9911796707
TMI Blog2019 (8) TMI 891X X X X Extracts X X X X X X X X Extracts X X X X ..... 4,440/- as against return of income of Rs. 1,64,440/-. 2. For that the CIT(A) has erred in passing exparte order dismissing the appeal without giving proper opportunity of being heard to the appellant. 3. For that the CIT(A) has violated the principles of equity, natural justice and fair play which requires proper and adequate opportunity of being heard. 4. For that the CIT(A) has erred in affirming initiation of proceedings u/s.147/148 of the Income tax Act. 5. For that the CIT(A) has erred in holding that the Assessing Officer has followed the guideline laid down by the Hon'ble Supreme Court in the case of GKN Driveshaft and has accordingly disposed of the objection of the appellant to the initiation of proceedings. 6. For that the CIT(A) has erred in holding that the case of the appellant is covered by main provision 147 and not by the first proviso. 7. For the Ld. CIT(A) has erred in not holding the initiation of proceeding u/s 147/148 to be barred by limitation. 8. For that the Ld CIT(A) has erred in holding that there has been proper service of notice u/s 148(1) and therefore reassessment proceeding has been validly initiated. 9. For that the Ld CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee has raised multiple grounds in its appeal but the grievance is consisting of three issues i.e. (i) initiation of proceedings u/s.147 of the Act (ii) confirmation of addition of Rs. 3,65,00,000/- made u/s.68 of the Act and (iii) the order passed by the CIT(A) is against the principle of natural justice. 4. Brief facts of the case are that the assessee is a Pvt Ltd Company and filed return of income u/s.139(1) of the Act on 11.10.2010. subsequently, the information was received that the bank account of the assessee has been credited by Rs. 55 lakhs from the three companies, namely, M/s Accord Sales Pvt Ltd, M/s Focus Trade Impex Pvt Ltd and M/s Safari Tradex Pvt Ltd during the year F.Y. 2009-10, however, source of the sum were not explained. Accordingly, reasons were recorded for reopening the case and notice u/s.148 of the Income tax Act, 1961 dated 31.03.2017 was issued and served on the assessee. In compliance to the notice the assessee filed written submission stating that the original return filed u/s.139 of the Act, dated 11.10.2010 may be treated as return filed in response to the notice u/s.148 of the Act. Later on the other statutory notice issued to the assessee an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntical. Copies of some of such identical confirmations are annexed to this order as annexure-1 containing 1 to 30 pages and the same are part of the order. Also, these confirmations contain only a part of the bank account statement of these entities showing only the transaction relating to share capital transferred to the assessee. It is also seen that these" confirmations have been posted from their respective places mostly on same day. In response to letter dated 22.12.2017 the A.R. of the assessee appeared on 28,12.2017 and stated their earlier contention. On the issue of similar nature pf confirmations received, the A.R. stated that he cannot say anything about confirmations sent by other entities. Such similarities in confirmation cannot be just coincidence. It is simply beyond human probability that different companies located at different addresses are sending in identical confirmation in the same language and typing font. It is certainly an outcome of an arrangement of dubious nature. Therefore, such confirmations cannot be relied upon. Rather it shows the dubious arrangement behind such transactions through which unaccounted money is being routed through these corpor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 148 of the Act. It is matter of record that the appellant company is in receipt of share capital & share application money from the aforesaid 3 companies about which there is no explanation in respect of identity, creditworthiness and genuineness of transaction as required under section 68 of the Act. 2.5 The submissions have been considered carefully in the light of the provisions of the Income tax Act, Constitution of India as well as the legal pronouncements on the subject by the Apex Court and various High Courts In this regard, it would be pertinent to look into the provision of this section which is extracted as under :- Income escaping assessment. 147. If the [Assessing] Officer ^[has reason to believe^] that any income chargeable to tax has escaped assessment/^ for any assessment year, he tl may, subject to the provisions of sections 148 to 153, assess or reassess^ such ^ income ^land also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings^ under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere an assessment has been made, but'- (i) income chargeable to tax has been underassessed ; or (ii such income has been assessed at too low a ratell; or (iii) such income has been made the subject of excessive relief under this Act; or (iv) excessive loss or depreciation allowance or any other allowance under this Act has been computed;] c) where a return of income has not been furnished by the assessee or a return of income has been furnished by him and on the basis of information or document received from the prescribed income-tax authority, under sub-section (2) of section 133C, it is noticed by the Assessing Officer that the income of the assessee exceeds the maximum amount not chargeable to tax, or as the case may be, the assessee has understated' the income or has claimed excessive loss, deduction, allowance or relief in the return;] (d) Where a person is found to have any asset (including financial interest in any entity) located outside India.] ^[Explanation 3.