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TMI Blog2024 (2) TMI 455X X X X Extracts X X X X X X X X Extracts X X X X ..... : The appellant reserves the right to add, amend, alter and delete the ground(s) of appeal at the time of hearing the appeal. III. RELIEF SOUGHT That above mentioned addition amounting to Rs. 1,26,09,000/- made by the Ld. AO and sustained by the CIT(A)-II is uncalled for, against the natural justice may kindly be deleted." 2. On the other hand, the revenue has assailed the impugned order on the following grounds of appeal: "1. Whether on points of law and on facts & circumstances of the case, the Ld. CIT(A) was justified in deleting the addition of Rs. 10,03,14,000/- out of total addition of Rs. 11,19,23,000/- made by the AO u/s. 68 of the Act?" 2. Whether on points of law and on facts & circumstances of the case, the Ld. CIT(A) was justified in deleting the addition of Rs. 10,03,14,000/- by ignoring the facts as brought on record by the AO that the assessee company failed to prove the identity, genuineness and creditworthiness of the investor company as per the parameters of the legal provisions u/s. 68 of the Act?" 3. "Whether on points of law and on facts & circumstances of the case, the Ld. CIT(A) was justified in deleting the addition, thereby not considering and n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the revenue, thereby giving a finding against the ratio of the settled law of the Hon'ble Bombay High Court in the case of Sanjay Bimalchand Jain, Nagpur (I.T.A. No. 18/2017 dated 10.04.2017, Bombay High Court. Nagpur Bench) wherein it is stated that since there is no economic or financial justification for the investment in the shares, the transaction has all the ingredients of attracting the rigors of Section 68 of the IT Act ?" 8 Whether on points of law and on points of facts & circumstances of the case, the Ld.CIT(A) having concurrent powers of the AO u/s. 250(4) of the Act, was justified in deleting the addition of Rs. Rs. 10,03,14,000/- made by the AO in the absence of satisfaction of parameters prescribed u/s. 68 of the Act?" 9. 'Whether on points of law and on facts & circumstances of the case, the Ld. CIT(A) was justified by giving a finding which is contrary to the evidence on record, as the Ld. CIT(A) has accepted the identity, creditworthiness of the entities investing in the share capital and share premiums of the assessee company as genuine. a finding which is factually incorrect, thereby rendering the decision, which is perverse'?" 10. Whether on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... forementioned persons. As per the notice issued u/s. 142(1) of the Act dated 20.03.2015, the A.O directed the assessee company to place on record evidences as regards the genuineness of the transactions a/w. creditworthiness of two share applicant companies, viz. (i) M/s. Arcade Dealcom Pvt. Ltd.; and (ii) M/s. Hector Dealers Pvt. Ltd. Also, the A.O directed the assessee company to produce all the aforementioned share applicants/shareholders for examination before him. In compliance, Shri Ashish Jaiswal, director of the assessee company appeared before the A.O who recorded his statement on oath. As is discernible from the records, Shri Ashish Jaiswal, i.e. director of the assessee company was also a director of the aforesaid three share applicant companies, viz. (i) Raja Kaimoor Buildcon Pvt. Ltd.; (ii) M/s. Arcade Dealcom Pvt. Ltd. and (iii) M/s. Hector Dealers Pvt. Ltd. Shri Ashish Jaiswal in his statement recorded by the A.O had categorically brought to his notice that he was director of all the aforementioned three share applicant companies for last 4-5 years. On being queried about the registered office address of the aforementioned three share applicant companies, viz. (i) Ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... furnished the said requisite details which for the sake of clarity is being culled out as under: Also, on being queried as to when the aforementioned share applicant companies were incorporated, Shri Ashish Jaiswal in reply to Question No.10, had furnished the respective dates of incorporation of the aforementioned companies, as under: 5. At this stage, we may herein observe that Shri Ashish Jaiswal who had made an investment of Rs. 3.50 lacs towards share application money with the assessee company, had in his reply to Question No.2 of his statement categorically confirmed the said transaction. Also, we find that he had divulged his income tax credentials a/w. the respective source of income in his statement recorded by the A.O. The assessee company in its attempt to substantiate the authenticity of its claim of having received genuine shares application money from the one share applicant , viz. Shri Ramesh Bind, had filed before the A.O the copy of the said investors return of income for the year under consideration wherein income of Rs. 1.78 lacs was returned by him. However, the A.O observed that the assessee company had failed to place on record the copy of the capital acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act. At the same time, the CIT(Appeals) was of the view that as the assessee company had failed to substantiate the authenticity of its claim of having received