comes to ₹ 66,60,000/-. There is Bank statement, ITR acknowledgement and financial statement available. This share applicant regularly filed Income Tax Return (ITR) and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of its fund for subscribing to the share capital/premium of the assessee company. From the bank statement of Pragati Complex Advisory Pvt Ltd enclosed at page no 280-281 of paper book it is clear that the share subscriber has invested ₹ 75,99,600/- in the assessee company as follows : on 16.08.2014 ₹ 37.998 lakhs and on 03.02.2015₹ 37.998 lakhs through banking channel. From perusal of bank statement it is evident that there was no cash deposit. Confirmation of its source is provided in Page 282 of Paper book. (iii) On perusal of the paper book, it reveals that the documents are placed at page 312 to 332 of share applicant M/s. RichifiieldVintrade Pvt Ltd which is a Private Limited Company, and which has Permanent Account No. AAFCR3199H and CIN U51909WB2011PTC163139 and its Net-worth as on 31.03.2015 (in total)- share capital reserve is to the tune of ₹ 14,44,43,237/- and the investment made in the assessee-company including the share premium comes to ₹ 94,32,000/-. There is Bank statement, ITR acknowledgement and financial statement available. This share applicant regularly filed Income Tax Return (ITR) and it has filed its Bank statement. Financial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - in the assessee company on various dates as follows : on 21.08.2014 ₹ 33.9156 lakhs and on 11.03.2015 ₹ 33.9156 lakhsthrough banking channel. From perusal of bank statement it is evident that there was no cash deposit. Confirmation of its source is provided in Page 373 of Paper book. (v) On perusal of the paper book, it reveals that the documents are placed at page 405 to 428 of share applicant M/s. LaxmipurtraTradecomm Pvt Ltd which is a Private Limited Company, and which has Permanent Account No. AACCL0187C and CIN U51909WB2011PTC158663 and its Net-worth as on 31.03.2015 (in total)- share capital reserve is to the tune of ₹ 13,31,01,760/-and the investment made in the assessee-company including the share premium comes to ₹ 97,09,200/-. There is Bank statement; ITR acknowledgement and financial statement available. This share applicant regularly filed Income Tax Return (ITR) and it has filed its Bank statement. Financial statement and source of fund of share subscriber has been duly filed. Thus we note that the assessee had duly discharged its onus to prove the identity of the share applicants by adducing PAN as well as income-tax returns. The financial s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al of bank statement it is evident that there was no cash deposit. Confirmation of its source is provided in Page 448 of Paper book. (vii) On perusal of the paper book, it reveals that the documents are placed at page 191-224 of share applicant M/s. Waltaz Commodities Pvt Ltd which is a Private Limited Company, and which has Permanent Account No. AABCW2145G and CIN U74999WB2012PTC174119 and its Net-worth as on 31.03.2015 (in total)- share capital reserve is to the tune of ₹ 39,78,13,925/- and the investment made in the assessee-company including the share premium comes to ₹ 48,96,000/-. There is Bank statement, ITR acknowledgementand financial statement available. This share applicant regularly filed Income Tax Return (ITR) and it has filed its Bank statement. Financial statement and source of fund of share subscriber has been duly filed. Thus we note that the assessee had duly discharged its onus to prove the identity of the share applicants by adducing PAN as well as income-tax returns. The financial statement shows that the share applicant had enough funds to invest in the assessee-company and the transaction has happened through banking channel. Since the case perta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... On perusal of the paper book, it reveals that the documents are placed at page 375 to 404 of share applicant M/s. Martgalkarnna Merchants Pvt Ltd which is a Private Limited Company, and which has Permanent Account No. AAHCM2337E and CIN U51909WB2011PTC163124 and its Net-worth as on 31.03.2015 (in total)- share capital reserve is to the tune of ₹ 14,84,65,406/-and the investment made in the assessee-company including the share premium comes to ₹ 81,61,200/-. There is Bank statement, ITR acknowledgement and financial statement available. This share applicant regularly filed Income Tax Return (ITR) and it has filed its Bank statement. Financial statement and source of fund of share subscriber has been duly filed. Thus we note that the assessee had