-For the purpose of assessment or reassessment!! under this section, the Assessing Officer may assess or reassess the income in respect of any issue, which has escaped assessment, and suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was relevant material on which a reasonable person could have formed a requisite belief. Whether the materials would conclusively prove the escapement is not the concern at that stage. This is so because the formation of belief by the Assessing Officer is within the realm of subjective satisfaction of him as held by the Supreme Court in the case of Raymond Woollen Mills Ltd. v. ITO M999] 236 ITR 34. Further, it was held what is to be seen "whether there was prima facie some material on the basis of which the department can reopen the case. The sufficiency or correctness of the material is not to be considered at this stage." If the Assessing Officer for whatever reason has reason to believe that income has escaped assessment it confers jurisdiction to reopen the assessment. It is, however, to be noted that both the conditions must be fulfilled if the case falls within the ambit of the proviso to section 147. The case at hand is covered by the main provision and not the proviso. 2.8 So long as the ingredients of section 147 are fulfilled, the Assessing Officer is free to initiate proceeding under section 147 of the Act. While issuing the notice u/s.148 of the Act, for the purpos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was mere change of opinion on the part of the Assessing Officer and as such, the reassessment proceedings could not have been validly initiated. The Tribunal upheld the decision of the Commissioner (Appeals) which was subsequently upheld by the Delhi High Court to be later affirmed by the hon'ble Supreme Court. On the particular set of facts, it has validly held to be change of opinion not the reason to believe. 2.10 But, in the present case, there is no apparent explanation in respect of sources of investment in the form of share capital received on premium found deposited in the bank accounts of the appellant. In view of this, it can be very well be said that the appellant cannot rest its case on the test of reason to believe as laid down in the case of Kelvinator India Ltd. Therefore, the Assessing Officer had validly assumed jurisdiction under section 148 of the Act on the facts and circumstances of the case. 2.11 The expression 'reason to believe' contemplates objective determination based on intelligent care and determination involving judicial review, as distinguished from a purely subjective consideration-Melina Fernandes v. Mohan Nair AIR 1966 Goa 23. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the belief, so that, on such reasons, no one properly instructed on facts and law could reasonably entertain the belief, such exercise of the discretionary power by the AO cannot said to legally proper and can be said to be invalid assumption of jurisdiction by the AO-S. Narayanappa's case (supra), Ganga Saran & Sons (P.) Ltd.'s case (supra).The existence of belief and the reason, therefore, but not the sufficiency of the reason is justifiable-SheoNath Singh's case (supra), N.K. Textile Mills v. CIT [1966] 62ITR 58 (Punj.) and RoshanLal& Co. v. CIT [1966162 ITR72(Puni). 2.14 In view of the aforesaid, it is being held that on the given facts and circumstances of the case, the AO has validly and legally assumed jurisdiction under section 148 of the Act on the basis of reason to believe that the income chargeable to tax has escaped assessment in the case of the appellant, therefore, the reopening of the assessment for the year in appeal is being upheld and this ground of appeal is dismissed. 3. In the course of the appellate proceedings of the case, it has been further contended by the appellant company that notice under section 147 of the act had been so beyond th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asad Kharag Prasad 280 ITR 541 (All); CIT v. Hotline International Pvt. Ltd. 296 ITR 333 (Del); Sri Nath Suresh Chand Ram Naresh v. CIT 280 ITR 396 (All); P.N. Sasikumar v. CIT (1988) 170 ITR 80 (Ker); Venad Properties (P) Limited v. Commissioner of Income Tax (2012) 340 ITR 463 (Del) and Mayawati v. CIT (2010) 321 ITR 349 (Del). 3.5 In view of these particular facts of the present case, it has to be decided whether notice under Section 148 of the Act is a jurisdictional requirement. The relevant portion of Section 148 (1) reads as under: "148. Issue of notice where income has escaped assessment - (1) Before making the assessment, reassessment or re-computation under Section 147. the Income-tax Officer shall serve on the Assessee a notice containing all or any of the requirements which may be included in a notice under sub-section (2) of Section 139; and the provisions of this Act shall, so far as may be, apply accordingly as if the notice were a notice issued under that subsection." 3.6 The hon'ble Supreme Court in R.K. Upadhyaya (supra), explained that there was a distinct shift in the scheme of the provisions of the 1961 Act in comparison with the corresponding prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sore was dealing with the case where the notice under Section 148 of the Act was issued in the names of the Assessee who were minors and not in the names of their guardians. The notices were served on a clerk of the father of the Assessee who was neither an agent of the Assessee nor authorized to accept notices on their behalf. The Court, relying on the decision in N. Narayana Chetty (supra) observed: "There is no doubt that a notice prescribed under section 148 of the Act for initiating reassessment proceedings is not a mere procedural requirement ; the service of the prescribed notice on the assessee is a condition precedent to the validity of any reassessment made under section 147. If no notice is issued or if the notice issued is shown to be invalid, then the proceedings taken by the Income tax Officer without a notice or in pursuance of an invalid notice would be illegal and void." 3.10 In CIT v. Hotline International (P) Ltd. (supra), the hon'ble High Court of Delhi had held that affixation of notice on an address at which the security guard of the Assessee-company refuses to receive such notice cannot be construed to be a proper service of notice under Section 148 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rity to receive the same could not be held to be a proper service on the Assessee." In Sri