genuine share application money from two share applicants, viz. S/shri Ramesh Bind and Dallu Nisad, thus, upheld the to the said extent. Accordingly, the CIT(Appeals) partly allowed the appeal of the assessee company. For the sake of clarity, the relevant observations of the CIT(Appeals) are culled out as under: "2.3 I have gone through the submission of the assessee and perused the assessment order. As per the above facts, the assessee has received share .application money from 3 companies and 3 individuals during the year. The three companies are group companies belonging to the same group as the assessee and the three individuals are also acquaintances. One of the individual investor is director of the assessee company. The AO has issued notice u/s. 133(6) in order to verify the share capital. The notices to two companies were returned unserved. When assessee's AR was confronted with this fact the director Shri Ashish Jaiswal appeared before the AO: Statement of the Director Shri Ashish Jaiswal was recorded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -11 vide order dated 3.12.2018 and for AY 2014-15 vide order dated 25.11.2016. No addition has been made and share capital of M/s Hector Dealers has been accepted as genuine by its assessing officer. As per the balance sheet, the company has capital and R&S of Rs 24.60 cr. out which the money has been advanced to the assessee. The company has also explained the source of money which was as received from repayment of money given to 25 companies the list of which has been furnished. On going through the balance sheets and bank statement of °M/s Arcade Dealcom, this company has shown total receipt of Rs 10,71,697/- in AY 2011-12, Rs. 1,61,34,358/- in AY 2012-13 and Rs 76,25,000/- in AY 2013-14. It has total asset and liabilities of Rs 15.25 cr. on YE 3/2012 which included share capital, and R&S of Rs 15.24 cr. Thus the company had sufficient own fund to advance to the assessee as share capital. The assessment of this company was completed under scrutiny for AY 2014-15 vide order dated 7.12.2016 and for AY 11-12 u/s 147/143(3) vide order dated 12.10.2018. No adverse comment has been made by the AO. Source of the money has been explained as received from M/s. Brotex Rs 38,00,000/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee company. The matter travelled upto the High court. The honourable Delhi HC held that - .. though initial burden is upon the assessee, once he proves the identity of credits/share applications by either furnishing permanent account numbers or copies of bank accounts and shows the genuineness of the transaction by 'showing money in the banks is by account payee cheques or by draft, etc., then the onus to prove the same would shift to the Revenue. Question which assumes importance at this stage is to what the Revenue is supposed to do to dislodge the initial burden discharged by the assessee and to throw the ball again in the assessee's court demanding the assessee to give some more proofs, as the documents produced earlier by the assessee either become suspect or are rendered insufficient in view of the material produced by the Department rebutting the assessee's documentary evidence. When registered letters addressed to companies returned undelivered AO presumed that these companies did not exist at the given address But, it has to be conclusively established that the company is non- existence AO did not bother to find out from the office of the Registrar of Compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... action by showing money in the banks is by account payee cheques or by draft, etc., then the onus to prove the same would shift to the Revenue. The question which assumes importance at this stage is to what the Revenue is supposed to do to dislodge the initial burden discharged by the assessee and to throw the ball again in the assessee's court demanding the assessee to give some more proofs, as the documents produced earlier by the assessee either become suspect or are rendered insufficient in view of the material produced by the Department rebutting the assessee's documentary evidence. It is not in doubt that the assessee had given the particulars of registration of the investing/applicant companies; confirmation from the share applicants; bank accounts details; shown payment through account payee cheques, etc. With these documents, it can be said that the assessee has discharged its initial onus. ...... Something more which was necessary and required to be done by the AO was not done. The AO failed to carry his suspicion to logical conclusion by further investigation. After the registered letters sent to the investing company had been received back undelivered, the AO pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sole purpose of landing entries. But, it is unfortunate that all this exercise is going in vain as few more steps which should have been taken by the Revenue in order to find out causal connection between the cash deposited in the bank accounts of the applicant companies and the assessee were not taken. It is necessary to link the assessee with the source when that link is missing, it is difficult to fasten the assessee with such a liability. A delicate balance has to be maintained while walking on the tight rope of ss. 68 and 69. On the one hand, no doubt, such kind of dubious practices are rampant, on the other hand, merely because there is an acknowledgement of such practices would not mean that in any of such cases coming before the Court, the Court has to presume that the assessee in question has indulged in that practice. To make the assessee responsible, there has to be proper evidence. It is equally important that an innocent person cannot be fastened with liability without cogent evidence. One has to see the matter from the point of view of such companies (like the assessees herein) who invite the share application money from different sources or even public at large. