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TMI Blog2019 (11) TMI 1224X X X X Extracts X X X X X X X X Extracts X X X X ..... ying with the mandatory procedure as laid down for extending the scope of limited scrutiny cases. 2. That under the facts and circumstances, both the lower authorities grossly erred in law and on merits in making and sustaining addition of Rs. 3,18,00,000/- u/s.68 of the I.T. Act for share capital/premium received from Avishkar Marketing (P) Ltd., by not accepting the source in the hands of Avishkar Marketing company being loans taken by Avishkar Marketing company from following parties:- Rs. 2,68,00,000/- Raju Investment (P) Ltd. Rs. 50,00,000/- M/s Superb Developers (P) Ltd. Rs. 3,18,00,000/- Total 2.1 That without prejudice, the assessee fully discharged his onus to prove the ingredients of sec.68 for Rs. 3,18,00.000 and the Ld. A.O. exceeded his jurisdiction and scope of examination by extending his inquiries for source of the source of the source, which is not permissible U/s.68 of the I.T. Act. 2.2 That without prejudice, under the facts and circumstances and in view of the documents information's and explanation furnished, even the source of the source stands fully proved." 2. The facts in brief are that assessee-company is engaged in the busines ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany. He also verified from MCA website about these lender companies and issued notices u/s. 133(6) to these companies for further clarification. In response, they had filed their confirmations, bank statement (filed subsequently during the course of assessment proceedings), audited financial accounts and their income tax returns. Later, on 08.12.2017, a reply was received to the Assessing Officer from M/s. Aviskar Marketing Pvt. Ltd. on e-mail, therein they had stated as under: "In this regard, it appears that these 05 names and the amount have been taken from the audited balance sheet of Aviskar as on 31.03.2015. In fact, the source of Rs. 6,68,00,000/- given to Prime in this year is only from following 03 companies namely. Raju Investments (P) Ltd. 2,68,00,000/- Superb Developers (P) Ltd. 50,00,000/- Mahesh Wood Products P Ltd. 50,00,000/- Total 3,68,00,000/-" 4. AO further observed that these parties had not submitted any bank statement, ledger account etc., therefore, identity, genuineness and creditworthiness of the above parties remain questionable and no one was produced by the assessee. The assessee's detailed submission wherein various documents were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loan to Aviskar which is coming in the bank a/c of Aviskar and from the bank a/c of Aviskar same amounts has been given to assessee. In the bank a/c of Aviskar, the name of the assessee is appearing showing that Aviskar has given these amounts to assessee. Thus even the source of the source stands explained by the assessee. 6. Ld. Assessing Officer without adverting to the documents filed went to observe that assessee did not produce any of the Directors of M/s. Aviskar Marketing Pvt. Ltd., M/s. Raju Investments Pvt. Ltd. and Superb Developers Pvt. Ltd., despite that assessee-company is the holding company of M/s. Aviskar Marketing Pvt. Ltd. He has also analyzed the bank statement of M/s. Aviskar Marketing Pvt. Ltd. and found that there were immediate credits in the bank account of the company before the loan was given to the assessee and there is a regular trend in the account of the company of credits followed by exact amount and this company has shown very meager income. He had also perused the bank statement of M/s. Raju Investment Pvt. Ltd. and M/s. Superb Developers Pvt. Ltd. alleged to have given unsecured loan to M/s. Aviskar Marketing Pvt. Ltd. After detailed discussion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eyond the scope of limited scrutiny proceedings, as noted above, the case was selected for limited scrutiny to examine the "Large share premium received during the year (verify applicability of Section 56(2)(viib))". Once, the Assessing Officer has the mandate to examine the large share premium received during the year, then he has to examine the transaction as a whole and it does not restrict him only to see the applicability of Section 56(2)(viib), which has bracketed to verify its applicability. AO has to examine the transaction of share premium received holistically, whether, same is genuine or not and its taxability from all the angles under the Act including in terms of Section 56(2)(viib). If the selection for scrutiny under CASS was to examine the large share premium received during the year, then Assessing Officer cannot circumscribe himself to a particular section and put blinkers when he during the course of assessment proceedings find that it is taxable under different section. His power to examine the issue encompasses under different sections also including u/s 68. It is not a case here that Assessing Officer has gone to issues other than share premium received during ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of Avishkar; * Notice u/s. 133 (6) Dtd.23.11.17 sent by A.O. to Avishkar ; * Reply to notice u/s. 133 (6) by Avishkar (confirming the investment of 3.68 Cr in shares of assessee). 