Nath Suresh Chand Ram Naresh v. CIT (supra) it was reiterated that service of valid notice under Section 148 was "the foundation for the initiation of reassessment proceedings and a condition precedent for the validity of the notice." It was held that the Tribunal was not right in holding that the notices under Section 148 addressed as "SCR and the karta "S were valid notices for reassessing the income of the HUF "MM or "MS or its successors. Onus on Revenue to prove service of notice. There is sufficient judicial authority for the proposition that the burden of showing that service of noticed has been effected on the Assessee or his duly authorized representative is on the Revenue. These include Fatechand Agarwal v. Commissioner of Wealth-Tax [1974] ITA No.72 of 2014 Page 16 of 24 97 ITR 701 (Ori) and Venkat Naicken Trust v. ITO [1999] 107 Taxman 391 (Mad). In CIT v. Thayaballi Mulla Jeevaji Kapasi (1967) 66 ITR 147 (SC), the Respondent to whom the notice was directed was not in town. The only information which the process server had was that the Respondent was either in Bombay or Ceylon. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filing the return, which was allowed by the However, the return was not filed within the extended time and an ex parte order was passed. Before the High Court it was contended that the employee on whom the service of the notice was found to have been made was not duly authorized to accept such notice and that the mere fact that the General Manager of the firm applied for time, would not render the service of notice on the employee a valid and a legal service. It is contended that the Assessee had not denied service of notice on such employee. The High Court however negatived the plea of the Revenue and held that in the absence of finding by the Tribunal that the employee of the Assessee was authorized to accept such service on behalf of the Assessee, notice could not be said to have been duly served upon the Assessee. It was held that "acquisition of knowledge in regard to the issuance of a notice under Section 22 (2) of 1922 Act could not be considered to be equivalent to, or a substitute for, the service of the notice on the Assessee." It was further observed that "knowing about the issuance of the notice otherwise than by its service on the person concerned is one thing and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... articipated in the reassessment proceedings after coming to know of it will not constitute a waiver of the requirement of effecting proper service of notice on the Assessee under Section 148 of the Act. (vi) Reassessment proceedings finalised by an AO without effecting proper service of notice on the Assessee under Section 148 (1) of the Act are invalid and liable to be quashed. (vii) Section 292 BB is prospective. In any event the Assessee in the present case, having raised an objection regarding the failure by the Revenue to effect service of notice upon him, the main part of Section 292 BB is not attracted. 4.13 On the facts of the present case, it is found that proper service of notice had been effected under Section 148 (1) of the Act on the appellant-company, therefore the reassessment proceedings is be said to be validly initiated. Further the CIT(A) has decided the issue on merits, which read as under :- "8. I have gone through the assessment order and submissions made by the appellant in the course of appellate proceedings as well as given careful consideration to the facts and circumstances of the case. It is matter of record that the appellant company had re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... factory It is only then that the sum so credited may be charged to income tax as income of the assessee of that previous year. 9.4 Section 68 requires that there is a credit in the books maintained by an oh credit is of a sum during the previous year: and the assessee offers no explanation about the nature and source of such credit, or the explanation offered by the assessee is not in the opinion of the assessing authority. satisfactory Then the sum so credited may be charged to tax as income of the assessee of that previous year The provisions of section 68 only set up a presumption against the assessee whenever unexplained credits are found in the books of account of the assessee The presumption is rebuttable. In refuting the presumption raised. the initial burden is on the assessee. Such burden, which is placed on the assessee. since as soon as the assesse establishes authenticity of transactions as executed between the assessee and its creditors sub-creditors Further. section 68 is not confined to cash entries in accounts. If a liability is shown in the accounts is found to be bogus, in the absence of any plausible and as the explanation offered by the assessee. the model ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the appellant that the share capital and share application money received by the appellant company. A genuine, and no addition in this regard is called for. However, the critical comment of section 68 is that the identity, capacity and genuineness of the transaction has to be cumulatively satisfied failing which the AO can invoke the provisions of section 68 of the Act as the obligation cast to discharge the burden of proof was not met Since. the critical requirement of section 68 of the Act has not been met, the AO had invoked the provisions of section 68 of the Income-tax Act, 1961. The burden under section 68 of the Act is to establish identity of the creditor. capacity of the creditor and genuineness of the transaction to the satisfaction of the AO which is discharged if the assessee proves these three ingredients. The Hon'ble High Court Kolkata in CIT Vs. Korlay Trading Co. Ltd. (1998) 232 ITR 820 (Cal) has held that mere filing of the income-tax file number of the creditors is not enough to prove the genuineness of the cash credit. The creditor should be identified. There should be creditworthiness_ There should be a genuine transaction. In K.M. Sadhukhan& Sons P. Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... share subscribers'. It observed that the "this aspect has to be decided on factual matrix of each case and strict or stringent test may not be applied to arms length angel investors or normal public issues. The said doctrine is applied when there is evidence to show that assessee may not be aware. could not have knowledge or was unconcerned as to the source of money paid or belonging to the third party However, when there is surrounding evidence and material manifesting and revealing involvement of the assessee in the "transaction " and that it was not entirely an arm's length transaction, resort or reliance to the said doctrine may be counter-productive and contrary to equity and justice. The doctrine is not an eldritch or a camouflage to circulate ill-gotten and unrecorded money.- Thereafter in para 25. the Honble High Court specifically considered the judgment in the case of Lovely Exports (supra) It also took into consideration the judgment in the case of CIT Vs. Nova Promoters &Finlease P. Ltd. (2012) 342 ITR 0169 (Del), in which it was held that 'in view of the link between the entry providers and incriminating evidence. mere filing of PAN number, acknowledgement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... romoters (supra) has held that the share capital in case of a closely held company is required to be examined by the AO in terms of section 68 and the failure of the assessee to satisfy the AO. calls for addition u/s 68. It is useful to mention that the SLP filed by the assessee against this judgment has been dismissed by the Hon'ble Supreme Court which has been since reported as Navodaya Castles Pvt. Ltd. Vs. CIT (2015) 230 Taxman 268(SC). 9.13 Therefore the assessee has to submit the primary evidence of the cash credits i.e. the confirmation from the creditor with PAN which can prove the identity of the party and has further to prove the nature and source as well as the genuineness of the transaction However, the onus does not get discharged simply on filing confirmation letters as is held in the case of United Commercial and Industrial Co(Pvt) Ltd. reported in 187 ITR 596 (Cal). In the case of Precision Finance Pvt. Ltd.. 208 ITR 465 (Cal). it is held that simply because the amount is received by cheque that is not enough to discharge the onus. Further when confirmations were filed and the AO did not proceed further and did not issue any notice u/s 131 to those companies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the A.O. Thus the issue to be decided by this Hon'ble Tribunal is whether the assessee has discharged its onus saddled by section 68 or not? It is already on record that the Assessing Officer has issued notices u/s 133(6) on 10.11.2017 to the 3 subscribers whose names were appearing in the reasons recorded (copy placed at page 66 to 73 to of PB). The appellant vide reply dated 06.12.2017 (page 4fe_ toT3 of PB) has submitted the names, addresses and the amount of share application / premium besides the complete details of subscribers' bank account and the distinctive numbers and share certificate numbers of the shares issued to the subscribers along with copy of Form 2 submitted to ROC Bihar, Patna. The Assessing Officer on the basis of the information so furnished has issued notices u/s 133(6) to 36 subscribers. It has been admitted by the A.O. that out of 39 subscribers compliances have been made from 32 subscribers (excluding 3 subscribers mentioned in the reasons recorded), copies of confirmations from 30 subscribers (including 3 subscribers mentioned in the reasons recorded) are forming part of the assessment order marked as Annexure-1 to the assessment order as wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d and affirmation of such finding by the CIT(A) is contrary to the evidences / material already on record. It is respectfully submitted that the case of the appellant is squarely covered by the judgment of the jurisdictional High Court in the case reported in 154 ITR 244 (Pat) - ACIT Vs Bahri Brothers wherein their lordships have held as under : "In the instant case, the transaction were completed through account payee cheque. The creditors gave the amount in question to the assessee by account payee cheque which were encashed by the assessee through his own Bank. Not only this, the assessee has also submitted the copy of a certificate of the Bank to the effect that the cheques in question, given by the creditors, were honoured in favour of the assessee. When the assessee disclosed the names of the creditors and the names of the Bank on which the cheques were drawn, the assessee discharged the primary onus and the assessee not only disclosed the identity of the creditor but also the source of income, In view of these facts, it could not be said that the creditors were fictitious persons." If the facts of the appellant's case is tested on the anvil of the aforesaid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - 1. Letter communicating of approval of PCIT-1, Patna vide F.No.CIT-1/Pat/Tech/ U/s 147/2016-17/8335 dated 31/03/2017; 2. Form No.ITNS 10. After perusal, it was argued on behalf of the appellant that (i) this document i.e. Form no.ITNS 10 cannot be admitted without its forensic examination and (ii) as per the judgment of Hon'ble Patna High Court reported in 189 ITR 786 (copy enclosed at Page 06-15 of this compilation) the validity is to be tested with reference to the reasons recorded u/s 148(2) and none of the authorities are authorized to refer to any other reason even if it can be otherwise inferred and/or gathered from the record. It would be evident from the letter dated 17/06/2019 that the enclosures (2) containing the alleged antedated satisfaction of the Pr. CIT is forming part of the record of the Pr. CIT and not of the Assessing Officer. Pursuant to petition dated 17/05/2018 (copy enclosed at page16-17 of this compilation) the Assessing Officer has issued certified copy of Form 10 (forming part of PB dated 12/03/2019 at page 41 & 42) which does not contain any satisfaction of the two authorities which are now appearing in the copy of Form 10 given along w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents and after obtaining necessary sanction as stated above notices are issued by him but if, in any case, it is found that the reasons recorded by him are not germane to the exercise of jurisdiction under section 147(a) of the Act, then the very assumption of jurisdiction will be ab initio void rendering the entire process of assessment as a nullity. There can be hardly any doubt in holding that the recording of the reasons is a prerequisite to the assumption of jurisdiction by the Income-tax Officer for initiating the proceedings under section 147(a). The reasons so recorded acquire much significance when the action is taken under clause (a) of section 147 because it is only the recorded reasons which can indicate as to why the Income-tax Officer was made to believe that income has escaped assessment for the relevant assessment year. Further, the language employed in section 151 clearly leads to the conclusion that the Board or the Commissioner of Income-tax, while according sanction for issuance of notice under section 148 and for coming to an objective conclusion authorising the Income-tax Officer to take action under section 147(a), are required to confine themselves only to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed along with PB dated 12/03/2019. The Td. CIT DR has also relied on the order of the Hon'ble Jaipur Bench of Tribunal dated 16/02/2018 which is distinguishable on facts as would be evident from page-48 para 16 wherein the Hon'ble Tribunal has found as a fact that "notwithstanding the same, nothing has been brought to our notice which demonstrates that these confirmations were filed by the asses see company and accepted by the AO during the course of assessment proceedings. " In the present case the Assessing Officer, however, recorded a categorical finding at page-7 of the order which is reproduced hereunder :- "Out of a total number of 39 corporate entities replies were received in 32 cases. On perusal of these replies, however some very strange facts come to notice. The similarities between the confirmations received from different companies is striking. The language of the confirmation, 'the very text and the typing font, everything is same, though the companies are located at different addresses. The confirmations of almost all companies located at Kolkata, though at different addresses are identical. Similarly, confirmation of the companies located at Delhi a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9 ITR 019 (SC) has properly been complied with. Further, ld. DR also relied on the decision of Hon'ble Supreme Court in the case of PCIT vs NRA Iron & Steel Pvt Ltd.,(412 ITR 161) and submitted that the issue of showing meager/zero amount in the return of income by the share applicants has been decided by the Hon'ble Supreme Court in the above case and similar is the position in the case of the present assessee. In the present case in hand, the share applicants have shown meager/zero amount in their return of income and creditworthiness of the share applicants have also not been proved, therefore, the above decision of Hon'ble Supreme Court is squarely applicable in the present case. Ld. DR further relied on the order of coordinate bench of the Tribunal in the case of Shree Bhagwati Concast Pvt. Ltd, in ITA No.33/JP/2015, order dated 16.02.2018. 11. Ld. DR also submitted that the provisions Section 68 require to prove by the assessee of three ingredients i.e. identity of creditors/depositors, creditworthiness and genuineness of the transaction is to be fulfilled by the assessee. In this case, one of the three ingredients i.e. creditworthiness of the share applicants have not been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t column Sl. No.12 & 13 which is blank and this form has been certified by Manish Verma, ITO Ward-2(1), Patna without dated. We also noted from the ITNS -10, which is filed by the CITDR that column No.12 & 13 has duly been filled by the appropriate authority. We are in agreement with the contention of ld. DR that the proposal copy for approval might have been given to the assessee as certified copy which was kept in the file of the AO at the time of sending for approval as one office copy. Therefore, this argument of the ld. AR of the assessee is also rejected. 15. With regard to the contention of ld. AR that the reassessment is not sustainable as there is a difference in figure in reasons recorded and in the findings recorded by the AO. In this regard, we are of opinion, that if there is any difference of figure mentioned in the reasons recorded and the findings recorded by the AO, that will not amount to non-sustainability of the reassessment proceedings. Accordingly, we reject this ground of assessee. 16. We also find that Hon'ble Supreme Court in the case of GKN Driveshafts (India) Ltd vs. ITO & Ors, 259 ITR 019 (SC) has held that when a notice under section 148 of the A.T.A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the share capital and share application money introduced into accounts of the assessee during the year as regards its source. Therefore, share capital of Rs. 2,63,50,000/- and Rs. 1,01,50,000/- as share application money introduced was treated as unexplained credit under section 68 of the Act and added the same to the total income of the assessee. 