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TMI Blog2018 (3) TMI 1189X X X X Extracts X X X X X X X X Extracts X X X X ..... deleting the addition of Rs. 22,92,00,000/- made by AO on account of unexplained cash credit u/s 68 of the IT Act, 1961 from Kolkata based companies. 3. That the Ld. CIT(A) has erred in ignoring the facts as the assessee company failed to discharge the onus u/s 68 of the I.T. Act 1961 to prove the identity, creditworthiness and genuineness of the transactions made by the Investors. 4. The Ld. Commissioner of Income Tax (Appeal) has erred in law and on the facts in ignoring the fact that companies which have provided unsecured loans don‟t have the capacity/creditworthiness to grant such loans as evident from their bank statement and P/L account & Return of Income. 5. The Ld. Commissioner of Income Tax (Appeal) has erred in law and on the facts in deleting the addition of Rs. 10,05,974/^ made on account of interest paid without appreciating the fact that the loans on which such interest paid are bogus. 6. The Ld. Commissioner of Income Tax (Appeal) has erred in law and on the facts in deleting the addition of Rs. 15, 50, 00,000/- made by AO on account of unexplained cash credit u/s 68 of the IT Act, 1961 from non Kolkata based companies. 7. The Ld. Commissioner of In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hawla [61 taxmann.com 412 (Del)], no addition was warranted in assessment u/s. 143(3) r.w.s. 153 A of the Act." 4. For AY 2013-14 the ld AO has raised the following grounds of appeal:- "1. The ld Commissioner of Income Tax (Appeal) has erred in law and on the facts in deleting the addition of Rs. 579232/- made by AO on account of disallowance of expenses u/s 14A Rule 8D of the IT Act, 1961. 2. The Ld. Commissioner of Income Tax (Appeal) has erred in law and on the facts in deleting the addition of Rs. 61500000/- made by AO on account of unexplained cash credit u/s 68 of the IT Act, 1961 from Kolkata based companies. 3. That the Ld. CIT(A) has erred in ignoring the facts as the assessee company failed to discharge the onus u/s 68 of the I.T. Act 1961 to prove the identity, creditworthiness and genuineness of the transactions made by the Investors. 4. The Ld. Commissioner of Income Tax (Appeal) has erred in law and on the facts in ignoring the fact that companies which have provided unsecured loans don‟t have the capacity/creditworthiness to grant such loans as evident from their bank statement and P/L account & Return of Income. 5. The Ld. Commissioner of Income Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Co No. 249/Del/2016 Assessment Year 2012-13 7. We first briefly state the facts for AY 2012-13. Assessee is a company engaged in the business of transmission, distribution of power with state electricity boards and servicing and maintenance of transmission and distribution networks. The company along with its sister concerns was subjected to search and seizure operations under section 132/133A of the Income Tax Act, 1961 on 12/04/2012. Notice under section 153A of the act was issued on 23/10/2013. In response, assessee filed return for Rs. 89391530/- on 16/05/2014. Consequently, assessment under section 153A, read with section 143 (3) of the Income Tax Act, 1961 [ The Act] was passed by the Ld. Assistant Commissioner Of Income Tax, Central circle - 17, New Delhi (hereinafter referred to as the Ld. AO) at Rs. 475915230/- wherein following disallowances were made:- i. disallowance under section 14A of Rs. 481801/- ii. disallowance of deduction of ESI payment of Rs. 113193 /- iii. unexplained cash credit under section 68 of Rs. 229200000/- and consequent disallowance of interest payment on unsecured loan of Rs. 1005974/ - iv. unexplained cash credit under section 68 of the act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... panies or have been routed through the assessee. She further examined the bank statements of the investors company, which revealed that the ‗source of source' was also explained and it was carried out through banking transaction. She also dealt with the various decisions relied upon by the Ld. Assessing Officer. She further rejected the inspector's report as inspector had not conducted the enquiry in the appellant's case and even otherwise, the inspector's report was refereeing to investor/ lender companies other than the companies for which addition is made in the case of the assessee. With respect to share application money, she held that there could be no reason to doubt the existence or identity of these companies since these companies have merged into Param Mitra Holdings private limited vide order of the Hon'ble Delhi High Court dated 9/11/2010. Therefore, she deleted the addition of Rs. 22,92,00,000/- made by the Ld. assessing officer under section 68 of The Income Tax Act. Similarly, addition for AY 2013-14 was also deleted. d. She further deleted the addition of Rs. 15,50,00,000/- made by the Ld. assessing officer under section 68 of The Income Tax Act, as unexplai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer therefore there cannot be any fault found with the assessment order. She further relied upon the provisions of section 14 A of the act and also on circular No. 14/2006 dated 28/12/2006, wherein it is stated that the legislative intent becomes crystal clear by the fact that disallowances to be made even if no income is earned during the year. She further referred to the decision of the Hon'ble Delhi High Court in case of Taikisha engineering India Ltd, India Bulls financial services Ltd versus DCIT, 76 Taxmann.com 268 and decision of the Hon'ble Supreme Court in case of Godrej & Boyce manufacturing Co. Ltd versus DCIT, 81 Taxmann.com 111. She further relied upon the several decisions of the coordinate benches. She further relied heavily on principles of interpretation of tax statute and submitted that in the light of all these decisions and the logical interpretation of section 14 A, even if there is no exempt income the disallowance is required to be made. She stated that the Ld. assessing officer has correctly disallowed the claim of expenditure pertaining to exempt income within the ambit of law and provisions of the act. 15. The Ld. authorized representative relied upon t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Assessee is incorrect having regard to the accounts of the Assessee, has ipso applied the method prescribed by Rules. The Id. A.O. in his calculation has taken the average of all the opening and closing investments and calculated the disallowance @1/2 % in accordance with Rule 8D by following Circular No. 5 dated 11/02/2014. Aggrieved the above Order of the Ld. A.O., appeal was duly preferred before the ld. CIT(A) pursuant to which the Ld. CIT(A) based on the facts of the case of the Assessee allowed relief to the Assessee, as brought out in the chart above. Aggrieved by the above, the Department is accordingly in appeal before your Honours followed by the cross-objection of the Assessee. In connection to the above, it is submitted before your Honours as also submitted before the ld. CIT(A) that investments considered by the Ld. A.O. for disallowance for above A.Ys were the investments of the Assessee Company in Group Companies wherein the same are made as strategic investments, purely on account of commercial expediency to promote the said Companies and not for purposes of earning capital gains or dividend income and any dividend income, if any, arising therefrom is purely ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uthorities. The Ld. CIT (A) has mentioned that assessee's investments have been made in-group concern for exercising control and management of such concerns and in the relevant assessment year, the assessee has not derived any exempt income. This fact is not disputed by the revenue. Therefore, as there is no exempt income earned by the assessee during the year, respectfully following the decision of the Hon'ble Delhi High Court in case of Cheminvest versus CIT( Supra) , we do not find any infirmity in the order of the Ld. CIT (A) in deleting the disallowance under section 14 A of the income tax act. In the result ground No. 1 of the appeal of revenue is dismissed. 17. The second ground of appeal of revenue relates to addition of Rs. 22,92,00, 000/- made by the Ld. assessing officer under section 68 of the Income Tax Act From Kolkata based companies deleted by the Ld. CIT (A). The Ld. assessing officer has made addition vide para No. 7 of assessment order at page No. 6 - 32 for AY 2012-13 are as under:- "Unexplained cash credit of Rs. 22,92,00,000/- 7. One of the allegations against the Aryan Sainik Group (i.e. assessee‟s company group) was that it has routed its unaccoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 60,00,000/- 9 Jubilee Vincom Pvt. Ltd. 28/D, Nayan Chand Dutta Street, Firish Park, Kolkata, West Bengal-06 AACCJ6266E 75,00,000/- 10 Khetan Tracon Pvt. Ltd. R.No. 3A, Ashirwad Apptt. 