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TMI Blog2024 (7) TMI 495X X X X Extracts X X X X X X X X Extracts X X X X ..... tion purposes for initiating the assessment machinery into motion that transactions conducted through the companies managed by him are not free from doubt. AO has not accepted this stand of assessee submitting with the help of procedural evidence i.e. PAN card, registration certificate of the share applicant company and bank details. The enquiry of the AO is to demonstrate as to how a newly incorporated company can command a premium of Rs. 390/- per share. In order to dispel this belief of the AO, assessee was required to submit details of its assets and future business prospective but the assessee failed to do so. It is also observed that assessee did not produce the share applicant company s directors because from them it could be unearthed as to how they decided to make investment in the assessee company. Therefore, both the authorities have examined the issue with an analytical mind and recorded a specific finding that this investment in the assessee company is a bogus one and it deserves to be considered as unexplained cash credit u/s 68 of the Act. Accordingly, appeal of the assessee is dismissed. - SRI RAJPAL YADAV, VICE PRESIDENT DR. MANISH BORAD, ACCOUNTANT MEMBER For th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to Rs. 35,00,000/- during the AY 2011-12 from M/s. Matrix Systel Pvt. Ltd. (8,750 shares of Rs. 10/- per share with share premium of Rs. 390/- each totalling to Rs. 35,00,000/- ). Claim of receipt of share application money is nothing but a colourable device which has been made only for the purpose of making accommodation entry into their books. Moreover, in spite of sufficient opportunities, the assessee company failed to discharge its onus to prove the genuineness of the transactions and creditworthiness of the transacting party. In the instant case a search and seizure action u/s. 132 of the I.T. Act, 1961 was carried out in the case of Varaha Infra Group of Jodhpur on 21.01.2015. Main allegation against the company was that it has rotated its unaccounted money in form of share premium through various paper companies based at Kolkata, Mumbai, Indore and Jodhpur. Main bogus entry provider in this case was Jagdish Prasad Purohit and his associates based at Kolkata and Mumbai. His residence along with residences of his associates namely, Eknath Mandavkar, Raj Kumar Kanodia, and family members Sushil Kumar Purohit, Anil Kumar Purohit and Kailash Prasad Purohit were covered u/s. 132. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the bank account of the assessee it is also found that the identical amount of Rs. 35,00,000/- was transferred out on 24.05.2018 vide cheque No. 078051 to M/s. Utkarsh Goods Pvt. Ltd. From the above facts, it is established that the money is being rotated through the paper companies without any business logic and rationale. Though the assessee tried to establish the fact that the money had been received as share application, it is nothing but colourable device to plough back its own income into the books of accounts. 11. The A/R of the assessee has relied upon various case laws. However, as the investor company s directors were not presented by the assessee for verification of the transaction with them, the case law cited are distinguishable from the facts of the case of the assessee. 12. In view of the above discussion, it is established that the transaction was done by the assessee with the intention of giving colour in the guise of receipt of share application money with premium. In view of the above, the said sum of Rs. 35,00,000/- is added to the total income of the assessee company treating the same as unexplained cash credit u/s.68 of the I.T. Act, 1961. I am satisfied that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... basis of circumstantial evidences. The circumstances serving this transaction pointed towards collusion between the appellant and Mr. Jagdish Prasad Purohit. Therefore, on the facts and circumstances of the case, the AO was correct in holding that Rs. 35 lakhs was unaccounted money being plough back in the books of accounts of the appellant through colourable device involving multiple layers. This account of appeal is therefore dismissed. 