18. Before us, Learned A.R. of the assessee relied on the decision of ITAT Kolkata in the case of Baba Bhootnath Trade & Commerce Ltd (supra),wherein, the Tribunal followed the decision of Hon'ble Supreme Court in the case of vs NRA Iron & Steel Pvt Ltd.,((supra) in deciding the issue in favour of the assessee. The Ld. A.R. argued that the onus cast on the assessee is fully discharged and there is no cause to take recourse to section 68 of the Act since the income tax returns and acknowledgements of the investor companies were provided to establish the identity of the investors and genuineness of the transaction. We find that the Hon'ble Supreme Court in the case of NRA Iron and Steel Pvt Ltd (supra) held that the assessee company is under a legal obligation to prove the source of receipt of share capital and/or premium to the satis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 68 of the Act. In the present case also the share applicants have shown meagre income and their creditworthiness have not been proved. Ld. AR has filed documents regard to the above 39 share applicants however, it has not been certified as to whether the documents have been produced before any authorities below. For examination and finding out as to whether the 39 share applicants have fulfilled the ingredients as prescribed in the provisions of Section 68 of the Act, we would like to discuss the documents filed with regard to 39 share applicants in the following paragraphs. a. M/s Debraj Vincom (P) Ltd. (PB 1 to 5) : (Rs. 10,00,000/-) The documents in relation to share application money of Rs. 10,00,000/-from this company have been filed at pages 1 to 5 of the paper book. The documents include Share Application form, details of Cheque/DD dated 22.09.2009, Acknowledgement of Return Filed for the assessement year 2009-10 declaring total income of Rs. 6007/- PAN CARD and audited balance sheet for the year ending 31.03.2009 without annexure and Schedules notes to accounts. No bank statement filed and Trading and Profit and Loss Accounts filed. On perusal of the balance sheet as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 81/-. The Date of Birth of the company is 4th March, 2008.The assessee has shown meagre income of Rs. 4,991/-for the ear ending 31.03.2010 and Rs. 10,770/- for the financial year 31.03.2009. The turnover for the company of 31.03.2009 is Rs. 7,95,960/- and other income shown at Rs. 158,794/- totalling to Rs. 954,754/- and total expenditure shown at Rs. 9,40,984/- containing purchase, salary, audit fees, printing and stationery, preliminary expenses, w/off, general expenses and back charges. The earnings per share shown in the notes of the account at page no.19 of the paper book is 0.09 & 0.04 for the financial year 2008-2009 & 2009-2010 respectively, the source thatthere is a no creditworthiness. We further noticed that there are huge reserve and surplus of the company. d. Rajkavira Mercantile Pvt. Ltd. (PB page No.20 to 25)(Rs. 10,00,000/-): The assessee has shown income of Rs. 3547/- for assessment year 2009-2010, only summary of balance sheet has been submitted which is in page book at page no.25 and no details of balance sheet are available and no trading profit and loss account submitted. The bank statement has also not been produced. Therefore, the genuineness of transacti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,50,000/- shares and the value of shares is Rs. 30,00,000/-. The resolution passed by the share applicants is at page no.22 dated 22nd January, 2009. But only they have authorised to the directors of the company for investing the surplus money in the shares securities, debentures, etc. No separate resolution are available on the record. The share applicants return of income for the assessment year 2009-2010 is placed at paper book at page no.45 showing total income of Rs. 6924. The assessee has enclosed only the auditor's report of the share applicants for the year ending 31.03.2010 and there is no balance sheet, trading profit and loss account and bank statements of the share applicants. The assessee has also not submitted latest share application forms. We further observed from the other's share applications forms, it has been issued at Rs. 100/- including premium of Rs. 90/- but this applicant has been issued at Rs. 20/-. Therefore, asper our considered opinion, the creditworthiness and genuineness of the share applicants are not proved by the assessee. h. Dhanmall Vyapaar Pvt. Ltd.(PB Page No.49 to 58)(Rs. 10,00,000/-) : On perusal of the share application form placed at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urn of income has been produced. The AR of the assessee is unable to prove the creditworthiness of this transaction. We further noted that the assessee company has issued shares to others at Rs. 100/- including Rs. 90/- as premium. k. Navratra Commodities Pvt. Ltd (PB Page No.76 to 84) (Rs. 5,00,000/-) The share applicant has applied on 29.01.2010. On perusal of paper book page 78 on the return of income for the assessment year 2009-2010, the share applicant has shown nil income. The total receipts of this share applicant is Rs. 1,03,627.33 and Rs. 1,72,537/- for the financial year 31.03.2009 & 31.03.2010 and total expenditure is of 101, 337.05 and 170,082.35. No bank statement has been produced. Therefore, the creditworthiness and genuineness of the transaction could not be proved by the assessee. l. Omkar Agencies Pvt. Ltd. (PB Page No.85-93) (Rs,5,00,000/-): He return of income for the assessment year 2009-10, placed at paper book showing nil income. The total receipts for the financial year 31.03.2009 is Rs. 1000088.11 and 104,459, for the financial year 31.03. & 31.03.2010 and total expenditure is Rs. 97,247 and Rs. 1,03,482.90 for financial year 31.03.2010. There is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m of Rs. 10/- each. There is contradictory documents produced. Both the documents have been issued by the share applicant. No return of income has been filed. The date of birth of the company is 04.03.2008. On perusal of trading profit and loss account the assessee has shown Rs. 10694/- and Rs. 4517/- as a net profit for the financial year 31.03.2009 and 31.03.2010 respectively. Opening balance is appearing in the bank statement of Rs. 10,05,025/- and on 2nd January and 13th January, 2010, Rs. 10,00,000/- has been withdrawn and only Rs. 5025/- is remained in the bank account.The total turnover for 31.03.2009 was nil and only interest on loan has been shown of Rs. 1,26,247/-. The total turnover for financial year 31.03.2010 is Rs. 13,87,660/- and purchase is Rs. 12,50,232/- and earing per share is Rs. 0.07 and 0.03 for the financial year 31.03.2009 and 31.03.2010 respectively. From the bank statement of the share applicant it is also apparent that the amounts are being deposited and the same have been withdrawn on the same day or on the next day or after two days. The assessee has produced only summary of the