duly discharged its onus to prove the identity of the share applicants by adducing PAN as well as income-tax returns. The financial statement shows that the share applicant had enough funds to invest in the assessee company and the transaction has happened through banking channel. Since the case pertains to AY 2015-16, the share subscribers has to show the source of its fund for subscribing to the share capital/premium of the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h has Permanent Account No. AAFCR1735B and CIN U51909WB2010PTC154877 and its Net-worth as on 31.03.2015 (in total)- share capital reserve is to the tune of ₹ 13,29,43,509/- and the investment made in the assessee-company including the share premium comes to ₹ 80,71,920/-. There is Bank statement, ITR acknowledgement and financial statement available. This share applicant regularly filed Income Tax Return (ITR) and it has filed its Bank statement. Financial statement and source of fund of share subscriber has been duly filed Thus we note that the assessee had duly discharged its onus to prove the identity of the share applicants by adducing PAN as well as income-tax returns. The financial statement shows that the share applicant had enough funds to invest in the assessee-company and the transaction has happened through banking channel. Since the case pertains to AY 2015-16, the share subscribers has to show the source of its fund for subscribing to the share capital/premium of the assessee company. From the bank statement of M/s. Ramdot Suppliers Pvt Ltd enclosed as page no 502 of paper book it is clear that the share subscriber has invested ₹ 80,71,920/- in the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 377; 7,71,120/-. There is Bank statement, ITR acknowledgement and financial statement available. This share applicant regularly filed Income Tax Return (ITR) and it has filed its Bank statement. Financial statement and source of fund of share subscriber has been duly filed. Thus we note that the assessee had duly discharged its onus to prove the identity of the share applicants by adducing PAN as well as income-tax returns. The financial statement shows that the share applicant had enough funds to invest in the assessee-company and the transaction has happened through banking channel. Since the case pertains to AY 2015-16, the share subscribers has to show the source of its fund for subscribing to the share capital/premium of the assessee company. From the bank statement of M/s. Ontime Securities Pvt Ltd enclosed as page no 335-336 of paper book it is clear that the share subscriber has invested ₹ 7,71,120/- in the assessee company on various dates as follows : on 18.08.2014 ₹ 3.856 lakhs and on 10.03.2015 ₹ 3.856 lakhs through banking channel. From perusal of bank statement it is evident that there was no cash deposit. Confirmation of its source is provided in Pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 00. This is an appeal preferred by the Revenue against the order of the Commissioner of Income Tax (Appeals)-4, Kolkata dated 18.11.2019 for A.Y 2016-17. Though the Revenue has raised 29 grounds of appeal, according to the Ld. CITDR, the main grievance of the Revenue is against the action of the Ld. CIT(A) in deleting the addition of ₹ 11,40,00,000/- and disallowance of interest claimed to be paid by assessee to the lenders to the tune of ₹ 31,99,351/-. 101. Brief facts as noted by the A.O on this issue are that the A.O on perusal of the balance sheet of the assessee noted that the assessee has taken short-term borrowings/unsecured loan of ₹ 37,51,30,470/- as on 31.03.2016. Therefore, the A.O asked the assessee to give details. According to the A.O, the assessee company furnished details. However, on going through the details of loan creditors as submitted by the assessee, it was noted by him that some of the loan creditors concerns were paper concerns/jamakharchi concerns managed and controlled by entry operators. The details of eight (8) paper concerns and the respective entry operators according to the A.O are as under: Sl. No. Name of the concern Managed contr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,89,344/- 7 M/s. Brijwasi Viniinay Pvt. Ltd. ₹ 25 lacs ₹ 14,795/- 8 M/s. Anjani Tradelinks Pvt. Ltd. ₹ 25 lacs ₹ 30.137/- Total ₹ 11.40 Crores ₹ 31,99,351/- 104. The A.O taking note that since directors of the aforesaid companies didn t turn up before him, has drawn adverse inference against the lender companies and made an addition of ₹ 11,40,00,000/- u/s 68 of the Act. 105. Aggrieved the assesseepreferred an appeal before the Ld. CIT(A) who was pleased to give relief to the assessee