TMI Blog2019 (3) TMI 695X X X X Extracts X X X X X X X X Extracts X X X X ..... plain satisfactorily the nature and source of those credits. As the assessee failed to discharge its onus of explaining source and nature of the credit received and failed to establish creditworthiness and genuineness of the transaction as required u/s 68 of the Act, the assessee is liable for addition under section 68 of the Act. Accordingly, we reverse the finding of the Ld. CIT(A) on the issue in dispute and confirm the addition in the hands of the assessee in terms of section 68 - Decided in favour of revenue. - ITA No.4778/Del/2013 - - - Dated:- 8-3-2019 - SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI O.P. KANT, ACCOUNTANT MEMBER For The Department : Shri N.K. Bansal, Sr. DR And Shri S.S. Rana, CIT(DR)3 For The Assessee : Shri S.K. Gupta, CA ORDER PER O.P. KANT, A.M This appeal by the Revenue is directed against order dated 03/06/2013 passed by the Ld. Commissioner of Income-tax (Appeals)-X, New Delhi [in short the Ld. CIT(A)] for assessment year 2006-07 raising following grounds: 1. On the facts and in the circumstances of the case the Ld. CIT(A) erred in deleting the addition of ₹ 4,85,58,000/- made by the AO u/s 68 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h. Surinder Kumar Arora , who stated that he was doing job work of screen printing with M/s Prakash Brothers in Chawri Bazar , New Delhi and he had nothing to do at personal level with M/s Karishma Industries. The Authorised Representative of the assessee requested before the Ld. CIT(A) to produce all the Directors/ CEO of the shareholding companies. 2.4. In view of the submission of the Ld. Authorised Representative of the assessee, the Ld. CIT(A) again directed the Assessing Officer on 2/11/2012 to examine the identity, creditworthiness and genuineness of the transaction in view of the books of accounts, income tax returns and other documents produced before him by the assessee. In the second round of remand proceedings, the Assessing Officer reported that notice u/s 133(6) of the Act issued to all the 10 parties were complied and a statement of the directors as on date, were also recorded and they confirmed the fact of shares applied as well as share premium amounts paid. The Ld. AO recorded two objections in respect of the documentary evidence is produced by the assessee: (i) from the shareholder s bank account it was observed that amount had been received by the parties ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i) The present set of facts clearly indicate that various documents to establish the identity, creditworthiness and genuineness of the shareholders had been provided by the appellant during the remand proceedings. These included the various documents referred to in earlier paragraphs. At the same time, the A.R. of the appellant insisted that he was willing to produce the directors of the various companies from whom the share application amount and the share premium amount had been taken. The directors of the various companies were also produced before the assessing officer and statements were recorded by him confirming these transactions. The assessing officer has not brought on record any adverse material to controvert the arguments of the A.R. of the appellant that it has fully discharged its onus with regard to this amount of ₹ 4,85,58,000/- which has been received by the company as share .190/08-09 Page 29 of 31 Synergy Finlease P. Ltd. application money and share premium amount. On going through the statements of the directors of different companies it has also been confirmed that shares had been allotted to these companies against the amounts paid. Though it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n is to be considered it should be considered in the hands of the shareholders and not in the hands of the company which has received the amount, once the initial onus had been discharged by the appellant and also keeping in view the various subsequent decisions regarding the requirements for discharging the initial onus including the cases of Nipuan Auto P. Ltd. (supra), Nipun Developers Builders (supra), CIT v. Dwarkadheesh (supra), CIT v. Value Capital Services (supra) and others, the facts in the present case clearly indicate that despite all the documents and personal appearance of the directors from whom the share capital had been received, the assessing officer has not pointed out any discrepancy for coming to the conclusion that this amount should be added u/s 68 of the IT. Act. After careful consideration of the facts of the present case as well as the various judicial pronouncements on the issue, I am inclined to agree with the arguments of the A.R. of the appellant that there is no justification for the assessing officer to uphold the addition after the details of the remand report alongwith statements of the directors and examination of various documents. Accord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Exprots (P.) Ltd. (51 taxmann.com 46 (Delhi) (2015) 228 Taxman 88) 6. The Ld. DR further relied on the decision of Hon ble Supreme Court in the case of Konark Structural Engineering (P) Ltd. Vs DCIT (2018) 96 taxmann.com 255 (SC)), decision of Hon ble Delhi High Court in the case of NDR Promoters Private Limited in ITA 49/2018, decision of the Hon ble Supreme Court in the case of Prem Castings Private Limited vs CIT in Special Leave Petition No. 16933/2018. 