balance sheet placed at page no.112 of the paper book. No profit and loss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the transaction could not be proved by the assessee. s. Choice Electricals Pvt. Ltd. (PB 220-251) (Rs. 10,00,000/-) : On perusal of the income tax return filed by the assessee for assessment year 2008-2009 the assessee has declared income of Rs. 32,498/-. On perusal of paper book at page 222 company master details printed on 08.07.2009 at 11.18 AM, the authorised and paid up capital is Rs. 1,00,000/- whereas as per the balance sheet produced the authorised capital issued and subscribed has been shown at Rs. 10,00,000/- for the financial year 31.03.2008. No other financial statements and income tax return for the financial year 31.03.2009 has been provided. The bank statement is placed at paper book at page 225 for the period from 20.05.2009 to 20.06.2009, the opening and closing balance is appearing of Rs. 9635/-The creditworthiness of the investing company could not be proved by the assessee company. From the bank statement of the share applicant it is also apparent that the amounts are being deposited and the same have been withdrawn on the same day or on the next day or after two days. t. Lavena Sales Company Pvt. Ltd. (PB 252-276)(Rs. 10,00,000/-) : As per share appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perusal of page no.344 the return of income has been filed for the assessment year 2008-09 declaring income of Rs. 7286/-. Date of last AGM and date of balance sheet showing nil. Total revenue has been shown as Rs. 1,57,474/- and total expenditure is Rs. 1,48,565/- for financial year 31.03.2008. No latest financial statements and income tax return have been produced. The creditworthiness of the investing company could not be proved by the assessee company. x. Tizaro Commercial Paper Pvt. Ltd. (PB 364-366)(Rs. 10,00,000/-) : On perusal of bank statement placed at page book page no.368 filed for 30.05.2009 to 20.06.2009, there is opening balance of Rs. 15293/- and the closing balance of Rs. 5293/-. From the bank statement of the share applicant it is also apparent that the amounts are being deposited and the same have been withdrawn on the same day or on the next day or after two days. The share applicant has filed return of income has been filed for the assessment year 2008-09 declaring income of Rs. 24,901/-.On perusal page no.365 the company master details generated on 08.03.2009 at 11.25AM the authorised capital is Rs. 25,00,000/- whereas paid up capital is showing Rs. 2,000/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... being deposited and the same have been withdrawn on the same day or on the next day or after two days.No latest financial statements and income tax return have been produced. The creditworthiness of the investing company could not be proved by the assessee company. aa. Eastend Realtors Pvt. Ltd. (PB 444-452)(Rs. 05,00,000/-) : On perusal of paper book page no.444 with regard to application for sales the share applicant has applied for 5000 equity shares at a premium of Rs. 90/- and issued cheque in favour of 19.03.2010. Further on perusal of income tax return placed at paper book page no.447 the income has been declared nil. On perusal of page no.449 & 450 the balance sheet of the company the authorised share capital is Rs. 1,00,000/- of 10000 equity shares and face value of Rs. 10/- each. The issued subscribed and paid up capital of 10000 equity share capital of Rs. 10 each fully paid up for the financial year 31.03.2009 & 31.03.2010. We noticed from paper book page no.449 the share application money has been shown of Rs. 3,60,40,800/-, how it is possible, the AR of the assessee has not explained anything about this that if all the shares have been issued on 31.03.2009, then s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e creditworthiness of the investing company could not be proved by the assessee company. af. New Age Infrabuilders Pvt. Ltd. (PB 530-538)(Rs. 05,00,000/-) : The share applicant has applied for 5000 equity shares of Rs. 10/- each at a premium of Rs. 90/- and issued cheque in favour of assessee company on dated 25.03.2010. On perusal of the income tax return filed for the assessment year 2009-2010 the gross total income of the assessee shown at Rs. 7987/-. The total receipts has been shown in the profit and loss account for 31.03.2009 is Rs. 66,258/- and expenditure is Rs. 52,756/-. The creditworthiness of the investing company could not be proved by the assessee company. ag. Pixel Engineering Pvt. Ltd. (PB 539 -545)(Rs. 05,00,000/-) : The share applicant has applied for 5000 equity shares of Rs. 10/- per share at a premium of Rs. 90/- and has issued a cheque dated 20.03.2010 in favour of the assessee company. On perusal of page no.542 the return of income has been filed for the assessment year 2009-2010 showing nil income. From the bank statement of the share applicant it is also apparent that the amounts are being deposited and the same have been withdrawn on the same day o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vesting company could not be proved by the assessee company. ak. Accord Sales & Tradex Pvt. Ltd. (PB 589-615)(Rs. 10,00,000/-) : The share applicant has applied for 50000 equity shares of Rs. 10/- per share at a premium of Rs. 10/- and has issued a cheque dated 28.05.2009 in favour of the assessee company. On perusal of page no.598 the return of income has been filed for the assessment year 2008-2009 showing income at Rs. 3278/-. On perusal of page no.599 the share applicant has shown income from commission of Rs. 45290/- and expenditure of Rs. 42,012/- containing preliminary expenses of Rs. 2720/- audit fee of Rs. 5618/- and other expenses Rs. 33674/-. The opening and closing balance have been shown at page 600 of the paper book at Rs. 1676.50. From the bank statement of the share applicant it is also apparent that the amounts are being deposited and the same have been withdrawn on the same day or on the next day or after two days. Latest balance sheet and income tax return has not been filed. The creditworthiness of the investing company could