TMI Blog2019 (6) TMI 604X X X X Extracts X X X X X X X X Extracts X X X X ..... r of the share capital without any detail of source of the cash in the hands of the subscriber companies. Assessee even failed to produce books of accounts and vouchers etc. of the assessee company before the AO. In the independent enquiry made by the AO through Inspector, those companies were not found at the addresses given and in response to summons issued, none appeared on behalf of those companies before the AO to explain the source of cash in their hands. It cannot be said that the assessee has discharged its onus of explaining nature and source of the credit as required u/s 68. In the instant case, the AO has not relied only on the report of the Inspector or on the statement of Sri. K.K. Bansal, who was engaged in providing accommodation entries and the AO has taken into consideration the failure of the assessee in explaining the creditworthiness of the share subscriber companies as well as genuineness of the transaction. In view of the recent decision of the Hon ble Supreme Court in the case of NRA Iron Steel Pvt. Ltd. [ 2019 (3) TMI 323 - SUPREME COURT] wherein the decision of Lovely export P Ltd [ 2008 (1) TMI 575 - SC ORDER] has also been considered, we find ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er on the facts in the circumstances of the case, the Ld. CIT(A) has erred holding that the assessee had submitted all books of account before the Assessing Officer, when he had clearly failed to do so. 4. The appellant craves to be allowed to add any fresh grounds of appeal and /or delete or amend any of the ground of appeal. 2. Briefly stated facts of the case are that the assessee company filed its return of income electronically on 14/11/2007 declaring total income of ₹ 2761/-. The case was selected for scrutiny and notice under section 143(2) of the Income-tax Act, 1961 (in short the Act ) was issued on 22/09/2008, which was duly served upon the assessee. During the assessment proceeding, compliance of various notices was made partly by the Authorised Representative appeared on behalf of the assessee. In the assessment completed under section 143(3) of the Act on 21/12/2009, the Assessing Officer made addition of ₹ 1,80,00,000/- under section 68 of the Act for the share application money/share capital shown to be received by the assessee during the year under consideration. The Assessing Officer also made addition of S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. Navodaya Castle Pvt. Ltd. Vs. CIT [2015-TIOL-314-SC-IT] 3. Konark Structural Engineering (P.) Ltd. Vs. Deputy Commissioner of Income Tax [2018] 96 taxmann.com 255 (SC) 4. Konark Structural Engineering (P.) Ltd. Vs. DCIT, [2018] 90 taxmann.com 56 (Bombay) 5. DRB Exports (P.) Ltd. Vs. CIT [2018] 93 taxmann.com 490 (Calcutta) 6. CIT Vs. Nipun Builders Developers (P.) Ltd. [30 taxmann.com 292, 214 Taxman 429, 350 ITR 407, 256 CTR 34] 7. CIT Vs. Nova Promotors Finlease (P.) Ltd. [18 taxmann.com 217, 206 Taxman 207, 342 ITR 169, 252 CTR 187] 8. CIT Vs. Ultra Modern Exports (P.) Ltd. [40 taxmann.com 458, 220 Taxman 165] 9. CIT Vs. Frostair (P.) Ltd. [26 taxmann.com 11, 210 Taxman 221] 10. CIT Vs. NR Portfolio Pvt. Ltd. [2014] 42 taxmann.com 339 (Delhi) [2014] 222 Taxman 157 (Delhi) (MAG)/[2014] 264 CTR 258 (Delhi) 11. CIT Vs. Empire Buildtech (P.) Ltd. (366 ITR 110) 12. CIT Vs. Focus Exports (P.) Ltd [51 taxmann.com 46 (Delhi)/[2015] 228 Taxman 88] 13. PCIT Vs. Bikram Singh [2017] 85 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,00,000/- cash on 24.3.07 5. New Way Steels P.Ltd., L- 119, Shastri Nagar, Delhi-CO Sandeep Kumar 2,178/- 32,50,000/- cash on 5.5.06 6. Paradise Soft Solutions P.Ltd.,1-3/76, Sector-16, Rohini, Delhi-85 Rakesh Kumar Garg 0 3,00,000/- cash on 20.3.07 7. Sai Soft Solutions P.Ltd., I- 3/76, Sector-16, Rohini, Delhi-85 Sandeep Kumar 0 7,50,000/- cash on 24.3.07 8. Gulbarga Associates P.Ltd., L-132, Shastri Nagar,Delhi-35 Sandeep Kumar 0 9,00,000/- cash on 5.5.06 5.1 During assessment proceeding, the Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Inspector of the Officer of Assessing Officer revealed that no business was carried out at the addresses of the share subscriber companies and the share subscriber companies as well as assessee company was found to be controlled by one Sh. K.K. Bansal, who admitted to have been engaged in providing accommodation entries. 5.2 In view of the above observation, the Assessing Officer concluded that the assessee failed to explain creditworthiness of the share subscriber companies and genuineness of the transactions. The relevant paragraph of the assessment order is reproduced as under: The overwhelming circumstantial evidence and the facts discussed above clearly prove that the alleged share holders have no creditworthiness of their own. As discussed above, the identity and creditworthiness have to be seen in their proper perspective in that the persons have either an established source of income or some standing in a particular line of activity. These signs could be the infrastructure or business, their intellectual capital, place of work, staff members, books of accounts, substantive evidence of the business carried by the persons in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee has discharged its onus provided under section 68 of the Act. The Ld. CIT(A) observed that when the money is received by cheque and is transacted through banking or other undisputed channels, to establish the genuineness of the transaction, submission of shareholder register, share application form, share transfer ratio etc. would be sufficient. As far as creditworthiness of the parties is concerned, same 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. Once these documents are produced, the assessee would have satisfactorily discharged the onus placed upon it. In view of the detailed finding in para 3.2 of the impugned order, the Ld. CIT(A) deleted the addition. 