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TMI Blog2018 (2) TMI 1754X X X X Extracts X X X X X X X X Extracts X X X X ..... charging of interest under sections 234B and 234D of the I.T. Act, are consequential in nature. - IT Appeal No. 6004 (delhi) of 2013 - - - Dated:- 2-2-2018 - Bhavnesh Saini, JUDICIAL MEMBER AND L.P. Sahu, ACCOUNTANT MEMBER For the Appellant : Somil Agarwal, Adv. For the Respondent : Afiq Ahmad, Sr. D.R. ORDER Bhavnesh Saini, Judicial Member This appeal by assessee has been directed against the order of the Ld. CIT(A)-XVII, Delhi, dated 23rd September, 2013, for the A.Y. 2008-2009, challenging the addition of ₹ 2.44 crores on account of income from undisclosed sources and charging interest under sections 234B and 234D of the I.T. Act, 1961. 2. Briefly, the facts of the case are that assessee filed return of income declaring NIL income. However, the assessee has declared income under section 115JB of the Act and tax have been calculated at ₹ 3,35,949. A search was conducted at the premises of Shri Tarun Goel, C.A. on 15.09.2008 and during the course of search, it was established that he had floated about 90 companies, which are not carrying on any business but providing accommodation entries. A statement was recorded in which he has admitt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee during the course of assessment proceedings. No adverse material was confronted to assessee and no explanation have been called. Therefore, there is no basis to make any addition against the assessee. The assessee relied upon the decision of Hon'ble Supreme Court in the case of Kishinchand Chellaram v. CIT [1980] 125 ITR 713/4 Taxman 29. The assessee received share capital from 15 companies and according to information of assessee, Shri Tarun Goel does not hold any position in any investor company. The assessee is a company and its accounts are duly audited. Assessee produced all the relevant documents before A.O. to prove the genuine credit in the matter which includes balance-sheet of the investors, confirmations, cheque nos, and date along with bank statements from where amounts have been received with their records of income tax department, certificate of incorporation of corporate subscribers. The assessee, therefore, produced all the documents before A.O. to prove the genuine credits in the matter. The initial onus upon assessee have been discharged. The A.O. made independent enquiries from these parties by issuing notice u/s 133(6) of the I.T. Act and it has bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Shri V.K. Verma ₹ 2,00,000/- 14. H.C. Dutta(HUF) ₹ 30,00,000/- 15. Shri Manish Saxena ₹ 5,00,000/- Total Rs.2,44.00,000/- 8.2. The AO therefore issued letters u/s 133(6) to all the parties. The parties were not produced by the appellant. The AO therefore stated that the identity, genuineness and creditworthiness of the parties could not be established and treated the money as income from undisclosed sources. 8.3. The matter was sent to the AO for inquiry vide letter dated 20.05.2011 as under: Your assessment order dated 21.12.2010 u/s 143(3) for the A. Y. 2008-09 in the case of the above assessee is not specific regarding the facts of the case. It appears that the case has been selected for the scrutiny based on the information received from the Investigation Wing after the search in the premises of Shri Tarun Goel, CA on 15.09.2008. You have made an addition of ₹ 2,44,00,000/- as unexplained share application money without specifying the section under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - 09 was shown in books of Company. The assessment was completed u/s 143(3) on 20.12.2010 at an income of ₹ 2,44,00,000/- as against NIL Income. Addition was made on account of unexplained share application money amounting to ₹ 2,44,00,000/- as the assessee company could not established the genuineness and creditworthiness of the parties after providing adequate opportunities. However since the assessee has received share application money of ₹ 2,44,00,000/- which is given as under:- Sr. No. PARTICULARS AMOUNT 1. AUROCHEM ESTATES (P). LTD. 5,00,000 2. BINCER MARKETING COMPANY (P). LTD. 15,00,000 3. BRAIN SOFT INFO CONSULTANT (P). LTD. 5,00,000 4. CRYSTAL INTERNATIONAL LTD. 20,00,000 5. A.S. INTERNATIONAL 12,00,000 6. INDLON HOSIERY (P). LTD. 5,00,000 7. M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gard the notice issued u/s 143(2), it is submitted that first scrutiny notice u/s 143(2) was issued on 25.09.2009 by speed post vide acknowledgment no. ED91040868081. This notice was not received back in this office. The assessee company never raised this objection during the assessment proceedings attended the proceedings after issue of notice. 