7. According to the Ld. DR, the assessee failed to discharge his onus of creditworthiness of the subscriber parties and genuineness of the transaction and therefore the Ld. CIT(A) was not justified in deleting the addition. 8. On the contrary, the Ld. Counsel of the assessee filed paper book containing pages 1 to 219. The paper who contains the documents filed before the Ld. CIT(A) in support of claim of discharging onus u/s 68 of the Act. The Ld. Counsel submitted that the assessee has filed all the documentary evidence to satisfy the nature and source of credit and the Assessing Officer has examined the directors of the shareholder companies , who have verified the fact of making investment in the assessee company an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th Ext-II, New Delhi- 110049 AAACH0604 A Vivek Singhal 20,04, 000.00 Q.No. 4 3340 0 KOTAK BANK 017220 000035 53 4 Karishma Industries Ltd 3198/15, 4th Floor, Gali No-1, Sangatrasha n, Paharganj,N. Delhi AACCK3760 C Sudhish Verma 54,12, 000.00 Q.No. 4 9020 0 KOTAK BANK 017220 000019 16 5 Worldlink Telecom Ltd 3198/15, 4th Floor, Gali No-1, Sangatrasha n, Paharganj,N. Delhi AAACW3782 A Deepak Tyagi 30,00, 000.00 Q.No. 4 5000 0 KOTAK BANK 017220 000099 33 6 Brite Industrial Resources Pvt. Ltd. C-7/230, III Floor, Sector-7, Rohini, Delhi- 110085 AAACB4877 H Vi render Jain 54,24, 000.00 Q.No. 4 9040 0 KOTAK BANK 017220 000100 50 7 Pitambnra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount 3. Audited Balance Sheet 4. Bank Statement for the period 01.02.2006 to 21.03.2006 5. List of Directors 6. Assessment order for AY 1989-1990, AY 2005-06 and AY 2007-08 7. E-filed ITR-V for AY 2012-13 8. Bank Statement for the period 01.04.2009 to 31.03.2010 9. List of Signatory details downloaded from MCA PortalWe have gone through all the documents and found that creditworthiness and genuineness of the transaction is not getting established from these documents. 11. The documents in relation to share application money of ₹ 56,40,000/-from M/s Vouge Leasing and Finance Private Limited have been filed at pages 46 to 64 of the paper book. The documents include audited balance sheet and bank statement for the period from 01/02/2006 to 23/03/2006 and for the period from 01/04/2009 to 31/03/2010. On perusal of the profit and loss account available on page 50 of the paper book, we find that the alleged share applicant has shown Nil income from consultancy , interest income of ₹ 39,014/-and profit on sale of investment at ₹ 2,51,020/-. Against said receipt, expenses on audit fees, bank charges, filing fee etc including ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d have been filed from page 65 to 82 of the paper book. The documents include balance sheet and bank statement for the period from 01/12/2005 to 05.01.2010 alongwith list of signatories etc. downloaded from the Ministry of Company Affairs Portal. On perusal of the profit and loss account on page 69 of the paper book, it is seen that there are rows for the income from consultancy fee, interest on loan and profit on sale of investment, which are identical to the stream of Revenue shown in the case of M/s Vogue Leasing and Finance Private Limited. During the year under consideration no income has been shown from consultancy fee or interest on loans and the only income of ₹ 1, 48,828/- has been shown from the profit on sale of investments. On the expenditure side nominal expenditures on different heads like audit fee (Rs 2,500/-); printing in a stationary ( ₹ 3,990/-) , bank charges, general expenses, postage and Telegraph etc have been debited resulting into loss of ₹ 7,322/- during the year under consideration. On perusal of the balance sheet on page 68 of the paper book, we find that liability and assets have been shown more or less similar to M/s Vogue Leasing and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f ₹ 4,62,760/- has been shown, and thus overall loss has been shown. In the balance sheet as on 31/03/2006 on liability side , paid-up share capital of ₹ 8,52, 00,000/-share premium of ₹ 16,18,00,000/-under reserve and surplus has been shown . On the asset side, investment in equity shares of companies has been shown as ₹ 35,66,54,000/- loan advances, share application money paid of ₹ 49,00,000/- loans of ₹ 10,60,72,542/-have been shown. The investment in equity shares is mostly in private limited companies. The copy of bank accounts available on page 92 to 96 is not found to be legible but in this also money has been withdrawn immediately after deposit in the bank account. The confirmation filed by the alleged share applicant is undated and without any address of the alleged share applicants. In the