171/12, Roy Bahadur Road, Kolkata, West Bengal-34 AABCK9871F 50,00,000/- 9,75,00,000 Share application money Name of the party Address Amount in (Rs) Amanat Agencies Pvt. Ltd. 14, Weston Street, Kolkata, West Benqal-12 4,40,00,000 Skipper Vinmay Pvt. Ltd. 14, Weston Street, Kolkata, West Benqal-12 3,22,00,000 Oasis Commotrade Pvt. Ltd. 14, Weston Street, Kolkata, West Bengal-12 5,55,00,000 Total 13,17,00,000/- Further, from the details submitted by the assessee in respect of the above noted companies which have invested share capital in the assessee company, it is seen that the assessee has furnished the address of the following investors i.e. M/s Amanat Agencies Pvt. Ltd., M/s Skipper Vinmay Pvt. Ltd. and M/s Oasis Commotrade Pvt. Ltd. have been shown as 129, Transport Centre, Punjabi Bagh, New Delhi. From the perusal of the details/addresses of the assessee group companies it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or and the genuineness of the transactions. The observations of Hon Tile Supreme Court in the case of [2007] 161 TAXMAN 169 (SC), Commissioner of Income-tax vs. P. Mohanakala with regard to nature 8s scope of Sec.68 is very pertinent and the same is reproduced below: 14. The question is what is the true nature and scope of section 68 of the Act? When and in what circumstances section 68 of the Act would come into play? That-a bare reading of section 68 suggests that there has to be credit of amounts in the books maintained by an assessees; such credit has to be of a sum during the previous year; and the assessees offer no explanation about the nature, and source of such credit found in the books; or. the explanation offered by the assessees in the opinion of the Assessing Officer is not satisfactory, it is only then the sum so credited may be charged to income-tax as the income of the assessees of that previous year. The expression "the assessees offer no explanation" means where the assessees offet no proper, reasonable and acceptable explanation as regards the sums found credited in the books maintained by the assessees. It is true the opinion of the Assessing Officer for not a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o probe 'further into the matter and investigate the case on materials available to the authority to come to an independent and unbiased finding as to the genuineness of the transaction. It is true that the tax authority is not entitled to reject the assessee's case summarily or arbitrarily or without sufficient reason. It is true that the authority's duty is to examine all the materials carefully and objectively. But if it is found that the authority concerned after careful consideration of all relevant materials has come to the conclusion that the assessee's case of a loan from a third party cannot be accepted it is not open to this court to disturb the finding in a reference under section 66(1). " Thus, in view of the above decisions / observations of the Hontole Courts and the settled law position that onus is on the assessee to not only prove the identity & capacity (creditworthiness) of the creditors, but also to prove genuineness of transactions, the facts of the present case in respect of unsecured loans are analyzed below. To verify the genuineness unsecured loans/share capital introduced in the assessee company, queries were asked through several lette ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ain papers were found. Further, it has been observed that the assessee has taken unsecured loans from the following entities in AY 2010-11. The details of the same are as under:- SI. No. Particular Amount (Rs.) 1 Good Hope Vyapaar Pvt. Ltd. 16,91,00,000.00 2 Jagnath Commodities 2,40,00,000.00 3 Komal Tie Up Pvt. Ltd 3,80,00,000.00 4 Omkara Agencies Pvt. Ltd. 4,60,00,000.00 Total Rs.27,71,00,000/- From the perusal of records, it is seen that all these companies are Kolkata based companies and found paper shell companies. In respect of these companies, the Inspector of this office was conducted inquires/ investigation in respect of assessments made of group companies earlier and the address given were not found correct. The Investigation Wing also conducted inquires/investigation in respect of these companies and it has given adverse finding in respect of these companies‟/identities. The above mentioned companies introduced huge share capital and share premium in the group companies of ACB namely M/s Garuda Imaging & Diagnostic Pvt. Ltd. and M/s Sindhu Holdings Ltd. etc. Further, from the perusal of documents, it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e floor of the given address are like 4A, 4B, 4C', 4D, 4E.... the name plate of company has not been found at the premise. *Banerjee Shipping Agency" running from RNo.4A of the address. The person available at premise never head the name of M/s Skipper Vinmay Limited. Further, the Inspector in his report has stated that either the addresses are not available or if the same was available then no traces of the companies have been found for most of the entities in Kolkata. A very striking feature also comes to notice that though the three companies (i.e. Amant Agencies Pvt. Ltd Skipper Vinmay Pvt. Ltd Oasis Commotrade Pvt Ltd ) have contributed huge share capital of Rs. 13.17 crs in only once company of the assessee group but still their address is common and on physical enquiries conducted, the whereabouts of these companies are not found. Inspector‟s report have been duly confronted to be assessee vide show cause notice dated 11.02.2015 and the relevant extract of the show cause notice is reproduced below:- "2. On scrutiny of the copy of return filed and replies submitted on various dates I have noticed that: 1. There is pending share application money. 2. Increa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmation of seized documents from time to time, it is stated that no paper was found/seized. However, on going through the seized material in the form of hard disk and loose papers etc. certain papers were found. Further, it has been observed that the assessee has taken* unsecured loans from the following entities in AY 2010- 11. The details of the same are as under:- SI. No. Particular Amount (Rs.) 1 Good Hope Vyapaar Pvt. Ltd. 16,91,00,000.00 2 Jagnath Commodities 2,40,00,000.00 3 Komal Tie Up Pvt. Ltd 3,80,00,000.00 4 Omkara Agencies Pvt. Ltd. 4,60,00,000.00 Total Rs.27,71,00,000/- From the perusal of records, it is seen that all these companies are Kolkata based companies and found paper shell companies. In respect of these companies, the Inspector of this office was conducted inquires/investigation in respect of assessments made of group companies earlier and the address given were not found correct. The Investigation Wing also conducted enquires/ investigation in respect of these companies and it has given adverse finding in respect of these companies‟/identities. The above mentioned companies introduced huge shar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dly reflected is incorrect as the amounts reflected against each company have been jumbled You have further mentioned that, all these companies are Kolkata based companies and you have alleged that, these companies were found to be paper shell companies. You have also mentioned about alleged enquiries having been conducted by the inspector of your office in respect of assessment made in group companies namely Garuda Imaging & Diagnostics Pvt Ltd and Sindhu Holdings Ltd. You have alleged that the identity/ credit worthiness has already been held as doubtful by your predecessor in his assessment order in the case of M/s Garuda Imaging & Diagnostics Pvt Ltd and Sindhu Holdings Ltd, and it has been concluded that genuineness in respect of above mentioned companies were not proved. In this connection, we wish to draw your kind attention by producing extract of relevant submissions as "Annexure:-16". Further, the relevant documents filed in the case of above referred group companies are as under a. Name, Address & identity of the Party b. PAN Details c. Copy of TTR d. Copy of Bank Statement e. Confirmation In view of the fact that, the assessee had submitted the above menti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n give huge amounts as loan to some other persons. On perusal of the replies of the share applicants/loan givers, it reveals that they were not financially sound to invest such huge amounts in the assessee company. The bank Statement, wherever available, speaks that for one debit entry, there was credit entry of more or less identical amount and all the transactions had undergone within the same day or within the next day. The balances remaining in the account are found to be nominal. On perusal of the copies of accounts of the share applicants, it has been found that huge amount was claimed to have invested in the unquoted shares. It is therefore, evident that the share applicants/loan givers lack creditworthiness to advance such huge loans worth several crores. Further, it appears that the assessee deliberately and with mala fide intention, did not furnish the Bank Statement of the various persons for the entire year and concealed the facts because it did not want the department to ascertain the sources from which the funds have been received by the various loan givers and it appears that the sources of these funds are assessee‟s undisclosed income only which are rout ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of Garuda Imaging8s Diagnostic Pvt. Ltd i.e. one of the assessee group company for AY 2010-11 where the facts of the case were almost same i.e. Garuda Imaging& Diagnostic Pvt. Ltd had taken share application money of Rs. 10.74 Crs. from the four Kolkata based companies, the details of the same are under:- . 