after taking note of the following facts as under: As hardly any time was given by the AO to assessee to produce these parties before the AO therefore during the course of appellate proceedings the AO was requested vide letter dated 08/05/2019 to submit a report regarding these loan creditors. However, till 18/11/2019 no such report OR any objections have been received in this office and therefore the appeal is decided on the basis of material on record. Paper Book 1. Copy of the audited accounts of the company for FY 2015-16 2. Statement giving particulars of ICDs Received from Companies totaling ₹ 11.40 crs. Assesseed u/s 68 3. Copy of the order of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eks Tekstil Sanayi Disticaret Ltd. e. Interfil S.P.A f. Lomat International HV g. MGSGC S LLC, DBA Seven Hills Imports h. TAC IC Distic Ltd. STI i. Weber Heusser GMBH Co. KG 7. Few sample copies of tax residency certificate provided by foreign agents namely: a. COGETEX SA b. DANTE MANFREDI c. INTEKS TEKSTIL SANAYI DISTICARET LTD d. INTERFIL SPA e. MAGSGC S LLC, DBA SEVEN HILLS IMPORTS f. TAC DIS TIC LTD, STI g. H.W.H. BIENZEISLER GMBH h. PT. SILVER LINE INTERNATIONAL i. RMV OVERSEAS LTD. j. TEXIENCE 8. Details of foreign sales commission paid in prior two years 9. Copy of the ITAT Kolkata s decision in the case of Lux Industries Ltd. in ITA Nos. 1144 1145/Kol/2015 dated 27.06.2018 10. Copy of the ITAT Kolkata s decision in the case of on process technology India pvt. Ltd..in ITA NO. 1047/Kol/2016 dated 24.05.2018. A copy of above mentioned documents was already forwarded to the AO while seeking remand report in this case. In this case there were 127 entities from whom loan amounting ₹ 37.51 crore was taken by the assessee during the year under consideration. Out of these 127 parties AO chose to verify the following eight (08) parties : i) M/s. Ujjwal Cloth Marketing Pvt. Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... documents submitted by the assessee before the undersigned regarding these parties were already forwarded to the AO. These documents as per the claim made by the assessee were produced/ available with the AO. However, till the date of passing of this order neither any defect was pointed by the AO in the documents filed by the assessee nor any verification was made. It is also noted that the AO ignored the material on record which was submitted before the AO. The response filed by the loan creditors were completely ignored and the assessment was completed on 28.12.2018. It is noted that in some of the cases the details were submitted between 17,12.2018 to 31.12.2018. In the details filed, it is noted that none of the company appears to be a shell company. For example, Dhanvriddhi Suppliers Pvt. Ltd. is being assesseed in, the same PCIT charge and duly assesseed for Income taxes. Similarly, Sanwaria Marketing Pvt. Ltd. was found to be not a shell company by my predecessor while deciding the appeal of the assessee company for A.Y. 2015-16. The other six companies were also found to be having sufficient resources to provide loan to the assessee company. The details in this regard has a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ortunity to submit their confirmation at the time of assessment as the summons were not served on them due to wrong or inaccurate address mentioned on the summons issued by the AO u/s. 131. It is pertinent to note here that even during the course of remand proceedings, the AO has not made any efforts to issue summons on the correct address and collect desired information. It is also seen that in one case the AO has not even opened the envelope in which the information was received. From the above, it can be seen that the addition has been made in an ad-hoc manner without considering the circumstances, factual details and marshalling the available facts on record and coming to a logical conclusions. Therefore, the additions cannot be sustained. As established above, it can be seen that addition has been made in a haphazard and in an ad hoc manner and without any basis. Therefore, the addition made by the AO are not on the basis of merit but in a whimsical manner. The assessing officer, has placed reliance on the decision of jurisdictional High Court in the case of CIT versus Precision Finance Private limited 208 ITR 463 wherein the honorable High Court has held that: it is for the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... et of Ujjwal Cloth Marketing Pvt. Ltd for year ended 31.03.2016. It will be noted from the audited account that there was no increase in the paid up capital of the creditor-company during the relevant