list of the directors, two names have been provided namely Sh. Rajesh Kumar Mishra and Sh. Pradeep Kumar Sharma, both having same address at 3198/15,Gali No. 1, 4th Floor , Sangatrashan, Paharganj, New Delhi - 110055 i.e. address of directors provided in the case of another alleged share applicant M/s SR Cables Private Limited. Other documents filed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -. Against the said income, nominal expenses under different heads including audit fees, bank charges, post and telegraph, printing and stationery etc amounting to ₹ 2,23,950/-has been shown. The expenses also include salary of ₹ 98,950/-. A nominal profit of ₹ 19,601/- has been shown in the profit and loss account. On perusal of the balance sheet as on 31/03/2006, available on page 128, we find that on liability side the paid-up share capital of ₹ 1,19,58,400/- share premium of ₹ 10,22,19,300/-under reserve and surplus has been shown. On the asset side investment in shares of the companies has been shown at ₹ 7,03,69,511/-loans and advances of ₹ 59,22,490/-have been shown and debtors of ₹ 7,56,73,007/- are shown. We find that the debtor appearing are M/s Hillfridge Investment Limited ( ₹ 7,49,12,000/-) and M/s Vogoue Leasing and Finance at Ltd. ( ₹ 7,61,000/-) , which are other two alleged share applicants in the present case before us. The bank statement available on page 132 of the paper book again shows the same trend of deposit of particular amount and withdrawal of the same amount immediately within one or two days l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aper book, we find that income from consultancy fees has been shown at nil, profit on sale of investment has been shown at ₹ 1,76,752/- and interest on loan has been shown at ₹ 2,325/-. Against which expenses of ₹ 1,73,759/- which includes expenses on bank charges, auditors remuneration, office rent ( ₹ 4500/-), salary of ₹ 63,685/-. A nominal profit of ₹ 5318/- has been shown for the year under consideration. On perusal of the balance sheet available on page 161 alongwith schedule on page 164, we find that on liability side paid-up share capital of ₹ 1,57,93,200/- and share premium of ₹ 14,12,38,800/-has been shown. On asset side, investment in shares of mainly private limited company has been shown ₹ 815,30, 93,477/- and share application money of ₹ 4,00,000/- has been shown. On perusal of the bank statement for the period filed similar trend of deposit and withdrawal of the equal amount within short interval has been shown leaving a nominal balance of ₹ 4,919/-. The list of the directors contain two names :- Sh Ajay Garg having address at 209, Bhanot Plaza-II, 3, DB Gupta Road , Paharganj, New Delhi -110055 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; 68, 452/- interest of ₹ 7,123/-and profit on sale of investment of ₹ 1,12,450/-. On expense side, administrative expenses of ₹ 2,44,873/- have been shown against advertisement expenses, auditor, bank charges, printing stationary , salary ( ₹ 39,900/-). During the year loss of ₹ 1,23,832/- has been shown. On perusal of the balance sheet as on 31/03/2006, available on page 195 alongwith schedule on page 197 of the paper book, we find that on liability side paid-up share capital of ₹ 9,99,80,000/-and share premium of ₹ 4, 87,50,000/-has been shown. On asset side investment in an unquoted equity shares of ₹ 14,01,37,500/-has been shown along with loan of ₹ 25,05,525/-. On perusal of the bank statement available on page 199, we find that deposit of ₹ 25, 02,000/- is appearing on the bank account on 18 March, 2006 and corresponding amount of ₹ 25,00,000/- has been withdrawn by way of clearing on 20/03/2006. Similarly amount of ₹ 22,50,000/-has been deposited and withdrawn within short interval of two days. Similarly on 23/03/2006 payment of ₹ 1,25,50,000/-was received from UGS Finance and on same date payme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from consultancy, interest on loan and profit on sale of investment, in case of all the alleged share applicants. No dividend income from investment in private limited companies has been shown. (iii) Salary expenses of these companies are around ₹ 1 lakh per annum, which shows that not more than one or two employees must have been employed by these companies that too for clerical services. (iv) The income and potential of the these alleged share applicant do not justify, the high amount of share premium appearing in their reserve and surplus account. (v) All the alleged share applicants have made investment in shares mostly of the private limited companies , most of which are common. (vi) The pattern of receipt of money and immediate withdrawal of almost equal amount is identical in all the alleged share applicants. (vii) One common person is director in two or three alleged share applicant companies. (viii) One of the most glaring observation is that there are only two common address of the director s in case of all alleged shareholders. The two common addresses are located in Paharganj , New Delhi as under: (a) 209, Bhanot Plaza-II, 3 DB Gupta Road , P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . All the circumstances manifests that these are all paper companies not having sufficient worth and created for providing entries of share application money or share capital or loans by way of accommodation entries. 