5.6 Before us, the Ld. DR has relied on the decision of the Hon ble Delhi High Court in the case of CIT Vs Navodya Castle Private Limited (supra) wherein the matter of addition under section 68 of the Act was restored back to the Tribunal as the assessee was unable to produce the directors and principal officers of the shareholder companies. In the case of CIT Vs. Ult ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d its business and immediately sought to infuse share capital at a premium ranging between ₹ 90-190 per share and was able to garner a colossal amount of ₹ 4.34 Crores, this Court is of the opinion that the CIT (Appeals) and the ITAT fell into error in holding that AO could not have added back the said amount under Section 68. The question of law consequently is answered in favour of the Revenue and against the assessee. 5.7 Further, in the case of CIT versus N.R. Portfolio Private Limited (supra), the Hon ble High Court held that if the Assessing Officer doubts the document produced by the assessee, the onus shift on the assessee to further substantiate the facts or producer share applicant in proceeding. The relevant finding of the Hon ble High Court is reproduced as under: 30. What we perceive and regard as correct position of law is that the court or tribunal should be convinced about the identity, creditworthiness and genuineness of the transaction. The onus to prove the three factum is on the assessee as the facts are within the assessee's knowledge. Mere production of incorporation details, PAN Nos. or the fact that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are 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 nonexistent at the address given, and the premises was owned by some other person. b. The companies at Kolkatta did not appear before the A.O., nor did they produce their bank statements to substantiate the source of the funds from which the alleged investments were made. c. The two companies at Guwahati viz. Ispat Sheet Ltd. and Novelty Traders Ltd., were found to be nonexistent at the address provided. The genuineness of the transaction was found to be completely doubtful. ii. The enquiries revealed that the investor companies had filed returns for a negligible taxable income, which would show that the investors did not have the financial capacity to invest funds ranging between ₹ 90,00,000 to ₹ 95,00,000 in the Assessment Year 2009-10, for purchase of shares at such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be particularly so in the case of private placement of shares, where a higher onus is required to be 27 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. 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 27 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. 5.9 In view of the above judicial decisions, when we examine the facts of the instant case, we find that entire share capital/share premium money of ₹ 1.80 crore has been shown to be receiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te of ₹ 1.8 crore under section 68 of the Act is accordingly sustained. The ground No. 1 of the appeal of the Revenue is accordingly allowed. 6. In ground No. 2, the Revenue challenged deletion of addition of ₹ 6,14,000/-made by the Assessing Officer. According to the Assessing Officer, no books of accounts or vouchers in support of purchase and sales were produced before him, accordingly he added the entire sales turnover of ₹ 6,14,000/- as Income from Other Sources . Before the Ld. CIT(A), the assessee produced books of account and vouchers etc. The Ld. CIT(A) deleted that the addition observing as under: 4.2 I have gone through the discussion in the assessment order and the submissions made by the AR of the appellant and am of the view that the appellant had reasonable cause for not producing before the AO the books of accounts, bills and vouchers. In the interest of natural justice and in exercise of the powers of the CIT (Appeals) u/s 254 (4), these books of accounts, bills and vouchers were required by me to be produced by the appellant. This requirement was duly complied with and after examination of the details, I a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ound of appeal. (2) No evidence shall be admitted under sub-rule (1) unless the [Deputy Commissioner (Appeals)] [or, as the case may be, the Commissioner (Appeals)] records in writing the reasons for its admission. (3) The [Deputy Commissioner (Appeals)] [or, as the case may be, the Commissioner (Appeals)] shall not take into account any evidence produced under sub-rule (1) unless the [Assessing Officer] has been allowed a reasonable opportunity- (a) to examine the evidence or document or to cross-examine the witness produced by the appellant, or (b) to produce any evidence or document or any witness in rebuttal of the additional evidence produced by the appellant. (4) Nothing contained in this rule shall affect the power of the [Deputy Commissioner (Appeals)] [or, as the case may be, the Commissioner (Appeals)] to direct the production of any document, or the examination of any witness, to enable him to dispose of the appeal, or for any other substantial cause including the enhancement of the assessment or penalty (whether on his own motion or on the request of the [Assessing Officer]) under claus ..... X X X X Extracts X X X X X X X X Extracts X X X X
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