5. Since no one has come present on behalf of the assessee, therefore, with the assistance of ld. D/R, we have gone through the record and on perusal of the record we find that before the ld. first appellate authority assessee has filed statement of facts which are running into 18 pages and very elaborate. Therefore, we deem it proper to take note of these submissions of the assessee filed before ld. CIT(A) as statement of facts which read as under: The appellant filed its original return of income by E-filing on 11/01/2012 declaring total income at Rs. 1,031/-. Subsequently, the case was re-opened u/s 147 of the I.T. Act on 28/03/2018 on the basis of search operation carried out in an unknown group named Varah Infra located in Jodhpur, wherein so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k Statements along with details in respect of unsecured loans by providing the confirmation of loan, copy of bank statement and copy of ITR s of the subscribers during the course of assessment proceedings. Therefore, the appellant did not fail to produce clinching evidence in this respect. Moreover, the Assessing Officer had relied upon the information from the DDIT(Inv)-II, Jodhpur, that the assessee company has failed to explain the source of this amount and also failed to prove the genuineness- and credit worthiness of the persons from whom such sum was received, However all the details comprising copy of return along with audited accounts and financial statement, statement of the Bank accounts for the entire year, share allotment advice and most importantly their impeccable sources of fund advanced on account of share application to the appellant were submitted during the course of assessment proceedings. On this issue, we like to refer to the ratio laid down by the ITAT MUMBAI in the case of ITO vs Shreedham Construction Pvt. Ltd. as on 14th November 2017. It was held that In the case of credit as share capital by corporate entity, whose existence is shown by its registration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the same has been shifted to the Assessing Officer who grievously failed to discharge the same. The opinion of the Assessing Officer must be justified by the test of reason and not reached anyhow with a preconceived mindset. Since the evidence relating to the identity, creditworthiness and genuineness of the transactions were borne on record, there was no requirement of the directors of the appellant to be personally present before the Assessing Officer. It is also submitted before your Honour that the futile consideration of the Assessing Officer that information received from the DDIT (Inv.)-II, Jodhpur in regard to the genuineness creditworthiness of the transactions were not proved is also a fallacy in the extreme. Therefore, to allege that the genuinely of share application money and unsecured loan transaction could not be proved in the teeth of the sacrosanct evidence adduced on record is preposterous. It is an abundant commentary in the manner of approval of evidence that as long as the details asked for are provided, some vague information based on the statement of an unknown third party cannot form the basis or detract from the validity or sufficiency thereof. Inspite of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not be shifted to the assessee. The onus is on the revenue to ensure his presence Therefore, the impugned addition was made with an arbitrary mindset which was not only misconceived but also outside the scope of and ambit of the provision of section 68 of the LT. Act 1961 and the Assessing Officer acted in total disregard of the evidence indulging in whims and fancies of conceiving specious violation thereof which is not in consonance with and therefore untenable in law. Further, the Hon ble Jurisdictional High Court in the case of CIT -Vs- Dataware Pvt. Ltd. in ITAT No. 263 of 2011 dated 21/09/2011 states while examining the issue of addition of share applications money received by the assessee u/s.68 of the I.T. Act, 1961 the Hon ble Jurisdictional High Court held that after getting the P.A. No. and getting the information that the creditor is assessed under the Act, the Assessing Officer should enquire from the Assessing. Officer of the creditor as to the genuineness of the transactions 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 c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e taxes have to be levied and collected pronounced by ITAT MUMBAI . It is clear that to ignore the documents produced by the assessee on the aforesaid aspects, the assessing officer has chosen to decide the issue on surmises and conjectures. There has to be some cogent reasons and materials for the Assessing Officer and he cannot go into the realm of suspicion as had been made in the appellant s case. In an identical circumstance, ITAT DELHI gave a judgement in case of Prabhatam Investment Pvt. Ltd. vs ACIT on 17th April 2017, stating its view on many issues such as The A.O. cannot ignore the documentation produced by the assessee to show that the investors are genuine. As per section 132(4) statement cannot be relied upon if the assessee is not given right of cross-examination. Further, fact that the shareholders did not respond to sec 133(6) notice does not warrant an adverse inference. Fact that the shareholders have low income does not warrant an adverse inference and the assessee is not required to prove the source of revenue It was the primary onus of the appellant to establish the identity as well as creditworthiness of the investors to invest money and genuineness of transa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt held in the case of CIT vs Green