8.5. The AO in the report has given details of persons who had given share application money. The AO stated that the appellant produced confirmation from all parties but could not produce the parties. Notices u/s 133(6) were issued and reply received in some cases. 8.6. The AO has again stated in the remand report that the creditworthiness of share applicants was not proved and hence addition u/s 68 was made. 8.7. The appellant has given details before me in appellate proceedings which have been considered. The various judicial decisions cited by the appellant have also been considered. 8.8. On perusal of documents submitted by the appellant, it is seen that in the case of Aurochem Estates Pvt. Ltd. ₹ 5,00,000/- have been invested. The return of income shows NIL income. Copy of bank account shows a deposit of ₹ 5, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s are withdrawn ₹ 50 lakhs are deposited on 14.08.2007 and 16.08.2007 and 17.08.2007 ₹ 25 lakhs are withdrawn. Again on 17.08.2007 ₹ 50 lakhs are deposited and on 18.08.2007 ₹ 25 lakhs each are withdrawn. 8.18. Shri V. K. Verma has invested ₹ 2 lakhs. Return of income shows income of ₹ 3,08,483/-. Bank account shows deposit of ₹ 2 lakhs on 14.03.208 and withdrawal on 15.03.2008. Throughout the year balance in the account is not more than ₹ 20,000/-. 8.19. In the case of Zenith Automotive (P) Ltd., ₹ 10 lakhs have been invested. Return of income shows income of ₹ 1,07,770/- Copy of bank account shows deposit and withdrawal of the same amount on 26.06.2007. 8.20. In the case of Lt. Gen. H. C. Dutta, ₹ 30 lakhs have been invested. Return of income shows income of ₹ 49,454/-. The copy of bank account is not legible and full details have not been given. 8.21. In the case of Manish Saxena ₹ 5 lakhs have been invested. Return of income shows income of ₹ 1,46,400/-. Copy of bank account shows deposit of ₹ 2 lakhs and ₹ 3 Lakhs on 16.04.2007 and withdrawal of ₹ 5 Lakhs on 20.04. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oney received by the appellant. If the creditor/subscriber is a company then the details in the form of resolution or PAN identity, etc. can be furnished. As regards the genuineness of the transaction to be demonstrated, the Court held that by showing that the appellant had in fact received money from the said shareholder and the money came from the corpus of that very shareholder the genuineness was duly established. The Division Bench also held that when the money is received by cheque and is transacted through banking or other undisputable channel, the genuineness of the transaction would be proved. Other documents showing the genuineness of the transaction could be copies of the shareholder's register, share application form, share transfer register, etc. As far as creditworthiness or the financial strength of the creditor or subscriber is concerned that can be proved by producing bank statement of the creditor/subscriber showing that it had sufficient balance in its account to enable it to subscribe to the share capital. 8.27. Various case laws given below clearly go towards establishing that any cash credit must be explained by the person in whose books the credits are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO to hold that it is income of the assessee and no further burden lies on the AO to show that income in question comes from any particular source. 8.28. The ratio of the judgement in the case of Nova Promoters and Finance (P) Ltd (Delhi Court) can be applied to this case as the facts are similar. Extracts of the judgement are given below: - For the assessment year 2000-01, the assessee-company filed a return of loss which was processed under section 143(1) accepting the loss. Subsequently, based on a letter from the Director of Income-tax (Investigation) regarding entry operators/accommodation providers, informing the Assessing Officer that there were 16 entry operators who had given accommodation entries to several persons of which the assessee was one, that there were statements recorded from persons confirming the facts, that the assessee had obtained accommodation entries of ₹ 1,18,50,000 from these persons in the garb of share application monies during the relevant year, the Assessing Officer issued notice under section 148 of the Act reopening the assessment of the assessee. In the course of the reassessment proceedings, the Assessing Officer issued a questionna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t been proved genuine and were only instruments used by the assessee to mislead the income-tax authorities. The Commissioner (Appeals) concluded that the Assessing Officer was not justified in making the addition of ₹ 1,18,50,000 