1. M/s Omkara Agency Pvt. Ltd. Rs.5,97,00,000/- 2. M/s Komal Tie-Up Pvt. Ltd. Rs. 1,60,00,000/- 3. M/s Good Hope Vyapar Ltd. Rs.2,80,00,000/- 4. M/s Jagannath Commodities Pvt. Ltd Rs. 37.00.000/- Rs. 10,74,00,000/- After conducting exhaustive and extensive enquiries, it has been held by my predecessor that all these four companies are basically papers shell companies which are not doing any business and as the identity, creditworthiness and genuineness of the transaction conducted by these companies have not been proved, the entire 'share capital of Rs. 10.74 Crs. received through the above noted four entities (as are involved in the present case also) have been treated as unexplained cash credit and the addition was made u/s 68 of I.T. Act, 1961. To summarize, I have again gone through the case records, submission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... into share application money through journal entries which clearly indicates that these transactions are not genuine. 7. The assessee‟s company also failed to submit the documentary evidences in respect of share allotment made to these companies in its reply filed on 09.03.2015 (i.e. annexure in reply to point no. 20), which clearly indicates these transactions are sham and were made only for the routing the accommodation entries of investors/lenders. Thus, the assessee company failed to discharge its basic onus/burden cast u/s 68 in respect of proving identity, creditworthiness of the loan giver/share application money contributor and genuineness of the. transaction. Therefore, these companies are papers shell companies and created only for providing accommodation entries to the investors/lenders. Further, the present case is covered by the decision of Hon‟ble Jurisdictional High Court in the case of CIT vs. Precision Finance Pvt. Ltd. [1995] 82 Taxman 31 (Cal), wherein, the HonTfie High Court has held as under : 6. It is for the assessee to prove the identity of the creditors, their creditworthiness and the genuineness of the transactions. In our view, on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r view was also expressed by the Hon‟ble Calcutta High Court in the case of United Commercial & Industrial Company Pvt. Ltd. [1991] 56 TAXMAN 304 (CAL). The relevant extract of the Hon'ble High Court decision is reproduced below : "6. In our view, the assessee failed to discharge the primary onus which lay on it to prove the nature and source of the credits. It was necessary for the assessee to prove prima fade the identity of his creditors, the capacity of such creditors to advance the money and lastly the genuineness of the transactions. Only when these things are proved by the assessee prima facie and only after the assessee has adduced evidence to establish the aforesaid facts, the onus shifts on to the department. It is not enough to establish the identity of the creditors. Mere production of the confirmation letters before the ITO would not by itself prove that the loans have been obtained from those loan creditors or that they have creditworthiness. The assessee tried to explain that the receipts and payments of the alleged hundi loans have been made by cheques. But, in the absence of the books of account and other evidence of the parties concerned, it was not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act itself promdes,‟ where any sum is found credited in the books of the assessees for any previous year the same may be charged to income-tax as the income of the assessees of the previous year if the explanation offered by the assessees about the nature and source of such sums found credited in the books of the assessees is in the opinion of the Assessing Officer not satisfactory. Such opinion found itself constitutes a prima facie evidence against the assessees, viz., the receipt of money, and if the assessees fail to rebut the said evidence the same can be used against the assessees by holding that it was a receipt of an income nature. In the case in hand the authorities concurrently found the explanation offered by the assessees unacceptable. ii) Sumati Dayal Vs. CIT [1995] 80 TAXMAN 89 (SC) But, in view of section 68 of the Act, where any sum is found credited in the books of the assessee for any previous year the same may be charged to income- tax as the income of the assessee of that previous year if the explanation offered by the assessee about the nature and source thereof is, in the opinion of the Assessing Officer, not satisfactory. In such case there is, pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ussed in detail in issue no.6). The details of interest payments are given below : sr. No. Name of the Party Amount received as unsecured loan Interest i Wellbuild Marketings Pvt. Ltd. 3,00,00,000/ - ~ 2 Concrete Credit Ltd. 55,00,000/ - 119947 3 Eagle Deal Trade Pvt. Ltd. 40,00,000/- 90208 . 4 Jagdhatri commodities Pvt. Ltd. 1,75,00,000/- - 5 Kailash Pati Vincom Pvt. Ltd. 70,00,000/ - 154788 6 Oscar Retailers Ltd. 75,00,000/- 168125 7 Vidkan Sales Agencies 75,00,000/- 163110 8 Winner Commosales Put. Ltd 60,00,000/ - 133594 9 Jubilee Vincom Pvt. Ltd. 75,00,000/- 167880 10 Khetan Tracon Pvt. Ltd. 50,00,000/ - 8322 9,75,00,000 1005974 Further, as the above interest payments are booked / paid on account of unsecured loans of Rs. 10,05,974/-, raised during the FY 2011- 12 and as these loans have been proved bogus beyond doubt, the assessee‟s undisclosed income u/s.68 of the I. T. Act, 1961, because of the assessee‟s failure to prove the identity, creditworthiness of the payers as well as the genuineness of the transactions. Acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny identical amounts have been deposited in their accounts either o n the same day or one day prior to transactions which in a way clearly points out towards circulation of such money through the investors / creditors account because invariably very small accounts are shown as closing balance n the accounts. These circuitous transactions are nothing but providing of entries to the assessee company in the form of unsecured loans. All these bank statements and return of income of the entities involving circulation of money raised huge doubts about the creditworthiness of these entities and certainly these companies do not appear to have financial backing /resources to advance huge loan to the assessee company. As this issue, has been discussed in detail in the above noted paragraphs when the creditworthiness and genuineness of transaction of Kolkata based companies was discussed, accordingly in order to avoid repetition and for the sake of brevity, the same are not discussed again. Thus, the above discussions conclusively prove that the assessee has failed to discharge the basic onus / burden cast upon it by the provisions of Sec.68 of the I. T. Act to prove the identity and capa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g in suppression/ under reporting of income. Such unaccounted income has been routed back into the Companies through the medium of some Kolkota based Companies in the garb of Share Application Money or Share Capital at very high premiums. (ii) The allegation of the AO regarding suppression/ under reporting of profits remains unsubstantiated in the case of the Appellant. In all the seven years that the AO has assessed during the post search period, he has not made any addition on account of suppression/ under reporting of income/ profits. Regarding the allegation of issuing Shares at very high premiums to these companies, it is clear from the records that no Shares had been issued to these Companies till AY 2013-14 albeit, the Appellant had taken Unsecured Loans and Share Application Money from these Companies. Moreover, as argued by the Ld ARs, the AO is not clear about the nature of these credits. At times the AO refers to these Credits as Share Application Money while on other occasions the AO refers to them as Unsecured Loans. The Ld ARs have also pointed out that the AO had called for different requirements to be filed for Unsecured Loans and Share Application Money vid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the said letter that the appellant was not given a copy of the Inspectors report. As already held in Appellant‟s case for A.Y. 2009-10 and 2010- 11, it is evident from a perusal of Appellant‟s submissions, the Inspector‟s Report and the assessment record that no adverse inference can be drawn merely on the basis of said Inspector‟s Report. (x) The Appellant had furnished various details like name, address, PAN, Bank statement, Copy of ITR and Confirmation of the aforesaid companies. These documents were sufficient to prove the identity of the investor. (xi) The Appellant has submitted that "It is merely a presumption of the AO that a company must show very high income in their ROI as against the Share Application Money. The companies can also invest out of their share capital or out of their borrowings. It is therefore not necessary for a company to show very high income in its ROI. Even a loss making company can make investments." The submissions of the Appellant are true. (xii) The investors are corporate entities. They are maintaining proper Books of accounts. These books of accounts are subjected to statutory Audit by Independent Auditors ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8223;s case for asst year 2009-10 and 2010-11 and in Appellant‟s Group concerns cases namely Garuda Imagining and Diagnostics Center and Sindhu Holdings Limited for Asst year 2009-10 and 2010-11. (XV) The AO has tried to summarize the reasons and findings on account of which he had made the addition. All the reasons have already been dealt with by the Appellant in their written submission and by me in the Appellate order. (xvi) (1) The AO had held that the "Present case is covered by the decision of Hon‟ble Jurisdictional High Court in the case of CIT Vs. Precision Finance Pvt. Ltd.