Infra Limited as on 16th January 2017, specifying that, Even if the premium at which the share are issued defies commercial prudence, the receipt cannot be assessed as UNEXPLAINED CREDIT if the identity of the prayer, genuineness of the transaction and capacity of the subscriber are not disputed. (iv) Hon ble ITAT, Mumbai Bench held in the case of Kashuka Trading Services Pvt. Ltd. -Vs- I.T.O. in ITA No. 1145/Mum 106 wherein it is held that mere non-compliance of Summons and notice, it cannot be held that the assessee has failed to discharge his burden. (v) Hon'ble Supreme Court Judgment in the case of CIT -Vs- Orissa Corporation 159 ITR 78(SC) wherein it is held that in case the creditor does not appear in response to summons issued u/s. 131, no adverse inference can be drawn. (vi) Hon ble Delhi High Court in the case of CIT -Vs- Pradeep Gupta 207 CTR 115 which has also been relied upon by the Delhi ITAT in recent judgment in the case of Babita Gupta in ITA No. 2897/06 wherein it is held that in the facts of the case it may be seen that the Assessing Officer had shifted entire burden upon the assessee and no material was brought by him to pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... received from them by the assessee represented the undisclosed income of the assessee vide Sencorp India Ltd. -Vs- Asstt. CIT (1993) 44 ITD 652 (Cal-Trib). (xiii)Where all the transactions are entered into between parties through Account Payee cheques, the question of identity of creditor becomes irrelevant as held in Addl. CIT -Ks- Bahri Brothers (P) Ltd. (1985) 154ITR 244 (Pat). Sir, the Assessing Officer had neglected all the norms of accounting system as well as Income Tax Act. Moreover, there are also some duties of the Assessing Officer. An assessment completed on mere conjectures, surmises and suspicions is invalid and unsustainable in law. The Assessing Officer has to conduct proceedings without bias. He has to conduct himself in accordance with rules of justice, equity and good consence. Further, the Assessing Officer should proceed independently and conduct the case himself so he is acting in a quasi-judicial authority. That is the essence of our judicial system as decided in plethora of case laws including Umacharan Shaw and Bros. -Vs- CIT (1959) 37 ITR 271 (SC), Dhakeswari Cotton Mills Ltd. -Vs- CIT (1954) 26 ITR 775 (SC) etc. Also the taxing authorities exercise quasi- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding by all rules and regulations of the trade. Sir, in this regard, we would like to submit before your honour that we have sold the shares to the applicant after receiving the payments through Banking Channel. Moreover, we would like to submit before your honour that being newly established company in the market, we could not make profit as per our expectation. But as projection was there in the market that we are going to join hands with big business giants, share subscriber became ready to pay premium. Sir, in regard to investor company s directors personal appearance before the Assessing Officer, we reiterate that the Assessing Officer is empowered by the Act to ensure the presence of the Directors of the share subscriber company which cannot be attributed to your appellant. In this regard, we have submitted judicial pronouncements before your honour in favour of the assessee in the foregoing paragraphs. Also we like to submit a very recently pronounced judicial decision of the Hon ble Income Tax Appellate Tribunal A Bench, Kolkata dated 6th February, 2023 wherein their Lordship had decided, We, therefore, respectfully following the judgment referred hereinabove by the Hon ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o delete. Sir, another issue we like to inform you that once the statement of fact was submitted before Ld. CIT(A), NFAC on 09/03/2021 photocopy of receipt of submission is enclosed herewith for your ready reference. Now, this statement of fact is being submitted before your honour after some modifications which may kindly be accepted. And for this act of kindness, your appellant as in duty bound shall ever pray. 6. On due consideration of the above material, we find that in the written submission case of the assessee is that it has demonstrated the existence of the share applicant company by producing the registration details of that company with the Registrar of Companies. It has demonstrated that share application money was taken through account payee cheque and identity of the applicant company is not in doubt. 7. It is also the contention of the assessee before the ld. CIT(A) that non-appearance of the director should not be considered as sufficient for rejecting the claim of the assessee which is otherwise supported with necessary documentary evidences, namely existence of the share applicant company, amount received through account payee cheque and duly recognized in the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X
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