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TMI Blog2023 (3) TMI 904X X X X Extracts X X X X X X X X Extracts X X X X ..... ch material which would have irrefutably proved to the contrary. As regards the observation of the A.O that during the course of search proceeding the statutory records of the assessee company, viz. minutes of meeting register, shareholders register, counter foils of issued share certificates etc. were not found at the registered office of the assessee company, we find that the CIT(Appeal) had vacated the same on the ground that a perusal of the statements recorded u/s.132(4) of the Act, nowhere revealed that any official of the search team in the course of the said proceedings had visited the registered office of the assessee company. Nothing is discernible from the records before us which would reveal that the observations of the CIT(Appeals) are either perverse or contrary to the facts available on record. Also, the ld. D.R during the course of hearing of the appeal had failed to rebut the aforesaid observation of the CIT(Appeals). No infirmity in the view taken by the CIT(Appeals) as regards the genuineness and authenticity of the assessee s claim of receipt of share application money, therefore, uphold his order to the said extent. Thus, the Grounds of appeal No.1 2 raised by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee and hence corresponding unrecorded sale thereof. 4. On the facts and in the circumstances of the case the CIT(A) erred in overlooking the investigation of facts and evidences on record to establish suppression of production by the assessee. 5. The CIT (A) has erred in passing the appellate order wherein he has acted in a perverse manner while passing the order which has been made in haste without giving reasonable opportunity to the AO to give his submissions on the issues." On the other hand the assessee as a cross-objector has raised the following grounds:- "1. On the facts and in the circumstances of the case, the Learned A.O is not justified in preferring an appeal against the deletion of addition on account of addition to share capital/application when the matter is well covered by the decision of the jurisdictional High Court and jurisdictional Tribunal, particularly, when the addition was without any material/incriminating document. 2. On the facts and in the circumstances of the case, the Learned A.O is not justified in preferring an appeal against the deletion of addition on account of alleged suppression of production when the matter is well cov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngs the search officials had looked for documents in the form of statutory records of the assessee company, viz. minutes of meeting register, share holders register, counter foils of issued share-certificates etc. which were required to be maintained at the registered office of the assessee company, but neither of the said documents were found. Also, the persons who were present at the registered office premises of the assesssee company also could not provide satisfactory explanation as regards non-availability of the aforesaid documents/registers in their statements which was recorded on oath. Apart from that, it was observed by the A.O that the duly filled in share application forms which were supposed to be received from the share applicants a/w share application money were also found amiss at the registered office of the assessee company as well as its other premises. The A.O in order to verify the identity, creditworthiness and genuineness of the assessee's claim of having received share application money of Rs.9.40 crore from M/s. Calidora Traders Pvt. Ltd issued notice u/s. 133(6) dated 11.12.2013 to the aforesaid investor company, which, however, was returned unserved on 24 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it was duly discharged. However, the A.O was not inclined to accept the aforesaid explanation of the assessee. It was observed by the A.O that the aforesaid share applicant did not have its own profit-making apparatus and was not involved in any business activities but was merely involved in rotating of the money which was channelized through its banking accounts. The A.O, thus, was of the view that the bank accounts of the share applicant company did neither reveal its creditworthiness nor proved the genuineness of the transaction under consideration. Also the A.O was of the view that the investor company during the year under consideration was not in receipt of any dividend or interest income. Thus, the A.O by relying on a plethora of judicial pronouncements concluded that the assessee company had failed to establish the identity, creditworthiness and genuineness of the transaction of receipt of share application money from the aforesaid investor company. It was further observed by him that merely for the reason that payment was received through banking channels would not conclusively prove the genuineness of the transaction and creditworthiness of the share applicant. Also, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 719.110 59520.02 3026780 1.666 60.01 84.74 2010-11 7610.07 41312.930 42983.600 77831.978 4779000 1.811 55.23 111.18 Total 20143.62 127186.68 224976.24 1486430 The A.O holding a conviction that the quantitative production of sponge iron would be proportionate to the consumption