12. No such discrepancies or short coming has been pointed out in the above documents by the Assessing Officer. Not only that, here the assessee has even proven the source of the source, i.e., the source of the fund in the hands of M/s. Aviskar Marketing Pvt. Ltd. which were out of loan taken by the said company from two other parties which is evident from the bank statement of M/s. Aviskar Marketing Pvt. Ltd.. 13. In so far as loan received from M/s. Raju Investments Pvt. Ltd., it was clearly pointed out that it is a NBFC who had given the loan out of ITS own funds and entire loan has been repaid by M/s. Aviskar Marketing Pvt. Ltd. mostly in the same assessment year and the balance in the two subsequent year. The proof of which, were given before the Assessing Officer and the Ld. CIT (A). The documents furnished to the Assessing Officer or collected by the Assessing Officer in respect of the loan received by M/s. Aviskar Marketing Pvt. Ltd. from M/s. Raju Investment were as under: * Not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the source of the source also was explained with evidence. It is not a case where the share application money has been given out of income but it has been given out of the loans taken from other parties out of which major amount has come from Raju Investments, which is a registered NBFC. In support of all his contentions, Ld. Counsel has also relied upon the catena of judgments. 16. On the other hand, ld. DR strongly relied upon the order of the Assessing Officer and Ld. CIT (A) and further relied upon the following judgments:- a. PCIT vs. NRA Iron & Steel Pvt. Ltd. (SC) dated 05.03.2019 b. PCIT vs. NDR Promoters Pvt Ltd. (2019-TIOL-172-HC-DEL-IT) c. CIT vs. MAF Academy (P) Ltd. (361 ITR 258) d. CIT vs. Navodaya Castle Pvt. Ltd. (2014) 367 ITR 306 (Del) e. Konark Structural Engineering P. Ltd. v. DCIT (2018) 96 taxmann.com 255 (SC) f. Pratham Telecom India Pvt. Ltd. vs. DCIT (2018-TIOL-1983-HC-MUM-IT) g. CIT vs. Nipun Builders & Developers (P) Ltd., 30 taxmann.com 292 h. CIT vs. Nova Promoters & Finlease (P) Ltd. (18 taxmann.com 217) i. CIT vs. N R Portfolio Pvt. Ltd., (2014) 42 taxmann.com 339. j. CIT vs. Empire Builtech P. Ltd., 366 ITR 110 k. P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M/s. Raju Investment Rs. 2,68,00,000/-, Super Developers Pvt. Ltd. Rs. 50,00,000/- and Mahesh Wood Products Pvt. Ltd. Rs. 50,00,000/-, out of which total amount of share money invested at Rs. 3,68,00,000/-. As stated above, amount of Rs. 50 lacs, i.e., the share application money to the tune of Rs. 50 lacs subscribed by M/s. Aviskar Marketing Pvt. Ltd. has been accepted by the Assessing Officer, which inter-alia means that the genuineness of part of the transaction of share capital and share premium stands accepted. The M/s. Aviskar Marketing Pvt. Ltd. before the Assessing Officer had filed the confirmations of the parties, who had given loan to it alongwith their ITRs, copy of ledger account, audited financial statements, etc. One of the major loan had come from M/s. Raju Investment Pvt. Ltd. who is a registered NBFC, has given loan of Rs. 2,68,00,000/- and the loan taken by M/s. Aviskar Marketing Pvt. Ltd. from the said company has been returned back mostly in this year and partly in the subsequent year. Even the audited financial statement of M/s. Raju Investment Pvt. Ltd. reflects the loan outstanding/receivable from M/s. Aviskar Marketing Pvt. Ltd. Similarly, loan given by Sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s are mere paper trail. 19. One of key reasons harped upon by the Assessing Officer is that there were common directors. Commonality of Directors will not render a transaction non- genuine or colourable, unless any inquiry or material is found to prove the nexus of the directors involved in some kind of accommodation entry routing any unaccounted income of the assessee company. If these entities are separate corporate entities having separate legal identity and separately assessed to tax, then they have to be treated independently, unless there is any doubt regarding the source of credit or source of the source is colourable. In that case the same needs to be examined by the Department in the case of the person who has given the money and if anything adverse is found regarding source; or source of the source then, onus shifts heavily upon the assessee. The Assessing Officer cannot presume the transaction to be bogus sans any inquiry or material. Doubt cannot be raised on the explanation backed by evidences without any adverse material coming before Assessing Officer. Here the genuineness of the transaction is proven from the fact that M/s. Aviskar Marketing Pvt. Ltd. has subscrib ..... X X X X Extracts X X X X X X X X Extracts X X X X
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