TMI Blog2018 (8) TMI 983X X X X Extracts X X X X X X X X Extracts X X X X ..... the Ld. D.R. is rejected that additional evidences should not be admitted by the Ld. CIT(A). Therefore, the totality of the facts and circumstances of the case, clearly prove that the assessee discharged its initial onus to prove the identity of the investor companies, their creditworthiness and genuineness of the transaction in the matter. No material is produced before us to rebut the finding of fact recorded by the Ld. CIT(A). - Decided against the revenue. - ITA No.3342/Del/2013 - - - Dated:- 9-7-2018 - SH. BHAVNESH SAINI, JUDICIAL MEMBER AND SH. L.P. SAHU, ACCOUNTANT MEMBER For the Revenue- Shri Vijay Varma, CIT-D.R. For the Assessee- Shri S.R. Wadhwa, Advocate ORDER PER BHAVNESH SAINI, J.M. This appeal by the Revenue has been directed against the order of Ld.CIT(A)-XXI, New Delhi dated 15.03.2013 for AY 2009-10, challenging the deletion of addition of ₹ 16.95 crores u/s 68 of the of the Income Tax Act, 1961 (in short Act ). 2. Briefly, the facts of the case are that the assessee company filed return of its income on 29.09.2009 declaring income of ₹ 69,860/-. The AO issued a notice u/s 143(2) of the Act to the assessee but no comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the companies reflects bare minimum or no business activities. g) Most of the entities are audited by same persons have similar standing, raises suspicion on basic existence of such entities. These entities may be mere paper companies. h) Why would such companies forward money to the assessee for its investment in Mutual Funds for the assessee, when such activities could have been done by such investors themselves? i) Why are such investors sacrificing their own profits for the sake of assessee; on such investments when they are not related enterprises on account of being companies, do not have mutual love affection? 3. The AO noted that the assessee has failed to prove creditworthiness of the investor companies and genuineness of the transactions u/s 68 of the Act, therefore, addition of ₹ 16.95 crores was made to the returned income. This addition was challenged before Ld. CIT(A). 4. The assessee filed written submissions before Ld.CIT(A which is forwarded to the AO for filing the Remand Report. The Remand Report is reproduced in the appellate order as under:- 1. In this Para the assessee has stated that formal notice u/s. 143(2) was issued by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quiry/query in the case, therefore the AO made a proposal for provisional attachment u/s. 281-B of IT Act on 3-10-2011. In his letter he has stated that there would be all possibilities that this case will be completed ex-parte resulting in huge demand as the assessee shown huge investments to the tune of ₹ 20.82 crores in Mutual Funds. Approval for which has also been granted by CIT The AO vide his letter ete dt 31.102011 made provisional attachment by writing letter to the Manager, HDFC Bank. Glujarat. As per note sheet entry dated 31. 10.2011. Shri Ashish Jain. CA attended the proceedings and filed Power of Attorney only. He was requested to file P LA/c, B/Sheet, computation of R.I. and he was also requested to justify the delay in attending the proceedings. The case was adjourned to 3.11.2011. As per record a letter dated 3.11.2011 has been filed in which it is stated that due to shifting of office the company has changed his registered office and also the name of the company has been changed from XO Infotech Limited to Saral Mining Limited w.e.f 17.8.2011. However, no details have been filed by the assessee. AO again issued a detailed questionnaire to the assessee o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was again refixed for 24.8.2011, 26.8.2011 far 2.9.2011, in bath dates no. body attended nor any reply has been filed by the assessee against the statutory notice issued u/s. 143(2)/142(1) along with detailed questionnaire. Therefore, the contention of the assessee is not correct as the case was fixed between the period August 2011 to. Oct., 2011. 4. The assessee's contention is bath correct because during the whale proceeding the assessee has failed to. file complete details as per questionnaire issued an 17-01- 2011 to. 29-12-2011 till the date of passing assessment order (almost one year). 5. From the above facts, it is apparent that the notices were being served on the assessee regularly and he was deliberately avoiding the proceedings by mis-leading the facts. 6. As regards the admission of additional evidence, the same is not admissible under Rule 46A of IT Rules, 1962 as none of the following circumstances wherein additional evidence can be permitted under Rule 46A apply to the case of the appellant. i) The AO did not refuse to admit said evidence as the same were not at all produced by the assessee during the assessment proceedings. ii) The Assessee was n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income Tax Officer should be well aware of the points on which he desires the assessee to produce evidenced issue of such notice. 