of Iron Ore and coal, thus, inter alia, for the year under consideration worked out the month wise details, as under: Month Sponge Iron Production ( in MT) Iron Ore Consumption (in MT) Yield % April, 09 2342.880 3944.940 0.59 May, 09 1764.930 3122.590 0.57 June, 09 1878.500 3099.040 0.61 July, 09 2533.980 4142.010 0.61 August, 09 1888.370 3344.790 0.56 September,09 2159.490 3670.460 0.59 October, 09 2665.020 4517.290 0.59 November, 09 3480.140 5930.270 0.59 December, 09 3962.670 6581.470 0.60 January, 10 4299.520 7067.420 0.61 February, 10 4397.680 7043.780 0.62 March, 10 4345.930 7055.960 0.62 35,719.110 59,520.020 0.58 The A.O observing that no uniform co-relation between the iron ore consumption and sponge iron production could be gathered on the basis of the details as were complied for the period FY 2006-07 to FY 2010-1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the assessee company did not reveal the true and correct picture of its business affairs. Also, the A.O in order to support his aforesaid conviction that the assessee had suppressed its yield relied on the fact that in the course of search proceedings excess stock of Rs.6,28,24,704/- was found. Considering the aforesaid facts the A.O held the books of account of the assessee as unreliable, and concluded that the yield of sponge iron could safely be taken as per average yield of 60% that was prevalent in the iron order industry. Accordingly, the A.O by adopting the yield at 60% in the hands of the assessee, therein, worked out suppressed yield for the period i.e. FY 2006-07 to F.Y 2011-12, as under: FY Total production (MT) Total Iron Ore consumed (in MT) Yield (%) Production with yield of 60% (in MT) Difference in production in MT Average rate of sponge iron (in Rs.) Difference in production (in Rs.) 2006-07 7161.09 12552.44 57.05 7531.46 370.37 19493 7219622.41 2007-08 11905.71 24618 48.36 14770.8 2865.09 18757.228 53741146.38 2008-09 19211.22 34092.03 56.35 20155.22 1244 14861.93917 18488252.33 2010-11 42983.6 77831.98 55.23 46699.19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as not the case of the department that the search team had visited the registered office premises of the assessee company and had specifically queried about the statutory records which latter had failed to produce or had expressed its inability to produce, or had admitted of not having maintained the same. On the contrary, it was observed by the CIT(Appeals) that Ms. Jaswinder Kaur Mission in her statement recorded u/s.132(4) on 21.06.2011 had specifically shown the members register, share certificates and counter foils of the assessee company to the search officials. Accordingly, the CIT(Appeals) on the basis of his aforesaid observation vacated the adverse inferences that were drawn by the A.O that the assessee had failed to maintain the statutory records at its registered office. 8. Adverting to the amount of Rs. 9.40 crore that was claimed by the assessee company to have been received as share application money from M/s. Calidora Traders Pvt. Ltd., the assessee had filed with the CIT (Appeals) a copy of the assessment order that was passed in the case of the aforesaid share applicant, viz. M/s. Calidora Traders Pvt. Ltd. for A.Y.2006-07. It was observed by the CIT(Appeals) tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d party without placing on record any material proving to the contrary. 9. Rebutting the adverse inferences that were drawn by the A.O as regards the assessee's claim of having received genuine share application money from the aforesaid investor, for the reason that notice which was issued u/s.133(6) of the Act was returned back as unserved, it was observed by the CIT(Appeals) that as the A.O himself had referred to the reply which was subsequently filed by the aforesaid investor company, therefore, the aforesaid adverse inferences did not survive any more. It was further observed by the CIT(Appeals) that the A.O had not carried out any enquiry or investigation as regards the aforesaid claim of the assessee of having received share application money from the aforementioned party, and instead of bringing the same to a logical end had summarily rejected the assessee's claim and dubbed the entire amount as an unexplained cash credit u/s.68 of the Act. Relying on the judgments of the Hon'ble Supreme Court in the case of CIT Vs. Lovely Exports (P) Ltd. 216 CTR 195 (SC) and also the judgment of the Hon'ble High Court of Chhattisgarh in the case of ACIT Vs. Venkateshwar Ispat (P) Ltd, 31 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uthorized representatives of both the parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by them to drive home their respective contentions. 