year. The creditor company s net owned funds in the form of Capital 8s Reserves were ₹ 14,56,93,873/-. As per the Balance Sheet, M/s. Ujjwal Cloth Marketing Pvt. Ltd had granted loans 8s advances to the tune of ₹ 14,60,60,054/-. The said Company had also made investments in shares of other Companies having cost of ₹ 5,25,10,511/-. It is also material to note that on the loans granted; M/s. Ujjwal Cloth Marketing Pvt Ltd earned interest income of ₹ 92,20,817/- which inter-alia included interest of ₹ 60,109/- which was payable by the assessee. Your goodself will therefore note that besides the interest income earned from the appellant Ujjwal Cloth Marketing Pvt Ltd had declared interest income in excess of ₹ 91 Lacs from the other loans as well. It is also evident that in respect of such interest income the taxes were deducted by the Payers and therefore the creditor company had claimed refund of ₹ 8,57,130/- out of TDS. 2. Trimurti Vincom Pvt. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ind perusal and record, we enclose herewith copy of audited accounts for the year ended 31.03.2016. It will be observed that the said Company s paid up capital remained same at ₹ 25,60,000/-. The Company s net owned funds in the form of Capital 6s Reserves was ₹ 12,48,19,072/-. The Loans 6s Advances granted by the Company as on 31.03.2016 were ₹ 6,61,91,843/- and investments in shares was ₹ 576 Lacs. The Company s Bank balance as on 31.03.2016 was ₹ 8,14,129/-. During the F. Y. 2015-16 it had earned interest income of ₹ 62,00,121/- which inter-alia included interest of only ₹ 68,306/- paid by the assessee. It will therefore be noted that besides the interest received from the assessee; M/s. Top Class Logistics Pvt. Ltd earned interest in excess of ₹ 61 Lacs from other Parties and the same was accounted in the books of the creditor. 4. Sanwaria Marketing Pvt. Ltd: M/s. Sanwaria Marketing Pvt. Ltd was a Company with whom the appellant had transactions in the earlier year as well. The opening outstanding balance due to M/s. Sanwaria Marketing Pvt. Ltd was Rs.l Crore. M/s. Sanwaria Marketing Pvt. Ltd is having its Regd. Office at 176, Jam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Parties to whom it had advanced loans. Your goodself will also note that in respect of such interest income the Payers had deducted tax of ₹ 13,50,401/- which duly appeared in the Balance Sheet of the said Company. Your goodself will further note that besides the interest income the said company had also earned Long Term Capital Gain of ₹ 10,93,196/-. It may also be pertinent to submit that in the preceding year also the loan received from Sanwaria Marketing Pvt. Ltd was assesseed as cash credit u/s 68. In fact in the immediately preceding year the AO had considered the Inter-corporate deposits received from 33 Companies to be unexplained cash credit and this inter-alia included Sanwaria Marketing Pvt. Ltd. The CIT (A) after appreciating the documents 6s evidences brought on record deleted the addition made u/s 68 vide his appellate order dated 16.08.2018 in Appeal No. 14/CIT(A)-14/2017-18. Copy of the said appellate order is enclosed. You will thus note that the identity and creditworthiness of M/s. Sanwaria Marketing Pvt. Ltd was accepted by the Ld. CIT(A) in the appellant s own case in the immediately preceding year. In the circumstances, there was no reason for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,00,000/- from the said Company on following dates: Date Amount 07.11.2015 ₹ 1,00,00,000/- 12.11.2015 ₹ 2,00,00,000/- 12.11.2015 ₹ 2,00,00,000/- Entire loan taken by the assessee during the relevant year was fully repaid prior to 31.03.2016 along with interest of ₹ 18,89,344/-. Copy of the Account confirmation issued by the loan creditor is enclosed. We submit that the creditor M/s. Dhanvridhi Suppliers Pvt. Ltd is having its Regd. Office at 91, Amlangsu Sen Road, Kolkata-700 048 and it is regularly assesseed to tax by ITO, Ward-10(1), Kolkata. For the A.Y. 2016-17 it had filed its return of income on 07.03.2017 under PAN: AADCD6306Q declaring total income of ₹ 20,61,396/-. Although in the impugned order the AO claimed that the creditor was controlled by one Mr. Shankar Khaitan; no tangible material including statement of Mr. Khaitan was brought on record by the AO to prove his allegation that creditor Company was managed by the said Entry Operator. Be the same as it may, for your kind perusal and record, we enclose herewith copy of the information extracted from Ministry of Corporate Affairs Website from which it will be evident that the creditor comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The long term loans advances granted by the creditor company were ₹ 2,88,20,000/- and short term loans advances were ₹ 4,10,65,116/-. It will further be noted that for the F.Y. 2015-16 the said Company had reported net profit of ₹ 12,29,470/-. During the relevant year the said assessee had reported interest income of ₹ 32,73,318/- which inter-alia included interest of only ₹ 14,795/- paid by the assessee. Your goodself will thus note that besides the appellant M/s. Brijwasi Vinimay Pvt. Ltd had derived substantial interest income from various Other Parties totaling ₹ 32,73,318/- and therefore it was not a case that the creditor had granted loan only to the appellant. 