24. The Ld. Counsel of the assessee has submitted that all the share applicants have been examined by the Assessing Officer in remand proceedings and no adverse comments have been made and thus he should be precluded from agitating the issue before the Tribunal. In support of the contention the Ld. Counsel has relied on the decision of the coordinate bench in the case of ACIT vs. RPG Credit and Capital Limited in ITA No. 4688, 4690/Del/2012. The Tribunal in the said case held that the department cannot raise any grievance when the Assessing Officer even in the remand proceedings fails to point out any justification for sustaining addition and under those circumstances appeals filed with the Revenue were held to be carelessly and frivolously filed. 25. But in the instant case, the Ld. Assessing Officer during the remand proceedings clearly pointed out that the person appeared before him were the current directors of these alleged the share applicant companies and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , who has relied upon decisions of the Delhi High Court in Commissioner of Income Tax Vs. Nova Promoters and Finlease (P) Ltd. [2012] 342 ITR 169 (Delhi), Commissioner of Income Tax vs.. N.R. Portfolio Pvt. Ltd., 206 (2014) DLT 97 (DB) (Del) and Commissioner of Income Tax-ll vs. MAF Academy P. Ltd. 206 (2014) DLT 277 (DB) (Del). The aforesaid decisions mentioned above refer to the earlier decisions of Delhi High Court in Commissioner of Income Tax vs. Sophia Finance Ltd. [1994] 205 IIR 98 (FB)(Delhi), CIT vs. Divine Leasing and Finance Limited [2008] 299 IIR 268 (Delhi) and observations of the Supreme Court in CIT vs. Lovely Exports P. Ltd. [2008] 319 ITR (St.) 5 (SC), 12. The main submission of the learned counsel for the assessee is that once the assessee had been able to show that the shareholder companies were duly incorporated by the Registrar of Companies, their identity stood established, genuineness of the transactions stood established as payments were made through accounts payee cheques/bank account; and mere deposit of cash in the bank accounts prior to issue of cheque/pay orders etc. would only raise suspicion and, it was for the Assessing Officer to conduct furth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the enquiries and investigations reveal that the identity of the creditors to be dubious or doubtful, or lack credit-worthiness, then the genuineness of the, transaction would not be established. In such a case, the assessee would not have discharged the primary onus contemplated by Section 68 of the Act. 29. After examining the facts of above referred case, in view of the principles on the issue of applicability of section 68 in the cases of credit of share capital/premium, the Hon ble Supreme Court reversed the orders of Hon ble High Court, ITAT and 1st appellate authority and restored the order of the Assessing Officer observing as under :- 12. In the present case, the A.O. had conducted detailed enquiry which revealed that: i. There was no material on record to prove, or even remotely suggest, that the share application money was received from independent legal entities. The survey revealed that some of the investor companies were non-existent, and had no office at the address mentioned by the assessee. For example: a. The companies Hema Trading Co. Pvt. Ltd. and Eternity Multi Trade Pvt. Ltd. at Mumbai, were found to be non-existent at the address gi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... how they had invested such huge sums of money In the Assesse Company - Respondent. Clearly the onus to establish the credit worthiness of the investor companies was not discharged. The entire transaction seemed bogus, and lacked credibility. The Court/Authorities below did not even advert to the field enquiry conducted by the AO which revealed that in several cases the investor companies were found to be non-existent, and the onus to establish the identity of the investor companies, was not discharged by the assessee. 14. The practice of conversion of un-accounted money through the cloak of Share Capital/Premium must be subjected to careful scrutiny. This would be particularly so in the case of private placement of shares, where a higher onus is required to be placed on the Assessee since the information is within the personal knowledge of the Assessee. The Assessee is under a legal obligation to prove the receipt of share capital/premium to the satisfaction of the AO, failure of which, would justify addition of the said amount to the income of the Assessee. 15. On the facts of the present case, clearly the Assessee Company - Respondent failed to discharg ..... X X X X Extracts X X X X X X X X Extracts X X X X
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