not be proved by the assessee company. al. Safari Tradex Pvt. Ltd. (PB 616-638)(Rs. 10,00,000/-) : The share applicant has applied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... necessary ingredients have to be cumulatively satisfied to escape from the clutches of section 68 of the Act, the CIT(A) upheld the action of the Assessing Officer in adding the amount of share capital and share application money of Rs. 3,65,00,000 as unexplained cash credit under section 68 of the Act. 23. We further noticed that during the same financial year the assessee has issued share capital to the different share applicants at a premium of Rs. 10/- and Rs. 90/- and the face value of the share is Rs. 10/- only which has deliberately been discussed in the foregoing paragraphs. At the same time, we find it very unusual that investment in shares of the assessee company having face value of Rs. 10 per share have been made at a premium which varies between Rs. 90/- in individual cases during the same financial year. The same clearly raises an apprehension on the overall genuineness of these and other similar related share transactions during the year under consideration. The genuineness of the transaction is not just limited to issuance of share capital rather it is coupled and necessarily has to be understood and read alongwith receipt and payment of share application money wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the bank account and immediate issue of cheque has been observed in the case of all the share applicants, which makes the genuineness of the transaction vulnerable. 27. In the case of Principal Commissioner of Income Tax-6, New Delhi Vs. NDR promoter's private limited in ITA 49/2018, the Hon'ble High Court of the Delhi has held the transaction of share application in similar circumstances as shame and make-believe only. In the above case the addition made u/s 68 of the Act for alleged share application money by the Assessing Officer, was deleted by that Tribunal, however the Hon'ble High Court reversed the decision of the Tribunal and sustained the addition. The Hon'ble High Court has relied on the decision of the CIT Vs Navodaya Castles P Lid (2014) 367 ITR 306 (Delhi). The relevant discussion and finding of the Hon'ble Court in the above case is reproduced as under: "11. Issue of bogus share capital in the form of accommodation entries has been subject matter of several decisions of this Court and we would like to refer to decision in Commissioner of Income Tax Vs. Navodaya Castles Pvt. Ltd. [2014] 367 ITR 306, wherein the earlier judgments were classi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch should be satisfied in such cases is, identification of the creditors / shareholder, creditworthiness of creditors / shareholder and genuineness of the transactions. These three requirements have to be tested not superficially but in depth having regard to the human probabilities and normal course of human conduct." 28. In a recent judgment dated 5.3.2019 in the case of Principal CIT(Central)-I vs. NRA Iron & Steel P. Ltd. arising out of SLP (civil) No. 29855 of 2018, the Hon'ble Supreme Court considered the decision of various courts on the issue in dispute and enumerated the principles emerged from various decision as under :- "11. The principles which emerge where sums of money are credited as Share Capital/Premium are: i. The assessee is under a legal obligation to prove the genuineness of the transaction, the identity of the creditors, and credit-worthiness of the investors who should have the financial capacity to make the investment in question, to the satisfaction of the AO, so as to discharge the primary onus. ii. The Assessing Officer is duty bound to investigate the credit-worthiness of the creditor/subscriber, verify the identity of the subscribers, and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Company - Respondent. Another example is of Ganga Builders Ltd. - Kolkatta which had filed a return for Rs. 5,850 but invested in shares to the tune of Rs. 90,00,000 in the Assessee Company - Respondent, etc. iii. There was no explanation whatsoever offered as to why the investor companies had applied for shares of the Assessee Company at a high premium of Rs. 190 per share, even though the face value of the share was Rs. 10/ - per share. iv. Furthermore, none of the so-called investor companies established the source of funds from which the high share premium was invested. v. The mere mention of the income tax file number of an investor was not sufficient to discharge the onus under Section 68 of the Act. 13. The lower appellate authorities appear to have ignored the detailed findings of the AO from the field enquiry and investigations carried out by his office. The authorities below have erroneously held that merely because the Respondent Company - Assessee had filed all the primary evidence, the onus on the Assessee stood discharged. The lower appellate authorities failed to appreciate that the investor companies which had filed income tax returns with a meagre or n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it 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 of Rs. 4, 85, 58,000/-in the hands of the assessee in terms of section 68 of the Act. The ground of the appeal of the Revenue is accordingly allowed."
25. In the peculiar facts and circumstances of the case, the case laws relied on by the assessee are not applicable in the present case.
26. From our above discussions as well as the judicial precedence along with the findings recorded by the both the authorities below, it is clear that the creditworthiness of the share applicants, in the present case in hand, have not been proved by the assessee, therefore, we do not find any error in the findings recorded by the CIT(A) and, hence, the same are upheld and appeal of the assessee is dismissed.
27. In the result, appeal of the assessee is dismissed.
Order pronounced in the open court under Rule 34(4) of the Income Tax (Appellate Tribunal) Rules, 1963 on 09/08/2019. X X X X Extracts X X X X X X X X Extracts X X X X
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