12. We have given a thoughtful consideration to the contentions advanced by the Ld. Authorized Representatives of both the parties in context of the aforesaid issue in hand, i.e., sustainability of the view taken by the CIT(Appeals) as regards the authenticity of the share application money of Rs.9.40 crore that was received by the assessee from M/s. Calidora Traders Pvt. Ltd. 13. As observed by us hereinabove, it is a matter of fact borne from record that the assessee company had claimed to have received an amount of Rs.9.40 crore as share application money from the aforesaid investor company, viz. M/s. Calidora Traders Pvt. Ltd. On being queried about the nature and source of the said credit appearing in its books of account, the assessee in order to substantiate the authenticity of its claim of having received the aforementioned amount as share application money from the aforementioned investor company, viz. M/s Ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enuine share application money from the investor company. On a perusal of the aforesaid observation of the A.O, it transpires that he instead of placing on record any clinching material which would have otherwise dislodged and disproved the assessee's claim of having raised genuine share application money from the aforesaid share applicant, viz. M/s. Calidora Traders Pvt. Ltd., had instead chosen to be guided by general observations for drawing of adverse inferences and summarily rejecting the same. We are afraid that the approach adopted by the A.O can by no means be accepted. In fact, we would have no hesitation to observe that the A.O except for harping on his generalized adverse inferences and heavily relying on certain excerpts of modus operandi that was in general adopted by accommodation entry providers to facilitate their nefarious activities of laundering the unaccounted money of certain companies, had however not uttered a single word as to on what basis the audited financial statements and the other documentary evidences which were filed by the assessee to substantiate the authenticity of the aforesaid claim of the assessee were being discarded by him. As observed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al which would have irrefutably proved to the contrary. 15. As regards the observation of the A.O that during the course of search proceeding the statutory records of the assessee company, viz. minutes of meeting register, shareholders register, counter foils of issued share certificates etc. were not found at the registered office of the assessee company, we find that the CIT(Appeal) had vacated the same on the ground that a perusal of the statements recorded u/s.132(4) of the Act, nowhere revealed that any official of the search team in the course of the said proceedings had visited the registered office of the assessee company. It was further observed by the CIT(Appeals) that the statement of the other persons belonging to the group companies also did not reveal that the assessee company had not maintained any statutory records/registers. It was also noticed by the CIT(Appeals) that the A.O had merely on the basis of an unsubstantiated allegation claimed that the aforesaid statutory records of the assessee company were not found in the course of the search proceedings at the registered office premises of the assessee company. Accordingly, the CIT(Appeals) was of the view that i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r by the A.O as regards the genuineness and authenticity of the assessee's claim of receipt of share application money of Rs.9.40 crore, therefore, uphold his order to the said extent. Thus, the Grounds of appeal No.1 & 2 raised by the revenue are dismissed in terms of our aforesaid observations. 18. We shall now deal with the addition of Rs. 1,84,88,252/- that was made by the A.O towards suppressed yield of sponge iron in the hands of the assessee company. As observed by us hereinabove, the A.O by adopting the average yield of sponge iron of 60% as a yardstick had made an addition of Rs. 1,84,88,252/- (supra) in the hands of the assessee company. On appeal, the CIT(Appeals) observed that not only there was any basis for adoption of the yield @60% as a yardstick by the A.O, but even otherwise there was no uniformity in the yield of sponge iron amongst similarly placed players in the industry. Apart from that, it was observed by him that the yield of the assessee company was better than the average yield prevailing in the iron ore industry. 19. Interestingly, we find that though the A.O vide his order passed u/s.153A r.w.s 143(3), dated 27.03.2014 had for the year under considerat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... survive. We may herein observe that not only both the lower authorities had failed to take cognizance of the aforesaid serious infirmity and had allowed it to perpetuate as such, but what is incomprehensible and rather strange is that even in the course of the proceedings before us neither the Ld. Authorized Representative for the assessee nor the Ld. Departmental Representative had pointed out the same to us. Be that as it may, as the grievance of the revenue is based on misconceived facts which clearly militates against the facts discernible from the assessment order, which reveals that the yield of sponge iron of the assessee company during the year under consideration i.e A.Y 2010-11 was 60.02% i.e better than the yardstick of 60% that was adopted by the A.O. therefore, the very basis of the grievance of the revenue does not survive. Accordingly, the Ground of appeal No.3 raised by the revenue being not maintainable is accordingly dismissed. 21. Ground of appeal No.5 being general in nature is dismissed as not pressed. 22. In the result, appeal of the revenue in ITA No.266/RPR/2014 for the A.Y.2010-11 being devoid and bereft of any merit is dismissed in terms of our aforesaid ..... X X X X Extracts X X X X X X X X Extracts X X X X
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