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to make such an order. In IT Appeal No. 726 of 2011, the entire case of the Revenue is based on the plea that as per the report, the investing companies were not found at the given addresses and on this basis, argument is raised that the companies are non-existing and the transactions were bogus and not genuine. Here, the case of the Revenue is even weaker than the cases discussed above. It is not even the case that the Directorate of IT (Inv.) has found MG in such racket of floating bogus companies. After the assessee had furnished the evidence, initial onus had been discharged and it was for the AO to make further necessary inquiries which are completely missing. No question of law much less substantial question of law arises. In IT Appeal no. 613 of 2011, there is nothing wrong in the approach of the Tribunal in remitting the case back to the AO. Conclusion Once adequate evidence/material is given, which would prima facie discharge the burden of the assessee in proving the identity of shareholders, genuineness of the transaction and creditworthiness of the shareholders, thereafter in case such evidence is to be discarded or it is proved that it has "created" evidence, the Reve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de u/s. 68 of the Act, are unsustainable on facts and in law as held by the ITAT Kolkata Bench 'IV in ITA No.1494/Kolkata/2017 dated. 5.4.2019 in M/s. Baba Bhootnath Trade & Commerce Ltd. vs. ITO, Ward -9(2) Kolkata It is not that the AO has proved that the impugned sums have been flown from the assessee's coffers. Exchange of cash between the assessee and the impugned share applicants was also not proved. Initial onus was discharged by the assessee company. As already stated, the companies mentioned above are regularly being assessed to tax and their assessment particulars were furnished. They explained the source of source for making the impugned investment. The entire investment was received through banking channels by way of account payee cheques. The share applicant companies furnished all the required details and confirmed the impugned transactions and explained the source of the source. Shares were also allotted as per information submitted to the ROC and also stood reflected in their respective IT records. In its recent decision in M/s. Baba Bhootnath Trade & Commerce Ltd. vs. ITO, Ward -9(2) Kolkata - distinguishing the decision of the Supreme Court in Pr.CIT v. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Arcade Dealcom Pvt Ltd, Hector Dealers Pvt Ltd, Raja Kaimur Build con Pvt Ltd , and Shri Ashish Jaiswal is hereby deleted. The addition of share capital from Shri Ramesh Bind and Shri Dallu Nishad is hereby sustained. 3.0 Appeal is partly allowed." 8. Both, the assessee company and the revenue being aggrieved with the order of the CIT(Appeals) has carried the matter in appeal before us. 9. We shall first deal with the grievance of the department which has assailed the order of the CIT(Appeals) to the extent he had vacated the addition made by the A.O u/s. 68 of the Act. As additions which had been vacated by the CIT(Appeals) pertains to four parties, therefore, we shall deal with the same in a chronological manner as under: A. Shri Ashish Jaiswal : Rs. 3,50,000/- 10. As is discernible from the assessment order, it transpires that Shri Ashish Jaiswal in compliance to the notice issued by the A.O appeared before him who recorded his statement on oath on 20.03.2015. On a perusal of the statement of Shri Ashish Jaiswal, we find that he had after duly identifying himself on the basis of documentary evidence had filed his complete income tax credentials, i.e. PAN, copy of ITR and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the business of share trading and had a turnover of Rs. 1,54,92,100/- during the year under consideration. Apart from that, Shri Ashish Jaiswal (supra) on being queried by the A.O had provided the details of bank account of the aforementioned investor company, i.e. current account No.301501010995706 with the Union Bank of India, Branch : Kolkata. Also, in reply to the query raised by the A.O about the number of employees a/w. their salary that was inter alia, paid to them by the aforementioned investor company, viz. M/s. Arcade Dealcom Pvt. Ltd., Shri Ashish Jaiswal had in his statement stated before the A.O that the aforementioned company had total four employees whose salary amounted to Rs. 3,40,000/-. Shri Ashish Jaiswal in reply to query raised by the A.O about the details of directors, and date of incorporation of the aforementioned investor company had furnished with him the requisite details. It was stated by him that the aforementioned investor company had three directors, viz. Shri Ashish Jaiswal, Shri Rajdulare Jaiswal and Shri Premnath Gupta, all of whom were residents of Raipur. It was further brought to the notice of the A.O that the aforementioned company was incor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f its own funds in the garb of the aforesaid transaction. 