4. The Commissioners and the Inspecting Assistant Commissioners should make it a point to see during the course of surprise or regular inspections as to whether the notices have been issued mechanically or not. In case some officers are in the habit of issuing notices mechanically, they may be suitably pulled up. 5. The Board desire that the contents of the above instructions may be brought to the notice of all the officers working in your charge. Instruction: No./367. dated 18-11-1980 (Source: 114th Report of P.A.C (1981-82) (Seventh Lok Sabha) (pp 14- 15) Thus this in itself demolishes the absurb reasoning assigned by the AO rendering the notice as the one issued mechanically and indiscriminately which did not specified any of his requirement. In the latter part in this para the AO has simply extracted selective portion from the impugned assessment order but has tacitly avoided offering any comments on the fact that the jurisdiction over the case was ested with the AO only in the middle of August, 2011. Needless to state that the AO ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o state that first questionnaire issued on 17/1/2011 remained uncomplied with. On the contrary, the first and foremost questionnaire was issued only on 14/11/2011 and the appellant has attended on each and every hearing and submitted replies vide letters dated 23-11-2011, 28-11-2011, 5-12-2011, 17-12- 2011 28-12-2011. The present AO has not offered any comments on such compliances and has simply rejected appellant's contention in a quite casual manner. 9. Vide para 5 the AO has stated that the notices were being served on the appellant and they remained uncomplied with. In this context, it is submitted that the remark of the AO is quite vague and he has not offered any comments on the additional evidences produced by the appellant. 10. Vide para 6, the AO has objected to admission of additional evidence saying the same is not admissible under Rule 46A of the IT Rules, 1962, without pin-pointedly mentioning as to how the appellant is not entitled to produce the same. In this context it is submitted that as stated in appellant's letter dated 3-7-2012, the then AO made an order appealed against, without giving sufficient opportunity to the appellant to adduce evidence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder:- 4. Decision on admission of additional evidence:- I have gone through the finding of AO in the Remand Report and appellant's rejoinder. In this regard vide letter dated 3.7.2012 appellant has submitted that in between the period from August, 2011 to 31-10-2011 no intimation was received from AO. Furthermore, as various written eplies were submitted vide letters dated 23.11.2011, 28.11.2011, 5.12.2011, 17.12.2011 and 28.12.2011 and order u/s. 143(3) of the IT Act w3as passed as on 30.12.2011, wherein, in para 2 and 23 it has been mentioned that appellant has purposefully delayed the attendance in the assessment proceedings. I have considered the submission in this regard and I found that additional evidences submitted by the appellant are very much essential to adjudicate the matter as these are the evidences which should have been taken on the record by the AO to decide the issue. I have considered the objection of the AO and in my considered opinion additional evidences are being admitted under Rule 46A(1)( c) of IT Rules. In this regard vide letter dated 3.7.2012 appellant has submitted all the circumstances under which he was prevented by sufficient cause to pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Trading Co. Ltd 2500187-00 510 -do- 1020828-36 511 5. Shanti Tradelink Pvt. Ltd. -do- 5000044-00 2010619-75 214 215 6. Shalibhadra Steels Pvt. Ltd. 5000044-00 446 12 -do- 2010372-62 447 7. Shankheshwar Metals Pvt. Ltd. 5000076-00 234 -do- 2010425-29 235 8. Amraworld Agrico Ltd. 1282087-15 537 -do- 3137906-15 538 -do- 8137906-15 539 -do- 3137906-15 540 9. Amardeep Industries Ltd. 1270698-07 541 -do- 3178827-50 542 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 584 -do- 5109029-02 585 -do- 3278609-02 586 18. Suchak Trading Co. Ltd. 201052-39 123 -do- 5010048-39 124 19. Corporate Strategic Allianz Pvt Ltd. 3300344-03 379 -do- 1350116-49 587 -do- 5339173-75 588 -do- 3356623-75 589 6.1 All the bank statements are available at various pages of Paper Book, which were perused by me and were sent to AO during the remand proceedings. Furthermore, Id. AR of the appellant has also submitted that AO has drawn inference on