8. Anjani Tradelinks Pvt. Ltd : In this case loan of ₹ 25,00,000/- was obtained by the appellant on 17.02.2016 and interest paid for the F.Y.2015-16 was ₹ 30,137/-. This loan together with accrued interest was fully paid by the assessee in F.Y. 2017-18. Copies of the Account Confirmations for the F.Ys 2015-16 to 2017-18 are enclosed. The said loan was paid from the A/c No. 0060102000103848 and the relevant Bank Statement of the creditor is enclosed for ready reference a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... waria Marketing Pvt. Ltd through Registered Speed Post and therefore it was wholly inappropriate for the AO to claim that the assessee had failed to establish the genuineness of the transaction. Similarly, in the case of Dhanvridhi Suppliers Pvt. Ltd the entire loan of ₹ 5 Crores was fully repaid along with interest during F.Y. 2015-16 itself. Similarly, the loan of ₹ 50 Lacs was fully repaid to Gonedawala Developers Pvt. Ltd along with interest. It was therefore wholly inappropriate for the AO to make the addition simply based on suspicion and conjecture. The appellant submits that if one scrutinizes the audited accounts of each of the loan creditor then it would be evident that each creditor possessed substantial resources of their own. Compared with the total investible funds available with each loan creditor, the loans advanced by them to the appellant during the year was not significant. For your perusal we are enumerating the fund position of each loan creditor and the loans advanced by them. The comparative data set out above will clearly establish that each of the bodies corporate had their own resources which were several times more than the loan advanced to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore, capacity of these companies to lend money cannot be doubted. Genuineness : Since loan has come through cheque further the companies belongs to reputed business houses, therefore, genuineness of the transaction is not in doubt. In view of the above analysis I am of the opinion that the loan amount procured by the assessee is genuine. The assessee has been able to prove Identity, capacity and genuineness of the transaction, therefore, addition of the same does not hold. Therefore, Ground Nos. 5 and 6 are allowed. 107. Aggrieved the Revenue is before us. 108. We have heard both the parties and perused the records. We note that the ground no. (i), (ii), (iv) to (xiii) and (xv) to (xviii) of the appeal are directed against the Ld. CIT(A) deleting the addition made u/s 68 of the Act of ₹ 11.40 crores and disallowance of interest paid on these loans totaling to ₹ 31.99 Lakhs. We also note that during the year under consideration the assessee has taken loan from one hundred and twenty seven (127) parties and paid interest on the said loan. In the course of assessment proceedings the assessee was called upon to furnish details of unsecured inter-corporate deposits (ICD) acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inter-corporate borrowings (ICB) from several parties and these were duly recorded in assessee s regular books. According to Ld. A.R, in the course of assessment proceedings the assessee was called upon to furnish details of unsecured inter-corporate deposits accepted during the relevant year and in compliance, the requisite details were furnished in the format prescribed by the AO. However after perusing the details the AO was of the opinion that some of the creditor Companies were paper companies allegedly managed controlled by certain entry operators and in Para 4.2 of the assessment order, the AO has set out the names of these purported Companies and corresponding names of the alleged entry operators and the said Chart is given below for ready reference : 110. Thereafter on Pages 4 to 16 of the assessment order, the AO extracted statements of alleged (5) entry operators, namely Mr. Jivendra Mishra, Mr. Pranaw Kumar Modi, Mr. Ankit Bagri, Mr. Vijay Kumar Gupta Mr. Akash