15. Considering the fact that the assessee company had on the basis of supporting documentary evidence duly substantiated the identity and creditworthiness of the aforementioned investor company, viz. M/s. Arcade Dealcom Pvt. Ltd. and also genuineness of the transaction of receipt of share application money by the assessee company, which as observed by us hereinabove, had not been disproved/dislodged by the department either in the course of the proceedings before the lower authorities or by placing on record any such material even in the course of the proceedings before us, therefore, we find no infirmity in the view taken by the CIT(Appeals) who had to the said extent rightly vacated the addition made by the A.O u/s. 68 of the Act. C. Hector Dealers Pvt. Ltd. : Rs. 6,79,00,000/- 16. As observed by us hereinabove, the A.O while recording statement of Shri Ashish Jaiswal (supra) on 20.03.2015 had categorically observed that he was, inter alia, a director of M/s. Hector Dealers Pvt. Ltd. On a perusal of the statement of Shri Ashish Jaiswal (supra), we find that he had provided to the A.O the complete registered office add ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... received by the aforementioned investor company, viz. M/s. Hector Dealers Pvt. Ltd. was factually incorrect. Interestingly, the A.O had failed to place on record any material which would dislodge the identity and creditworthiness of the aforementioned investor company as well as genuineness of the transaction of receipt of share application money by the assessee company from the aforementioned investor company. In fact, the A.O had merely hushed through the matter and without dislodging the authenticity of the assessee's claim of having received genuine share application money from the aforementioned share applicant company had dubbed the same as an unexplained cash credit u/s. 68 of the Act. 18. As is discernible from the record, the assessee company had filed before the A.O confirmation of the aforesaid investor company, PAN, copy of return of income a/w. computation of income, financial statements a/w. audit report, copy of articles of association, copy of share application forms and copy of bank account from which investment towards share application money was made with the assessee company, Page 245 to 310 of APB. On a perusal of the bank statement of the aforementioned inve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on had a turnover of Rs. 3,06,35,000/-. Apart from that, Shri Ashish Jaiswal (supra) on being queried by the A.O had provided the details of bank accounts of the aforementioned investor company, i.e. current account No.0399002100076210 with the PNB, Branch : Kolkata. Also, in reply to the query raised by the A.O about the number of employees a/w. their salary that was inter alia, paid by the aforementioned investor company, viz. Raja Kaimoor Buildcon Pvt. Ltd., Shri Ashish Jaiswal had in his statement stated before the A.O that the aforementioned investor company had total four employees whose salary amounted to Rs. 3,60,000/-. Shri Ashish Jaiswal in reply to query raised by the A.O about the details of directors, and date of incorporation of the aforementioned investor company had furnished the requisite details. It was stated by him that the aforementioned investor company had three directors, viz. Shri Ashish Jaiswal, Shri Rajdulare Jaiswal and Shri Premnath Gupta, all of whom were residents of Raipur. It was further brought to the notice of the A.O that the aforementioned company was incorporated on 31.01.2008. At this stage, we may herein observe that, on a specific query by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... share application money by the assessee company, which as observed by us hereinabove, had not been disproved/dislodged by the department either in the course of the proceedings before the lower authorities or by placing on record any such material even in the course of the proceedings before us, therefore, we find no infirmity in the view taken by the CIT(Appeals) who had rightly vacated the addition to the said extent u/s. 68 of the Act. 24. Based on our aforesaid observations, we are of the view that now when the assessee company had duly discharged the primary onus that was cast upon it as regards proving the identity and creditworthiness of the aforesaid share applicants and genuineness of the respective transactions of receipt of share application money from the said persons on the basis of supporting documentary evidence, which we are afraid, had not been dislodged/disproved by the A.O till date, therefore, there was no justification on his part to have rejected the same and dubbed the amount so