suspicion, conjectures and surmises and has brushed aside all the written and oral submissions made during the course of assessment proceedings and addition of Rs.l6.95 crores has been made without cross verification of the fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant has submitted five replies on various dates, but no independent inquiry has .been conducted u/s. 133(6) of the Act so as to disapprove the claim of the appellant. in this regard vide letter dated 2.11.2012 Id. AR of the appellant has relied on the judgment of Hon'ble Supreme Court in the case of CIT- II, New Delhi vs. Khamdhenu Steel Alloys Limited, wherein, Hon 'ble Supreme Court has affirmed the decision of Hon'ble Delhi High Court in the above mentioned case, reported at 248 CTR 33. The reply of the appellant is reproduced hereunder:- In addition to what is being submitted early the appellant most respectfully craves liberty to place on record copies judgments of the order passed by Honorable Supreme Court of India rendered in the case of CIT-II, New Delhi versus Khamdhenu Steel Alloys Limited in petition for special leave to Appeal in CC 15640/2012 arising from the judgment and order dated 23.12.2011 in ITA No. 927/2009 of the High Court of Delhi at New Delhi (As reported in 248 CTR 33). The appellate strongly relies on the judgment of jurisdictional High Court of New Delhi as affirmed by the Honorable Supreme Court of India being binding on the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l details were made available to AO during the course of assessment proceedings as well as during the course of remand proceedings, AO has not bothered to conduct any inquiry in this regard. So, there was a clear lack of inquiry on the part of the AO, though, all the details were furnished before AO during the course of assessment proceedings as is evident from reply filed by the appellant on five dates as mentioned above. So, appellant's reliance on the judgment of Hon'ble Supreme Court in the case of Khamdhenu Steel Alloys Limited is appreciated. Furthermore, judgment of Hon'ble Delhi High Court in the case of Gangeshwari Metal Pvt. Ltd., as discussed, clearly applies on the facts of the case. So, in my considered opinion addition made by AO amounting to ₹ 16,95,00,00/- deserves to be deleted. Grounds No.1, 2 and 3 of the appeal are allowed. 7. We have heard the learned Representatives of both the parties and perused the material on record. 8. The Ld. D.R. relied upon the order of the A.O. He has submitted that there were no compliance to the statutory notices at assessment stage. Notice under section 133(6) were issued which were partly complied by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... remand proceedings). It is well settled law that no source of the source is to be proved by the assessee. he has filed chart of all the investor companies supported by confirmation, ledger account, PAN, acknowledgment of ITR, balance-sheet, annual accounts, share application form and bank statements of all the investor companies. He has submitted that since assessee company is a listed company, therefore, permission of SEBI for allotment of additional shares were also obtained. Copies of the same are filed in the paper book. Learned Counsel for the Assessee submitted that it was explained before the authorities below that assessee-company is a listed company and all the issuance of shares are done as per SEBI guidelines and during the year, assessee company has increased its paid-up equity share capital from ₹ 217.284 millions to ₹ 386.784 millions, adding the value of ₹ 169.50 millions and also specified manner of issue of warrants. The details of shareholders whose share warrants are converted in the equity shares and against paid-up value were brought to the notice of the authorities below. All the details were furnished before the authorities below. However, A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dgment of Hon ble jurisdictional Delhi High Court in the case of CIT Ors. Vs. Five Vision Promoters Pvt. Ltd., Ors. (2016) 380 ITR 289 (Del.) in which it was held as under : Provisions of s 68 can be invoked only where assessee offers no explanation at all or explanation offered is unsatisfactory; and addition thereunder can be made only on that condition. 9.6. Judgment of Hon ble jurisdictional Delhi High Court in the case of CIT vs. Shiv Dhooti Pearls Investment Ltd., (2016) 237 Taxman 104 (Del.) in which it was held as under : In terms of section 68, assessee is liable to disclose only source(s) from where he has himself received credit and it is not burden of assessee to show source(s) of his creditor nor is it burden of assessee to prove creditworthiness of source(s) of sub- creditors. 