under section 68 of the Act. Consequently, he also deleted the addition of ₹ 2,96,250 made for commission paid to the entry providers for obtaining the entries, which had been added under section 68. The Tribunal confirmed the deletion of the additions made under section 68 of the Act. On appeal by the Department: Held, that the assessment was reopened on the basis of information received from the investigation wing of the Department about the existence of accommodation entry providers and their modus operandi in which the assessee was also found to be involved. The Tribunal had recorded, while dealing with the assessee's cross- objections challenging the jurisdiction of the Assessing Officer to reopen the assessment, that the information was specific, not general or vague, and referred to transactions entered into by the assessee during the year under consideration, that as per the information of the investigation wing, the names of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot proper. There was, in this case, no such duty cast on the Assessing Officer. The assessee had been blocking any enquiry by the Assessing Officer at every stage on some plea or the other, including a frivolous plea that no cross-examination was allowed, overlooking that once they filed the affidavits retracting from their earlier statements the plea lost force. The findings of the Tribunal were based on irrelevant material or had been entered ignoring relevant material. The finding that the share application monies had come through account payee cheques was, at best, neutral The question required a thorough examination and not a superficial examination. The fact that the companies which subscribed to the shares were borne on the file of the Registrar of Companies was again a neutral fact. That these companies were complying with such formalities did not add any credibility or evidentiary value, in any case, it did not ipso facto prove that the transactions were genuine. Material was gathered by the investigation wing and made available to the Assessing Officer, who in turn had made it available to the assessee. The Tribunal had ignored relevant material. The Tribunal also erred i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies on the assessee is to establish the identity/existence of such share holdings and once it is established, the assessee is not required to prove anything further. Therefore, these judicial pronouncements are in favour of the revenue and may not help the assessee because the assessee has not proved the identity of such share applicants. 8.30. In the recent judgment of CIT v. M/s Neelkanth Ispat Udhyog Pvt. Ltd (Delhi High Court ITA No. 427/2012), the court has given its decision in favour of the revenue in respect of addition made u/s 68 of the IT Act. The Court observed as under:- It would be clear that the nature of enquiry undertaken by the income tax authorities would vary from case to case, depending on the nature of the material furnished to them by the assessee, when called upon to do so. In this case, the material in the form of addresses and documents pertaining to the share applicants of the assessee were enquired into thoroughly by the AO. He found a pattern in the way funds were moved into the accounts of those investors. The pattern was common to each of them; the amounts were received within a few days or weeks before the shares were allotted; there was n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of. In view thereof the amount credited is considered to be unexplained. I therefore confirm the addition of ₹ 2.44 Crores made by the AO. This ground of appeal is ruled against the appellant.' 3.1. The Learned Counsel for the Assessee reiterated the submissions made before the authorities below. PB-26 is list of share applicants. The A.O. issued notice us 133(6) to all parties and majority of them confirmed making investment in assessee company. Copies of the same are filed at pages 149 to 270 of the paper book. PB-27 to 148 are the documents filed before A.O. in respect of share applicants which are the confirmations, bank statements, audited accounts, ROC, etc., and income tax records to prove the identity, creditworthiness of investors and genuineness of the transaction in the matter. The shares are allotted to all the parties. Statement of Shri Tarun Goel and other documents have not been confronted to the assessee. The A.O. asked the assessee to produce all the investors vide order sheet dated 16th December, 2010 and 20th December, 2010. The assessee filed reply before A.O. on 20th December, 2010 (PB-22) in which the assessee submitted that the time is very short ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted in the