[1995]82-Taxmann31(Cal)". The ld ARs have demonstrated that the facts of the relied upon case are different from the present case. The AO also placed relianceon following cases: * CIT Vs. Korley Trading Co. Ltd. [1998]232 ITR 820 * Hon‟ble Calcutta High Court in Shankar Industries Ltd. Vs. CIT [1978] 114 ITR 689 (Cal) * Hon‟ble Calcutta High Court in the case of United Commercial and Industrial Co. Pvt. Ltd. [1991] 56 Taxmann 304 (Cal) * The Hon‟ble Supreme Court in the cases of SumatiDayal Vs. CIT and CIT Vs. P. Mohalkala The ld ARs have fully explained as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on or contradiction. In the cited case, the amounts were borrowed at extremely high rate of interest by the assessee. This too made the genuineness of the Creditors prima-facie suspect in the eyes of the Revenue. In the case under appeal, no such finding has been given by the AO. Thus, in the case under appeal, the genuineness of the Creditors was fully established in the eyes of Law. Since the facts of the cited case are entirely distinguished from those the appellants case and since the cited case does not pertain to the appellants jurisdiction it is respectfully submitted that no reliance should be placed on this case." (c) High Court of Delhi in the case of CIT-VI Vs. T.S. Kishan& Co. Ltd. [2014] 50 Taxmann.com 368 (Delhi), "In the cited case, it is seen the assessee could not produce the PAN Number, address and confirmation of Creditors. However, in the case under appeal, the appellant had already submitted PAN Number, address, account confirmation, copy of acknowledgment of ITR and the bank statements of the said Creditors. Thus, in the case under appeal, the identity and creditworthiness of the Creditors was fully established in the eyes of Law. The cited case is t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s therefore distinguished from the case under appeal on bare facts. Thus, in the case under appeal, the identity and creditworthiness of the Creditors was fully established in the eyes of Law." (f) ITAT Agra Bench in the case of Smt. Suman Gupta Vs. ITO, Ward- 1, Aligarh [2012] 25 Taxmann.com 220(Agra) "In the case under appeal, no direction was issued by the AO to produce the investor companies or their directors. Moreover, the Creditors were corporate entities and had maintained proper books of accounts that were also subjected to statutory audit and their Balance sheets and P&L A/c were duly filed with their return of income. Thus, in the case under appeal, the creditworthiness of the Creditors was fully established in the eyes of Law and there can be no preponderance of probabilities that these loans were in fact accommodation entries. Since the facts of the cited case are entirely distinguished from those the appellants case and since the cited case does not pertain to the appellants jurisdiction it is respectfully submitted that no reliance should be placed on this case." As in earlier years, the Appellant has relied upon Case Laws in support of Appellant‟s cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issued to some of the creditors could not be served or they failed to attend before the Assessing Officer cannot be aground to treat the loans taken by the assessee from those creditors as non-genuine in view of the principles laid down by the Supreme Court in the case of Orissa Corporation [1986[ 159 ITR 78. In the said decision the Supreme Court has observed that when the assessee furnishes names and addresses of the alleged creditors and the GIR numbers, the burden shifts to the Department to establish that revenue‟s case and in order to sustain the addition the revenue has to pursue the enquiry and to establish the lack of creditworthiness and mere noncompliance of summons issued by the Assessing Officer under section 131, by the alleged creditors will not be sufficient to draw an adverse inference against the assessee. In this case of six creditors who appeared before the Assessing Officer, they have admitted having advanced loans to the assessee by account payee cheques and in case the Assessing Officer was not satisfied with the cash amount deposited by those creditors in their bank accounts, the proper course would have been to make assessments in the cases of those c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lic/rights issue through banking channels and furnished complete details of the shareholders, no addition could be made under section 68 in the absence of any positive material or evidence to indicate that the shareholders were benamidars or fictitious persons or that any part of the share capital represented company's own income from undisclosed sources. The similar view has been taken by the other High Courts. As the Apex Court has considered the law in Lovely Exports (P.) Ltd.'s case (supra) and in view of law laid down by the Apex Court, we find that the substantial questions framed in these appeals do not arise for our consideration. Accordingly, all these appeals are dismissed with no order as to costs. " In fact, similar view has also been expressed in the following cases: i) 350 ITR 220 (All) CIT vs. Jay Dee Securities and Finance Ltd. ii) 350 ITR 222 (All) CIT vs. Misra Preservers (P) Ltd. ii) 361 ITR 220 (Del) CIT vs. Kamdhenu Steel and Alloys Ltd. iv) 320 ITR 619 Bhav Shakti Steel Mines (P) Ltd. vs. CIT v) ITA No. 1497/2010, 1518/2010 (Del) CIT vs. Derby Overseas (P) Ltd. vi) ITA No. 904/2010 (Del) CIT vs. Dhawan Jewellers (P) Ltd. vii) 329 IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o establish the identity and credit worthiness of the investor and to prove the genuineness of the transaction. In the instant case it is observed that the Appellant has discharged the initial onus by furnishing the Name, Address, PAN, Copy of ITR, Copy of Bank Statement and Confirmation from the Investor/Creditor. The Inspector‟s Report cannot be relied upon as the Inspector had not conducted the enquiry in the Appellant‟s case and even otherwise these Companies were not appearing in the list of Companies that had been enquired into. There can be no reason to doubt the existence or identity of these companies since these had merged into Param Mitra Holdings Pvt Ltd vide order dated 09/ 11/2010 passed by the Hon‟ble High Court Delhi. The amount of investments from these companies had come through account payee cheques/ bank transfers. The same had not come through cash. As per the admission of the AO, no cash was deposited in the investor company‟s bank account on dates immediately proceedings the dates on the said cheques were issued. The statutory requirements u/s 68 till A.Y. 2012-13 was that the assessee was duty bound to explain the "source". From ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore be imprudent for any company to keep large balances in their bank accounts." The investor had confirmed the transaction and furnished the entire corroboratory. The Appellant had therefore fully discharge the Initial owners cast upon on him u/s 68 of the Act. Following my own decisions in the case of Garuda Imagining & Diagnostics centre and Sindhu Holdings Limited and respectfully following the judicial pronouncements of the Apex Court in the case of Lovely Exports Private Limited v. CIT [2008] 216 CTR 195 SC and CIT vs. Stellar Investment Ltd. reported in 251 ITR 263 and by the Jurisdictional High Court in the case of Kamdhenu Steel 8s alloys Limited v. CIT [2012] 19 taxmann.com 26, (Delhi) the addition of Rs. 22,92,00,000/- and Rs. 6,15,00,000/- made u/s 68 of the I T Act in assessment years 2012-138s 2013-14 respectively is hereby deleted. This ground of appeal is therefore allowed and the addition of Rs. 22,92,00,000/- and Rs. 6,15,00,000/-in A.Y. 2012-13 and 2013-14 respectively is hereby deleted. Ground raised in appeal is allowed." 