Agarwal and thereafter having selectively extracted part of the statements of those five (5) persons, the AO proceeded to make additions of ₹ 11.40 crores being the Loans/ICDs received by the assessee from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... editor was a Company controlled by Mr. Mishra it was wholly improper/illegal for the AO to claim that M/s Brijwasi Vinimay Pvt. Ltd was a Company controlled by the said entry operator. Thereafter he drew our attention to the copy of the Company Master Data in respect of M/s. Brijwasi Vinimay Pvt. Ltd. and from a perusal of the same it is noted that its Regd. Office is located at 26B, Park Lane, 2nd Floor, Kolkata - 700016 and since April 2010 Directors of the said Company were Shri Pawan Kumar Agarwal Shri Punit Madhogaria. On the other hand Mr. Mishra had admitted that the Companies controlled by him were managed from Offices located at Room No. 311, 85, N. S. Road, Kolkata - 700001, 18A Rama Kanta Bose Street, Kolkata - 700003 and Room No. 757, 25, Strand Road, Kolkata. Thus according to Ld. A.R it can be noted that the Regd. Office of Brijwasi Vinimay Pvt. Ltd had no connection whatsoever with any of the places from where Companies controlled and managed by Mr. Mishra were having Offices. At page-6 of the assessment order Mr. Mishrahas admitted that Mr. Murli Kumar Mishra, Mr. Gopal Maity, Mr. Mithilesh Kumar Mishra, Mr. Tara Kant Chowdhury, Mr. Rajesh Kumar Jha, Mr. Biswanath J ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ind Haidar Mr. Tanmoy Haidar and there has been no change in the Directors since inception. In contradistinction to the information available in the Company Master Data, it is noted from the statement of Mr. Modi that he had admitted before investigation wing that he was a resident of 1/24, Gandhi Colony, Regent Park, Tollygunge, Kolkata and affairs of the Companies controlled by him were maintained from Office located at 1/24, Gandhi Colony, Regent Park, Tollygunge, Kolkata. Nowhere in his statement Mr. Modi had claimed that Mr. Govind Haidar Mr. Tanmoy Haidar were working under his control and were engaged in providing accommodation entries. Thus we find having regard to the information as is available from the extracted statement of Mr Modi vis-a-vis the information available in the Company Master Data,the AO could have alleged that the assessee had availed accommodation entry in the form of ICD from M/s Trimurti Vincom Pvt. Ltd.Therefore we note that apparently there was no material/oral evidence available in the statement of Mr. Modi, on the basis of which any adverse inference could have been drawn against M/s Trimurti Vincom Pvt. Ltd. or the assessee,so the AO erred in relyi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessment order by the AO extracted part of before the DDIT (Inv), Unit-IV(l) Kolkata, we have already considered his statement supra, however for completeness, we will deal with it in respect of this year. In the assessment order, the AO has alleged that Mr. Vijay Kumar Gupta allegedly controlled managed the affairs of M/s. Sawaria Marketing Pvt. Ltd which had granted ICDs to the tune of ₹ 450 Lakhs. The Ld. A.R pointed out that the assessee had loan transactions with M/s Sawaria Marketing Pvt. Ltd in the F.Y. 2015-16 as well as in the F.Y. 2014-15 which was the preceding year. It is noted that the Statement of Mr. Gupta was recorded in August 2015 i.e. the same year in which the loans were availed by the assessee from M/s Sawaria Marketting Pvt. Ltd. On careful perusal of the statement of Mr. Gupta, it is evident that nowhere in the statement recorded before the DDIT (Inv) he had named M/ s. Sawaria Marketing Pvt. Ltd to be a Company controlled managed by him for providing accommodation entries. In Answer to Question No. 5, Mr. Gupta had enlisted names of various persons who were his relatives and in Answer to Question No. 7, he had given names of 2 persons, who wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent order by the AO wherein he is alleged to be controlled managed the affairs of M/s. Top Class Logistics Pvt. Ltd from which the loan of ₹ 25 Lakhs was obtained by the assessee in the month of December 2015. It is seen that the Statement of Mr. Agarwal was recorded in February 2015 by the DDIT (Inv), Kolkata and therefore there could not have been any admission on his part that he had provided accommodation entry to the assessee through M/s. Top Class Logistics Pvt. Ltd. From a perusal of the statement it is discernible that Mr. Akash Agarwal was resident of 4D/4E of ST Towers Kestopur, Kolkata and his office premises were at Room No. Ill, 1st Floor, 