9.7. Judgment of Hon ble jurisdictional Delhi High Court in the case of CIT vs. Gangeshwari Metal (P.) Ltd., (2013) 30 taxmann.com 328 (Del.) in which it was held as under : Where assessee in support of transaction of receipt of share application money brought on record various documents such as names and addresses of share applicants, etc., no addition could be mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition against the assessee without application of mind. When the assessee filed all the documents before the Ld. CIT(A) and requested for admission of the additional evidences, same were again referred to the A.O. for examination/verification and comments. The A.O. however, did not verify and examine the additional evidences and merely objected to the admission of the same. The Ld. CIT(A) on perusal of the same, correctly noted that these documents are relevant and essential for disposal of the matter. The Ld. CIT(A) vide impugned order admitted the additional evidences under Rule 46A of the I.T. Rules. However, the Revenue Department did not challenge those finding of fact recorded by the Ld. CIT(A) for admitting additional evidences at appellate stage. No grounds of appeal have been raised by the Revenue. No material is produced before us to contradict the findings of fact recorded by the Ld. CIT(A). In the absence of any challenge to the admission of additional evidences which were already part of the record of the A.O, the contention of the Ld. D.R. is rejected that additional evidences should not be admitted by the Ld. CIT(A). In this case, it is an admitted fact that assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot filed and that they did not have any assets for business. However, the finding of fact recorded by the Ld. CIT(A) clearly prove that the investor companies have their creditworthiness to make investment in assessee company and the copies of the bank statement and audited accounts have been filed on record. Therefore, finding of fact recorded by the Ld. CIT(A) have not been rebutted by the authorities below. The details furnished by the assessee also shows that prior to assessment year under appeal, 11 investor companies have also made investment in assessee company in earlier years which would strengthen the case of the assessee that it has received the amount from genuine parties having creditworthiness. There is no material on record to disprove the explanation of assessee. The Ld. CIT(A) was, therefore, justified in holding that assessee proved creditworthiness of the investors and genuineness of the transaction in the matter. We, rely upon the following decisions. 10.1. Decision of Hon ble jurisdictional High Court in the case of CIT vs. Kamdhenu Steel and Alloys Ltd., Ors. 361 ITR 220 (Del.) in which it was held as under : Once adequate evidence/material is give ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it was held as under : We have examined the position, we find that the shareholders are genuine parties. They are not bogus and fictitious therefore, the impugned order is set aside. 10.5. Decision of Hon ble jurisdictional High Court in the case of Divine Leasing Finance Ltd., 299 ITR 268, in which it was held as under : No adverse inference should be drawn if shareholders failed to respond to the notice by A.O. 10.6. Decision of Hon ble M.P. High Court in the case of CIT vs. Peoples General Hospital Ltd., (2013) 356 ITR 65, in which it was held as under : Dismissing the appeals, that if the assessee had received subscriptions to the public or rights issue through banking channels and furnished complete details of the shareholders, no addition could be made under section 68 of the Income-tax Act, 1961, 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 the company's own income from undisclosed sources. It was nobody's case that the non- resident Indian company was a bogus or non-existent company or that the amount subscribed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eleted 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 the deletion of addition was justified. 10.8. Decision of Hon ble jurisdictional High Court in the case of CIT vs. Winstral Petrochemicals P. Ltd., 330 ITR 603, in which it was held as under : Dismissing the appeal, that it had not been disputed that the share application money was received by the assessee-company by way of account payee cheques, through normal banking channels. Admittedly, copies of application for allotment of shares were also provided to the Assessing Officer. Since the applicant companies were duly incorporated, were issued PAN cards and had bank accounts from which money was transferred to the assessee by way of account payee cheques, they could not be said to be non-exis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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