19. Ld. CIT DR relying on the findings of the ld AO, submitted that in respect of Kolkata based companies the investigation directora ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lhi). A written submission made on this aspect of the various judicial precedent is as under:- "It is well settled law that onus of proving credits in its book of accounts lies squarely on the assessee and such proof consists of proving the identity of the subscriber or creditor, capacity of such creditor or subscriber to make payment and also prove the genuineness of the transaction. It is only when the assessee discharges this primary onus, that onus shifts to the Department. * Merely establishing the identity of the creditor is not sufficient. This is the ratio laid out numerous decisions including Shankar Industries Vs. CIT (1978) 114 ITR 689(Cal);. * The manner of payment by the account payee cheque is also not sacrosanct and this cannot make a bogus transaction as genuine one [(CIT VS. Precisions Finance Pvt. Ltd. (208 ITR 465, 470,471 (Cal). Cf. Nizam Wool Agency Vs. CIT, (1992) 193 ITR 318, 320 (All)). * The Hon'ble Delhi High Court in the case of Commissioner Of Income -tax v. Nova Promoters and Finless (P) Ltd. reported in [2012] 342 ITR 169 has held that the finding that the share application monies had come through account payee cheques was, at best, neut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... * Where any sum is found credited in the books of the assessee for any previous year it may be charged to income tax as the income of the assessee for that previous year if the explanation offered by assessee about the nature and source thereof is, in the opinion of the Assessing Officer, not satisfactory. Sumati Dayal Vs CIT (SC) 214 ITR 801 Vasantibai IM. Shah Vs CIT (Bom) 213 ITR 805 Sreelekha Banerjee & Ors. Vs CIT (SC) 49 ITR 112 * There is ample authority for the position that where an assessee fails to prove satisfactorily the source and nature of certain amount of cash received during the accounting year, the Income Tax Officer is entitled to draw the interference that the receipt are of an assessable nature. Govindarajulu Mudaliar 34 ITR 807 (SC) Sec. 68 does not confine to cash entries in books. V.I.S.P. (P) Ltd. Vs CIT (MP) 265 ITR 202 * Sec. 68 applicable even to share application money. CIT Vs Sophia Finance Ltd. (Del) 205 ITR 98 CIT Vs Active Traders P. Ltd. (Cal) 214 ITR 583 CIT Vs. Nivedan Vanijyya Ltd (Cal) 263 ITR 623 CIT Vs Bhagwati Jewels Ltd. (Del) 201 ITR 461 CIT Vs Prateek Finance & Investment Co. Ltd. (Del) 215 ITR 272 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nclosed) where Hon'ble Supreme Court held that merely because the assessee has been able to show that the shareholder companies were duly incorporated and their identity & genuineness stands established, there were deposits of cash in the bank accounts prior to issue of cheque or pay orders, the same would raise suspicion and addition can be made on such account * CIT Vs Navodava Castle Pvt Ltd T20141 367 ITR 306 (Del) (Copy Enclosed) where Hon'ble Delhi High Court accepted^that since the assessee was unable to produce the directors and the principal officers of the six shareholder companies and also that as per the information and details collected by the Assessing Officer from the concerned bank, the Assessing Officer had observed that there were genuine concerns about identity, creditworthiness of shareholders as well as genuineness of the transactions. * Rick Lunsford Trade & Investment Ltd Vs CIT T2016- TIOL-2Q7-SC-IT1 (Supreme Court) (Copy Enclosed) Where Hon'ble Supreme Court dismissed SLP upholding that it is open to the Revenue Department to make addition on account of alleged share capital u/s 68, where the assessee company has failed to show ge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cants whereas in case of some of share applicants, there were transactions of deposits and immediate withdrawals of money from bank, impugned addition made under section 68 was to be confirmed. * Om Logistics in ITA 4301/Pel/2014 for A.Y 2001-02 * CIT Vs Focus Exports (P.) Ltd (51 taxmann.com 46 The above submissions and judgements may kindly be considered while adjudicating the case of the Revenue. Without prejudice to the arguments taken above it is submitted as under: [A] The provisions of section 153A are clear and do not mandate requirement of incriminating documents for purpose of finalizing assessment or reassessment under section 153A. 153A unambiguously states that 153(1) Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, in the case of a person where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A after the 31st day of May 2003, the Assessing Officer shall * CIT Vs Focus Exports (P.) Ltd (51 taxmann.com 46 (Delhi)/r20151 228 Taxman 88) (Copy Enclosed) Where Hon'ble Delhi High Court held that wher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... buildMarketings Pvt Ltd 3,00,00,000/- Concrete Credit Ltd 55,00,000/- Eagle Deal Trade Pvt Ltd 40,00,000/- Jagdhatri Commodities Pvt Ltd 1,75,00,000/- KailashpatiVincom Pvt Ltd 70,00,000/- Oscar Retailers Ltd 75,00,000/- Vidhan Sales Agencies Pvt Ltd 75,00,000/- Winner Commosales Pvt Ltd 60,00,000/- Jubilee Vincom Pvt Ltd 75,00,000/- KhetanTracon Pvt Ltd 50,00,000/- Total 9,75,00,0007- Further during AY 2012-13, the following amount was also received as share application money:- Name Amount Amanat Agencies Pvt Ltd 4,40,00,000/- Skipper Vinimay Pvt Ltd 3,22,00,000/- Oasis Commotrade Pvt Ltd 5,55,00,000 Total 13,17,00,0007- Both the afore-said amounts were treated as cash credit and added in the hands of the respondent assesse AY 2013-14 The respondent assesse had received the following amounts as unsecured loans from certain Kolkata based companies:- Name Amount Timely Merchant Pvt Ltd 2,50,00,000/- Primeline Sales Pvt Lid 2,50,00,000/- Daisy Realtors Pvt Ltd 45,00,000/- Pradhi Dealer 70,00,000/- Total 6,15,00,000/- The afore-said amounts were treated as cash cre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sp; : Grds 2 & 3 of Assessee‟s Cross Objection A.Y.2010-11 : Rs. 33,81,00,000/- : Grds 2,3 & 4 of Departmental Appeal &n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were as under:- * Name and address of the subscriber * Confirmations from parties indicating the PAN and ward/circle of the loan creditor. * PAN & Income Tax Jurisdictional details Bank statements In this regard, attention is sought to the decision of the LdCIT(A) for AY 2007-08 to 2010-11 page 97 wherein he has held that section 68 casts the initial onus on the assesse to establish the identity and credit-worthiness of the investor and to prove the genuineness of the transaction. In the instant case it is observed that the appellant has discharged the initial onus by furnishing the Name, Address, PAN, Copy of ITR, Copy of Bank statement and Confirmation from the Investor/Creditor" The allegation of the department that the group has routed its unaccounted money earned from suppression/underreporting of profits into the business in the form of share application money issued at high premium through various Kolkata based companies is not supported by any material unearthed in the course of search. No evidence of suppression of profit has ever been detected. In this regard attention is sought to page 81 of the decision of the Ld CIT(A) for AY 2007-08 to 2010-11 wherein h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amitra Holdings Pvt Ltd., is a matter of knowledge of public domain on Government portals like MCA. c. As regards the allegation that the said companies had no income or less income it was submitted that there is no rule that loans can be made from earnings only. The said companies had enough capital to advance the said funds. d. As regards the fact that there were debits just before credits in the bank accounts of the said companies it was explained that it is the decision of the companies whether or not to keep the said amounts in current account. Further there were no cash deposits in the said accounts. In case of M/s Garuda Imaging after hearing the aforesaid arguments the LdCIT(A) dropped the additions made. Aggrieved by the said order, the department has filed an appeal before Hon‟ble ITAT. CASE LAWS RELIED UPON BY THE ASSESSING OFFICER The Ld AO while making his assessment order had relied upon several case laws. The respondent assesse while making his submission had distinguished each of the said case law. The same is dealt with by the LdCIT(A) on pages 57-76, 82-84 and 91-97 of his order for AY 2007-08 to 2010-11. Attention is sought to the findi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Amount Amanat Agencies Pvt Ltd 4,40,00,000/- Skipper Vinimay Pvt Ltd 3,22,00,000/- Oasis Commotrade Pvt Ltd 5,55,00,000 Total 13,17,00,0007- Both the afore-said amounts were treated as cash credit and added in the hands of the respondent assesse AY 2013-14 The respondent assesse had received the following amounts as unsecured loans from certain Kolkata based companies :- Name Amount Timely Merchant Pvt Ltd 2,50,00,000/- Primeline Sales Pvt Ltd 2,50,00,000/- Daisy Realtors Pvt Ltd 45,00,000/- Pradhi Dealer 70,00,000/- Total 6,15,00,000/- The afore-said amounts were treated as cash credits and added. Further the following amounts received as unsecured loans from non-Kolkata based companies were also added as cash credits:- Arya Marketing Pvt Ltd 4,00,00,000/- Manisha Traders 20,00,000/- Raghav Power & Steel (P) Ltd 50,00,000/- Raghav Trade 20,00,000/- Yugantar Power & Steel Pvt Ltd 1,10,00,000/- Shiv Coal Benficiation& Power Pvt Ltd 3,50,00,000/- Space Buildwell (I) Pvt Ltd 3,00,00,000/- Aditya Tradecom 3,00,00,000 Total 15,50,00,000 Name Amount Arya Marketing Pvt Ltd 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . As regards the companies providing share application the said addresses in the PAN and bank statement are old addresses. The enquiry was being conducted in March 2015. The said companies had since shifted to Delhi fw.e.f 25.06.2012, 30.06.2012 <6 30.06.2012] and the necessary formalities of the ROC were duly complied in this regard. This new address is also available on MCA portal and hence the same is in public domain. Hence the respondent-assessee when