received from the said persons as unexplained cash credits u/s. 68 of the Act. 25. As is discernible from the assessment order, it is a matter of fact that the A.O had grossly faile ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bt, such kind of dubious practices are rampant, on the other hand, merely because there is an acknowledgement of such practices would not mean that in any of such cases coming before the Court, the Court has to presume that the assessee in questions as indulged in that practice. To make the assessee responsible, there has to be proper evidence. It is equally important that an innocent person cannot be fastened with liability without cogent evidence. One has to see the matter from the point of view of such companies (like the assessees herein) who invite the share application money from different sources or even public at large. It would be asking for a moon if such companies are asked to find out from each and every share applicant/subscribers to first satisfy the assessee companies about the source of their funds before investing. It is for this reason the balance is struck by catena of judgments in laying down that the Department is not remediless and is free to proceed to reopen the individual assessment of such alleged bogus shareholders in accordance with the law. That was precisely the observation of the Supreme Court in Lovely Export (supra) which holds the fields and is bin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Revenue understood the limitation of their case. For this reason, a fervent plea was made that this case be remitted back to the AOs to enable him to make further investigation. 21. However, in the facts and circumstances of these cases, it would be difficult to give such an opportunity to the Revenue. There are number of reasons for denying this course of action which are mentioned below: (i) It is not a case where some procedural defect or irregularity had crept in the order of the AO. Had that been the situation, and the additions made by the AO were deleted because of such infirmity, viz., violation of principle of natural justice, the Court could have given a chance to the AO to proceed afresh curing such procedural irregularity. One example of such a case would be when statement of a witness is relied upon, but opportunity to cross-examine is not afforded to the assessee. (ii) On the contrary, it is a case where the AO(s) did not collect the required evidence which they were supposed to do. To put it otherwise, once the assessee had discharged their onus and the burden shifted on the AO(s), they could not come out with any cogent evidence to make the additions. No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e High Court in the case Commissioner of Income Tax Vs. Kamdhenu Steel and Alloys Ltd. (supra), for this negligence on the part of the A.O, he could not be provided with "fresh innings". We, thus, in terms of our aforesaid observation finding no infirmity in the view taken by the CIT(Appeals) to the extent he had vacated the aforementioned additions made by the A.O by treating the money received from the said persons as unexplained cash credits u/s. 68 of the Act, and uphold the same. 28. In the result, the appeal filed by the revenue in ITA No.11/RPR/2021 for A.Y.2012-13 is dismissed in terms of our aforesaid observations. ITA No. 99/RPR/2020 A.Y. 2012-13 29. We shall now deal with the appeal filed by the assessee company in ITA No.99/RPR/2020 for A.Y.2012-13, wherein the assessee is aggrieved with the order passed by the CIT(Appeals) as regards sustainability of the addition with respect to two share applicants, viz. (i) Shri Ramesh Bind : Rs. 18,00,000/- and (ii) Shri Dalla Nisad : Rs. 1,08,09,000/-. A. Shri Ramesh Bind : Rs. 18,00,000/- 30. The Ld. AR, in order to substantiate his contention that the assessee had in the course of the assessment proceedings discharged the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ein observe that though Shri Ramesh Bind (supra) had filed an "affidavit" wherein he had accepted the fact of having made an investment of Rs. 18 lacs with the assessee company, but despite specific direction by the A.O, the aforesaid company had failed to produce him for necessary examination in the course of the assessment proceedings before the A.O. 32. Considering the totality of the aforesaid facts, we are unable to find any infirmity in the view taken by the lower authorities who had rightly held the amount of Rs. 18 lacs received by the assessee company from the aforementioned person as an unexplained cash credit u/s. 68 of the Act. B. Shri Dallu Nisad : Rs. 1,08,09,000/- 33. The assessee company in order to substantiate its claim of having received genuine share application money from the aforementioned person, viz. Shri Dallu Nisad had filed before the lower authorities certain documentary evidences in support thereof, Page 100 to 114 of APB., viz, copy of confirmation, copy of PAN, copy of bank account (from which investment was sourced), copy of affidavit and copies of share application forms. 34. Before proceeding any further, we may herein observe that the letter ..... X X X X Extracts X X X X X X X X Extracts X X X X
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