23B, Netaji Subhas Road, Kolkata. It is noted from a perusal of the assessment order that the AO has selectively extracted some of the Questions Answers from Mr. Agarwal s statement at Pages 15 16 and in his answers to DDIT s question he had admitted of earning commission from accommodation entries provided by him. However from a perusal of the statement it is relevant to note that nowhere in the selective extracted statement he had neither admitted of providing accommodation entries to the assessee nor he had admitted AO s cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nted inter-corporate deposits to the assessee. According to the AO, the notices u/s 131, were issued on 06.12.2018 requiring presence of the Parties before him on 14.12.2018. According to AO in response to notices u/s 131 of the Act compliances were made by two (2) Companies and the loans received from these two Companies were accepted by the AO. In respect of remaining eight (8) Companies, the AO drew adverse inference primarily because the notices u/s 131 remained un-complied with. According to AO, the failure of the loan creditors to appear before him and their failure to confirm the transactions were sufficient reason to hold that the amounts of ICDs received were not genuine assessable as income u/s 68 of the Act. According to AO the assessee was given more than twenty three (23) days this was sufficient opportunity for producing the relevant evidence. Since the assessee failed to produce the Parties for AO s verification, drew adverse inference against the assessee company.In this regard, Ld. A.R drew our attention to the assessment order from which it is noted that the assessment proceedings were initiated by issue of notice u/s 143(2) in the month of July 2017. Thereafter n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... even though during the relevant year, the assessee had made new borrowings of₹ 4.5 Crores; during the year itself the assessee had paid through proper banking channel sum of ₹ 250 Lacs along with interest. It was brought to our notice that repayment of ₹ 1 crore on 21.12.2016 was in the nature of contra-entry. According to Ld. A.R, in response to notice u/s 131 required information was submitted by M/s Sanwaria Marketing Pvt. Ltd through Registered Speed Post and therefore, it was unreasonable for the AO to claim that the assessee had failed to establish the genuineness of the transaction. Similarly, it is noted in respect of loan from M/s Dhanvridhi Suppliers Pvt. Ltd the entire loan of₹ 5 Crores was fully repaid along with interest during F.Y. 2015-16 itself. Similarly, the loan of ₹ 50 Lacs was fully repaid to M/s. Gonedawala Developers Pvt. Ltd along with interest. It was therefore according to Ld. A.R, the AO was un-justified to make the addition simply based on suspicion and conjecture. The Ld. A.R submits that if one scrutinizes the audited accounts of each of the loan creditor then it would be evident that each creditor possessed substantial re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 16.08.2018 had deleted the AO s additions on being satisfied that the assessee had established identity and creditworthiness of the said loan creditor, which action of Ld CIT(A) has received our imprimatur (supra). 123. However, it is noted that in the proceedings u/s 143(3) of the Act the assessee had placed before the AO documents to prima-facie discharge the onus of the nature source of the loan it took from the lender companies [i.e. fresh loans received during the year]. It is noted that all the loan creditors were regularly assessed to tax. The net owned funds of each loan creditor was several times more than the loans advanced by them to the assessee. The assessee had therefore discharged the primary onus to prove the identity of the shareholders, creditworthiness of the shareholders genuineness of the transactions as contemplated by Section 68 of the Act. In the circumstances the AO could not have arbitrarily and in a whimsical manner could not havedrawn adverse inference against eight (8) loan creditors. 124. It is noted that the AO has made sweeping and generalized imputations while justifying additionwhich is not borne out from the documents and evidences on recor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... losed interest income in their respective tax returns. The AO was neither able to controvert the documentary evidences filed by the assessee nor prove that the loan monies received were not genuine and that the loan creditors were non-creditworthy by carrying out the exercise as directed by the Hon ble High Court in the case of M/s Data Ware (supra). Therefore in the facts and circumstances the Ld CIT(A) rightly deleted the addition of ₹ 11,40,00,000/- and further, the disallowance of interest of ₹ 31,99,351/- was also unjustified, since the assessee had paid interest to each loan creditor after duly deducting taxes u/s 194A in respect of such interest and the loan creditors had disclosed interest income in their respective tax returns,thereforein the facts and circumstances the Ld CIT(A) rightly deleted the addition of ₹ 31,99,351/- and we confirm the same. The Revenue appeal on this issue fails. 