called upon to furnish the addresses of the said companies, furnished the present addresses. Since the said companies had shifted to Delhi obviously the inspector could not find them at the Kolkata addresses. As regards the issue of bank statements, the same is already dealt with in earlier assessment years [discussed supra] and for the sake of brevity is not repeated here. Following its decision for earlier years, the additions made in Asst Years 2012-13 & 2013-14 were also deleted. As regards unsecured loans from non-Kolkata based companies, the findings and reasons given by the Ld AO for making the said additions being identical as also admitted by the AO in his order, the arguments of the respondent assesse are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plete details with respect to the confirmation, income tax return and bank statements of the above parties. He further stated that vide letter dated 9/3/2015 further details were submitted. He further stated that Hon'ble Delhi High Court vide order dated 17/12/2013 where all the 3 companies from whom the share application money has been received merged with Param Mitra investment holdings private limited. He submitted that at the time of merger all these companies were found in existence, their creditworthiness and genuineness of the about transaction is proved as the Hon'ble high court has approved the merger of these 3 companies and exchange ratio has been decided, he also referred to assets of those companies. He further submitted that during the merger the income tax department also gives its objection if any. No such objection from Roc about existence of these companies as well as Official Liquidator was received even remotely suggesting that these companies do not exist or are in genuine. He further submitted that none of these companies is also appearing in the list of shell companies. In view of this, he submitted that when Hon'ble high court has held that these companies a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the whole addition without verifying the plethora of details given by the assessee to him and without looking at the correct facts produced before him. He submitted that the Ld. AO has stated that there is a report of the investigation wing. However, no such report was given to the assessee to counter it. He further stated that no information from that particular report with the respect to the assessee or with respect to the investor companies have been given to the assesse or mentioned in any of the query letters. Even otherwise, no reference has been made by the assessing officer of any part of any such report in his assessment order also. Therefore, the Ld. AO has relied upon the report of the investigation wing where assessee or the investor/ Lender Company or the lender companies have been implicated at all. He further seriously objected to the fact that ld AO has made addition only based on the geographic location of the investor Companies without any basis. He further submitted that ld AO though has not mentioned any location of other companies for addition of Rs. 15.50 crores, but has also made the addition. Therefore, the action of the ld AO in classifying the investors ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , permanent account number details, assessment particulars, mode of payment for share application money through banks, bank statements, cheque number in questions and the balance sheets. The master data of that company with the registrar of company also shows the same particulars. He further stated that in the present case also as held by Hon'ble Delhi High Court The Ld. assessing officer has strangely failed to conduct any scrutiny of documents and rest contended by placing reliance merely on the report of inspector which is erroneous. He further stated that though in the case before the Hon'ble Delhi High Court it was a case of the report of the investigation wing whereas in the case of the assessee no such report has been relied upon by the Ld. assessing officer but merely stated that director (Investigation) has held that Calcutta companies are bogus. Therefore, he stated that when the assessing officer has failed to do any examination of the details submitted by the assessee, assessee discharges the complete onus cast upon under section 68 of the income tax act, addition could not be made. He further referred to the decision of the coordinate BENCH in case of Hasrhwardahan Gem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers of the lower authorities. Apparently, assessee is a company, which has taken unsecured loans from several companies during the AY 2012-13 and 2013-14 and share application money for both the years. The limited issues open before us is that whether the acceptance of above loans and share application money by the assessee company is chargeable to tax under section 68 of the income tax act or not in the hands of the assessee. Both the parties have relied heavily on several judicial precedents in favour and against the issue. However, both the parties relied upon one decision of the Hon'ble Delhi High Court in case of CIT versus Nova promoters and Finlease private limited (342 ITR 169) (Delhi) to advance their arguments. We are also convinced that above decision of the Hon'ble high court has laid down certain parameters within which the case of the assessee is required to be tested. The Hon'ble Delhi High Court in the above decision has held after considering the decision of the Hon'ble Supreme Court in case of CIT v. Lovely Exports P. Ltd. [2009] 319 ITR (St.) 5 (SC) ; [2008] 216 CTR (SC) 195 as well as decision of Hon'ble Delhi High Court in case of CIT v. (1) Divine Leasing and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Finance Ltd. [2008] 299 ITR 268 (Delhi), the five companies were registered in Sikkim at the same address. They all filed replies to the Department asking for further time to provide the details of their investments. They had also filed returns of income under the Sikkim Taxation Manual and had subscribed to the shares through banking channels. Moreover, the investigations carried out into those companies by the Income-tax Department at Calcutta and the adverse findings therein had been struck down as being without jurisdiction in appeals filed by those companies and, therefore, the Assessing Officer having jurisdiction over General Exports and Credits Ltd. in Bulandshahar could not rely upon them. In these circumstances, the Tribunal had deleted the addition made under section 68 on the ground that the identity of the shareholders had been proved. This court did not approve of the ground on which the Tribunal had cancelled the addition and observed that the judgment of the Full Bench of this court in Sophia Finance Ltd. [1994] 205 ITR 98 (Delhi) [FB] could not be understood to have enunciated that once the identity of the shareholders is proved there can be no addition in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rough the masquerade or channel of investment in the share capital of a company must be firmly excoriated by the Revenue. Equally, where the preponderance of evidence indicates absence of culpability and complexity of the assessed it should not be harassed by the Revenue's insistence that it should prove the negative. In the case of a public issue, the company concerned cannot be expected to know every detail pertaining to the identity as well as financial worth of each of its subscribers. The company must, however, maintain and make available to the Assessing Officer for his perusal, all the information contained in the statutory share application documents. In the case of private placement the legal regime would not be the same. A delicate balance must be maintained while walking the tightrope of sections 68 and 69 of the Income-tax Act. The burden of proof can seldom be discharged to the hilt by the assessee; if the Assessing Officer harbours doubts of the legitimacy of any subscription he is empowered, nay duty bound, to carryout thorough investigations. But if the Assessing Officer fails to unearth any wrong or illegal dealings, he cannot obdurately adhere to his suspicion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd no infirmity with the impugned judgment. Subject to the above, special leave petition is dismissed." 39. The ratio of a decision is to be understood and appreciated in the background of the facts of that case. So understood, it will be seen that where the complete particulars of the share applicants such as their names and addresses, Income-tax file numbers, their creditworthiness, share application forms and share holders' register, share transfer register, etc., are furnished to the Assessing Officer and the Assessing Officer has not conducted any enquiry into the same or has no material in his possession to show that those particulars are false and cannot be acted upon, then no addition can be made in the hands of the company under section 68 and the remedy open to the Revenue is to go after the share applicants in accordance with law. We are afraid that we cannot apply the ratio to a case, such as the present one, where the Assessing Officer is in possession of material that discredits and impeaches the particulars furnished by the assessee and also establishes the link between self-confessed "accommodation entry providers", whose business it is to help assessees b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns who are selfconfessed "accommodation entry providers.