case of Shri Tarun Goel that assessee received so much money of ₹ 20 lakhs from M/s. Torus Iron and Steel Co. Pvt. Ltd., which information not available in scrutiny assessment and assessee did not receive any such amount from this company not shown in books. The A.O. in the remand report accepted that assessee filed confirmations from all the parties to prove genuineness of the parties but did not produce the parties for examination. The notice under section 133(6) of the Act were issued to the parties and 07 of the investors have filed their replies directly to A.O. confirming investments in assessee-company. The A.O. therefore, noted in the remand report that it is not denied that assessee had established the identity of these parties but the fact remained that share applicants had never appeared before A.O. Learned Counsel for the Assessee produced all the replies filed by these 07 investors before A.O. in response to notice under section 133(6) from pages 149 to 270 of paper book. All these investors have confirmed making investments in assessee company and filed their affidavits, confirmation copy of PAN, audited accounts etc. The existence of other parties ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 1st April, 2005) held that it is now well settled that where assessee requests the A.O. to issue summons, to enforce attendance of the creditors to establish the genuineness and capacity of the creditors, it is the duty of the A.O. to enforce attendance of creditors by issuing summons. If the A.O. does not choose to issue summons and examine the creditors, he cannot, subsequently treat the loans standing in the name of such creditors as non- genuine nor add the amount thereof to assessee's income. 5.2. Since, in this case, A.O. at the fag end of the assessment asked the assessee to produce the investors and did not issue summons u/s. 131 on the request of assessee to enforce the attendance of the investors, no adverse inference could be drawn against the assessee and no addition could be made against the assessee treating the investment as non-genuine for non-production of parties. The authorities below noted that identity of the investors have not been proved as they have not been produced but the A.O. in the remand report admitted that assessee proved identity of the investors. Since the A.O. did not issue summons under section 131 of the I.T. Act for production of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... record if the investments came from the coffers of the assessee-company. Thus all the points raised by the authorities below to reject the explanation of assessee are not justified and would not support the case of the Revenue. The evidences on record clearly support the explanation of assessee-company that assessee-company proved all the ingredients of Section 68 of the I.T. Act by proving identity of the investors, their creditworthiness and genuineness of the transaction in the matter. 5.4. Decision of Delhi High Court in the case of CIT v. Kamdhenu Steel Alloys Ltd. [2014] 361 ITR 220/[2012] 206 Taxman 254/19 taxmann.com 26 (Delhi) in which it was held as under : 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 Revenue is supposed to make thorough probe before it could nail the assessee and fasten the assessee with such a liability under s. 68; AO failed to carry his suspicion to logical conclusion by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... For the assessment year 2001-02 on scrutiny of accounts, the Assessing Officer found an addition of ₹ 71,75,000 in the share capital of the assessee. The Assessing Officer sought an explanation of the assessee about this addition in the share capital. The assessee offered a detailed explanation. However, according to the Assessing Officer, the assessee failed to explain the addition of share application money from five of its subscribers. Accordingly, the Assessing Officer made an addition of ₹ 35,50,000/- with the aid of section 68 of the Act, 1961 on account of unexplained cash credits appearing in the books of the assessee. However, in appeal, the Commissioner of Income-tax (Appeals) deleted the addition on the ground that the assessee had proved the existence of the shareholders and the genuineness of the transaction. The Income-tax Appellate Tribunal confirmed the order of the Commissioner of Income-tax (Appeals) as it was also of the opinion that the assessee had been able to prove the identity of the share applicants and the share application money had been received by way of account payee cheques. On appeal to the High Court: Held, dismissing the appeals, that t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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