126. In ground nos. (iii) (iv) the Revenue is aggrieved against the deletion of addition of ₹ 2,57,56,247/- made u/s 40a(i) on account of payment of sales commission. 127. The AO from perusal of the Tax audit Report found that the assessee has paid sales commission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usal, we also enclose sample copies of the letters of appointment in terms of which the foreign agents had rendered services to the assessee for procuring export orders. We also enclose herewith sample copies of the Tax Residency Certificates issued in favour of these Agents which prove that the Payees were foreign tax residents and not tax residents of India. It is material to submit that the AO has not brought on record any material whatsoever to prove that any part of the services were rendered by the Agents in India so as to attract tax liability in their hands in India. It is settled legal proposition that before provisions of Sec. 195 are invoked by AO he has to demonstrate that the amount paid to the Nonresident is legally chargeable to tax in India. If however the amount is held to be not chargeable to tax in India, then the assessee has no liability to deduct tax and consequently therefore no disallowance under 40(a)(i) is called for. In the present case the commission was paid to foreign agents solely for obtaining export orders from Parties located outside India. The services in connection with marketing of the Company's products and to secure orders were entirely pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ities towards marketing and sale support services were not chargeable to tax in India and in that view of the matter the assessee was right in, law in not deducting any tax thereon under sec. 195 of the Act. Accordingly, we hold that the impugned disallowance of ₹ 2,96,05,045/ - made by the AO as well as confirmed by the Ld. CIT (A) u/s 40(a)(i) of the Act is unsustainable. Accordingly, it is directed to be deleted. This ground of appeal of assessee is allowed. Similar issue was considered by the ITAT Kolkata in yet another case of M/s. Lux Industries Ltd in ITA No. 1144 1145/Kol/2018 dated 27.06.2018. In. this case alsothe assessee paid foreign export commission in respect of export of its hosiery products. In respect of export orders secured by the foreign agents outside India export sales commission @5% was paid on the value of export orders secured. The AO disallowed the export commission on the ground that no tax was deducted at source. The Jurisdictional ITAT relying on the decision of the Co-ordinate Bench at Ahmedabad in the case of DCIT Vs Welspun Corporation Ltd (I.T.A. No. 48/Ahd/2015) dated 31.03.2017 deleted the said disallowance. In the decided case of Ahmedabad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 of the I T Act 1951. The AO has failed to controvert this basic and was deleted. 22. It is submitted to your honours that the order of the Ld. CIT (A) was in conformity with the order of the Hon ble Kolkata Bench of the ITAT and therefore there is no mistake in the order of the Ld. CIT (A). The same should be confirmed. It is prayed that the ground no. (iii) (xiv) of the appeal of revenue be dismissed. 23. In view of the foregoing submissions it is prayed that the order of the Ld. CIT (A) be confirmed and the appeal of the Revenue be dismissed 129. We have heard both the parties and perused the records. We note that AO on perusal of the tax audit report found that the assessee has paid sales commission of ₹ 2,57,56,247/-; and further he noted that the assessee has not deducted TDS on the sales commission paid by it. Therefore, as per him, since the assessee has not deducted tax u/s 195 of the Act, he disallowed the said expense in terms of section 40(a)(i) of the Act. On appeal, the Ld. CIT(A) deleted the addition, by citing the decision of the Tribunal in JCIT vs. Omprocess Technology India Pvt. Ltd. (supra) as well as the Hon ble Delhi High Court decision in the case of C ..... X X X X Extracts X X X X X X X X Extracts X X X X
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