‖‖ 29. On careful consideration of the above decision of the Hon'ble Delhi High Court, illustratively but not exhaustively ,following five situations comes to our mind with respect to the taxation of share capital and unsecured loan under section 68 of the income tax act in case of companies, which are as under:- a. in case of public companies i. if public issue is floated which is governed by the provisions of SEBI act, or ii. If deposits are accepted from public as per acceptance of deposit rules and during the course of assessment proceedings the assessee furnishes before the Ld. assessing officer details of the shareholders, such as the name, address, bank account number with the details of the bank and branch of the bank, permanent account number, and the assessee has discharged its primary onus cast under section 68 of the income tax act. In such a situation, no addition can be made in the hands of the assessee company generally. Other Loan transactions in case of companies would be dealt with separately as in case of a private company. b. However, in case of a public company, if the issues of shares ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of asking for crossexamination of such entry providers in certain cases also fails as held in the case of CIT versus Nova promoters and Finlease private limited ( Supra). 30. On the basis of above premises, the facts of the case before us is required to be tested that whether the share application money and loans obtained by the assessee from various companies is chargeable to tax u/s 68 of the act. 31. Admittedly, assessee has not obtained the loans as well as the share application money in any public issue but it is privately placed. During the course of assessment proceedings it is not controverted that assessee has submitted following details before the assessing officer with respect to loan and the share application money. a. Name and address of share applicants and lenders b. Permanent account numbers of the parties c. Confirmation of the parties with respect to above transactions d. Photocopy of bank accounts of the parties from which the amount of share application money and loans have been paid to the assessee e. Photocopy of Income tax Return of the share applicant and lenders f. Balance sheet of the depositors and shareholders 32. Vide letter dated 21.10.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter company where the AO of the assessee is also the same giving details of cross verified data from the MCA website as the enquiry is being made after two years. It was further stated that notices u/s 131 or 133(6) may be issued to these parties if the AO has any doubt. 33. Based on above information submitted it is necessary to examine that what enquiry and information ld AO gathered using his power granted to him as per Income Tax Act. The ld Assessing Officer stated that a. Report of the investigation wing was the main reason for making addition that the assessee group has been alleged to be routed its unaccounted money by suppressing the profit by way of bringing it back as share application money at a high premium through various Kolkata based companies. Further, enquiry conducted by the Investigation Wing it is proved that Assessee Company has received money through various Kolkata based companies. Further, details in respect of share application money and unsecured loan received from the various Kolkata based companies were retrieved from the seized documents during the search and seizure operation. However, the ld Assessing Officer has not shown any report of investig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the PAN data base also shows the address of the Kolkata. Therefore, the ld Assessing Officer noted that it appears to him that assessee has wrongly shown their Delhi address but in fact, these companies are Kolkata companies. M/s. Amanat Agencies Pvt. Ltd, Skipper Vinamay Pvt. Ltd, and Oasis Comotrade Pvt. Ltd are the three companies of which the ld AO has disputed that they are Kolkata based companies and therefore, these are bogus. It is important to note that above three companies were before the Hon'ble Delhi High Court in case of a merger of other companies including these three companies into another company namely Param mitra Investment Pvt. Ltd. According to the petition No. 343/2013 connected with company application No 77/2013 u/s 391 and 394 of the companies act 1956 on which Hon'ble Delhi High Court has passed order dated 17.11.2013 where the scheme of amalgamation of several companies which also includes three companies are mentioned. Hon'ble Delhi High Court vide para No. 2 also states that registered office of the petitioner companies including these three companies are based in Delhi. Further the balance sheet of all these companies for March 2012, Ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... these companies and in absence of any adverse material, there is nothing available on record before us to show that transaction is not genuine. e. Inspector's report was also relied heavily by the dl AO. With respect to the companies where the loan of Rs. 9.75 crore was obtained from 10 companies undoubtedly they are based in Kolkata as per the information given by the assessee as well as the PAN data shown by these above companies. In all the above companies with respect to the details available with the assessee were furnished before the ld Assessing Officer. However, with respect to the identity the ld Assessing Officer stated that they do not exist at the above address. At page No. 15 and 16 of the assessment order, the ld AO has mentioned reference to inspector's report where in extracts of five companies shows that premises are closed or address is not available. To show this the name of the companies are mentioned M/s. Goodhope Vyapaar Ltd, Jagganath Commodities Pvt. Ltd, M/s. Komal Tyre Pvt. Ltd, M/s. Omkara Agencies Pvt. Ltd and M/s. Skipper Vinimay Pvt. Ltd. We have also perused the list of the companies which are mentioned at page No. 8 of the assessment order where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of sufficiently earlier as well subsequent period of loans. , however, the assessee has consistently asked the ld AO for any further details required to satisfy him but no such query was raised or assessee was asked to submit it. Ld AO also did not seek such statement u/s 133 (6) from the bankers. h. Merely because in the bank statement there are high value transactions where substantial amount are deposited through transfers before the share application money deposited with the assessee may be the first trigger of the investigation. However, it cannot be made basis for making the addition. Admittedly, the transactions are not in cash. On our examination of bank statement, we could not find huge cash deposits in those bank accounts at any time for which the bank statements are laid before us. i. The allegation of the ld Assessing Officer that the investors and lenders were engaged in the activity of providing accommodation entries and bank accounts were opened only for routing transaction through banking channel. The ld AO has not put before any evidence to show that these companies are engaged in providing accommodation entries. In absence of any evidence, it becomes a w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssion and has also argued that the ld Assessing Officer in assessee's own case has accepted the transaction with above companies in Assessment Year 2009-10 and AY 2010- 11 of loan on the submission of similar details. He also stated that the addition is made with respect to those companies only in this year. To show its case, ld AR stated that all these companies have opening balances in their ledger accounts in the books of the assessee. The interest has also been paid on the opening balances; however, it is added for this year but allowed in earlier years. There is no action from the ld AO to treat this companies as bogus in earlier years is made. The above facts remain uncontroverted by revenue. if in the past year the same companies have been accepted as existing and creditworthy and in absence of any change in the facts and circumstances which have not been demonstrated by the ld Assessing Officer, such shifting stands do not support the case of the revenue. o. Mere reliance on several decided case does not help the case of the revenue unless the facts are also matched with those decisions or investigation and inquiry is carried out in similar fashions. There is no inquiry m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with respect to the unusual transactions in the account of the investors as per F & U Ind wing as ld AO has alleged that the investors have high value transactions. The above information so collected and on examination of director or major shareholder of the investor/ lenders company, the ld Assessing Officer should have formed his opinion about the existence of those companies and motive behind such companies. After framing the prima facie opinion, he must exercise vast powers available with him under the Income Tax Act with the Assessing Officer of those companies to investigate the correct facts then should have placed before the assessee to rebut it. Strangely, none of the above exercise has been carried out by the Assessing Officer. The inspector's report relied upon the by the ld AO was not related to the companies who have invested money in the company loan or share capital. Even though such information not obtained/ collected during the assessment proceedings, even such information could also have been collected in subsequent proceedings of penalty etc and placed before either the CIT (A) or coordinate bench as additional evidences. Even that is not being done. Even otherwi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and accommodation providers. According to that letter, the Ld. AO noted that there were 16 entry operators who had given accommodation entries to several persons of which the assessee was also one of them. The Ld. Assessing Officer also issued summons two persons and the AO also issued summons to some other companies. There was no response to those summons, which were served and many of them had been returned unserved. The Ld. Assessing Officer further sent an inspector who reported that no such person or company was available or existing at the address to which summons were issued. In that particular case, the Ld. assessing officer asked assessee to produce the persons and companies from whom it had received share application money which was also not complied with by the assessee. In these facts and circumstances the addition under section 68 was confirmed. However, in the present case there is no statement of any of the persons who have stated that the entries of loan and share application money taken by the assessee are bogus. There does not exist any enquiry made by the Ld. Assessing Officer by issue of summons under section 131 of the income tax act, either to the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elied upon is CIT Vs. Focus Exports Pvt. Ltd 228 Taxmann 88 (Del) wherein, the additions were upheld even the address and PAN no were not provided and in some of the depositors there is immediate withdrawal of money was found. In that particular the Hon'ble High Court drew obvious inference that the assessee had intentionally tried to block and obstruct inquiries knowing the nature of the transactions. In that particular case summons were also issued which remain uncomplied with. The present case is complete lack of inquiry/ investigation on the investment made. f) The next decision relied upon was in case of CIT Vs. MAF Academy Pvt. Ltd where the assessee a private limited company sold shares at a huge premium to an unrelated party and purchased back at less than face value where it was held that even despite production of details such as PAN no and income tax returns may not be sufficient to cross the threshold of satisfaction u/s 68 of the Act and addition can be made on the basis of surrounding circumstances. In that particular decision in para No. 8 modus operandi adopted by the entry operator was also noted. However, in the present case there is no allegation of any e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion Wing and assessee has furnished complete information as could have been submitted by it the ld Assessing Officer has failed to conduct any scrutiny of such documents or further inquiry from external source in any manner, the issue is squarely covered in favour of the assessee. We also draw support from another decision of the Hon'ble Delhi High Court in case of Pr. CIT-7 Vs. Oriental International Company Pvt. Ltd ITA No. 9/2018 dated 08/01/2018 wherein, the High Court has held that if the AO were to conduct his task diligently he ought to have at least sought the material by way of inquiry to discern the fact about the source of the money. In the absence of any such inquiry the Hon'ble Court was of opinion that the findings holding that assessee had not discharged the onus placed upon it by law cannot be considered unreasonable. Thus, Hon'ble High Court stressed the need that AO must have made definite inquiries on the information submitted by the assessee to sustain the addition u/s 68 of the act. 38. We come to the request of the ld CIT DR who vehemently tried to salvage the case of revenue to set aside the matter back to the file of the ld AO. The ld AR vehemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r pedestal than the case before the Hon'ble Delhi High Court. In view of this, we reject the contentions of the ld CIT DR. 40. For the identical facts and circumstances the coordinate bench has dealt with the plethora of judicial precedents of various high courts and coordinate benches have been discussed and dealt with in ITA No. 453/Del/2016 dated 01.01.2018 therefore, we do not find it necessary to deal with all the judicial precedents raised before us. Accordingly, we have dealt with the judicial precedents, which have material bearing on our decision. However, all the decisions cited before us were perused carefully with respect to our decision in this case. 41. The case of the assessee in its favour is also covered by several other judicial precedents submitted before us as under :- Sr No Title Reference 1 CIT V Gagandeep infrastructure private Limited ITA No 1613/2014 dated 20/3/2017 394 ITR 680(Bom) 2 Pr CIT V laxman industrial resources Limited ITA No 169/2017 dated 14/3/2017 ( Del) 3 Pr CIT V Dhanlaxmi Equipmemts Limited ITA No 189/2016 dated 23/10/2017 (Raj) 4 Pr CIT V A R Leasing P Limited ITA no 361/2012 dated 3/7/2017 (Del) 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee company from eight different private companies. During the course of assessment proceedings the assessee furnished all those details as they have been submitted in case of alleged companies in ground No. 2 to 5 of the above appeal. The ld AO made the addition u/s 68 of the Income Tax Act without making any inquiry about the lender companies. The ld CIT (A) in her order held as under :- "Findings 21. As in the case of ground no.7 and 5 in A.Y. 2012-13 and 2013-14 respectively, these grounds also relate to Unsecured Loans. The AO has considered these Unsecured Loans also as unexplained cash credit u/s 68 of the Act. The findings and reasons for making the additions are identical. The AO has also stated in the order that he is relying upon the same reasons. The submissions of the appellant are also on similar grounds. The only difference is that the Unsecured Loans in Ground no.7 and 5 in A.Y. 2012-13 and 2013- 14 respectively had been received from Kolkata based companies whereas the Unsecured Loans in this ground have been received from non Kolkata based companies. Keeping in view the above circumstances, with a view to avoid duplication, in the interest of b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... artly allowed. ITA No. 3224/Del/2016 CO No. 250/Del/2016 Assessment Year 2013-14 54. The ground No. 1 of the appeal is with respect to disallowance of Rs. 579232/- made by the ld Assessing Officer u/s 14A of the Income Tax Act, which was deleted by the ld CIT (A), therefore, revenue is in appeal before us. 55. Admittedly, before us the facts of the case are similar to Assessment Year 2012-13 where no exempt income was earned by the assessee. Therefore, for the reasons given by us in our order for AY 2012-13 deleting the similar disallowance we also confirm the finding of the ld CIT (A). In the result, ground No. 1 of the appeal is dismissed. 56. Ground No. 2 is with respect to the addition of Rs. 6.15 crores being loan taken by the assessee from 4 companies for which the assessee has submitted the confirmation, copy of the bank accounts, income tax return etc however, the ld Assessing Officer has made the addition for the reason that these are Kolkata based companies and have low income. The ld CIT (A) deleted the above addition as assessee has furnished the complete details but the ld Assessing Officer did not carry out any inquiry. The revenue is in appeal on this issue befor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there is no change in the facts of the case. As on the similar circumstances, we have confirmed the finding of the ld CIT (A) in deleting the addition made by the ld Assessing Officer u/s 68 of the Income Tax Act where the assessee has provided the complete details but he AO has not carried out any inquiry or investigation. Therefore, for the same reasons we confirm the finding of the ld CIT (A) in deleting the addition of Rs. 30 lacs u/s 68 of the Act with respect to non Kolkata Companies. In the result grounds, No. 6 and 7 of the appeal of the revenue are dismissed. 62. In the result, appeal of the revenue is dismissed. CO No. 250/Del/2016 AY 2013-14 63. Now we come to the Cross objection of the assessee in CO No. 250/Del/2016 which is supportive in nature with respect to ground No. 1 to 5 as they support the finding of the ld CIT(A). As we have upheld the order of the ld CIT (A) to that extent we allow ground No. 1 to 5 of the cross objection. 64. In the result, cross objection of the assessee is allowed. 65. In the result, appeal of the revenue for Assessment Year 2013-14 in ITA No. 3224/Del/2016 is dismissed and CO No. 250/Del/2016 of the assessee is allowed. 66. Order p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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