TMI Blog2020 (1) TMI 161X X X X Extracts X X X X X X X X Extracts X X X X ..... irected to be deleted. Disallowing of depreciation claim on account of fixed assets - Disallowance includes disallowance of depreciation on account of addition to shad and building and addition to plant and machinery - HELD THAT:- The assessee fails to pin-point any irregularity in the above depreciation chart indicating the correct figure of ₹3,88,15,062/- as against that claim of ₹4,49,88,165/-. We accordingly uphold the impugned depreciation disallowance therefore. The assessee s second substantive ground is rejected - ITA No. 910/Kol/2019, ITA No.1187/Kol/2019 - - - Dated:- 3-1-2020 - Shri S.S.Godara, Judicial Member And Dr. A.L. Saini, Accountant Member For the Assessee : Shri Subash Agarwal, Advocate For the Revenue : Smt. Ranu Biswas, Addl.CIT-DR ORDER PER S.S.Godara, Judicial Member:- The Revenue and assessee have filed their cross-appeal for assessment year 2015-16 against the Commissioner of Income Tax (Appeals)-Burdwan s common order dated 06.02.2019 passed in case No.138/CIT(A)-BWN/Cir-1/BWN/17-18, involving proceedings u/s 143(3) of the Income Tax Act, 1961 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Ltd. 7,00,000 shares for ₹ 70,00,000/- iii. M/s Samrat Rice Mill Pvt. Ltd. -4,00,000 shares for ₹ 40,00,000/- Total: ₹ 3,25,00,000/- 4.3. The assessee has contested above additions/ disallowance made in the assessment order. In the case of PEE AAR Securities Ltd. Vs DCIT ITAT, Delhi' A' Bench, the Hou'ble bench has held that assessee had received ₹ 80 lakh as share capital subscription from two entities. The AO had good reasons to believe that these were merely accommodation entries as the assessee company simply submitted the names and addresses of the entities who contributed to share capital, and did not furnish any details of source of funds received. Since the assessee is a private limited company which is by law, prohibited from offering its securities for subscription by general public, it is not open to the assessee to contend that it has no clue about the identity of the subscribers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry high share premium. It is also observed that when summons u/s 131 of the Income Tax Act, 1961 was issued to the directors of the assessee company to examine the basis of premium and also when the assessee company was requested to produce the directors of the investor Company for verifying their identify, genuineness of transaction and their creditworthiness for such investments, neither the directors of assessee company appeared nor the directors of the investor company appeared. Thus, the facts and circumstances of the case suggest that the assessee company has failed to corroborate the creditworthiness of the investor's despite reasonable opportunity. 4.5 In this context, it is relevant to quote the judgment of Ld. ITAT Bench in the case of M/s Bisakha Sales Pvt. Ltd. Vs CIT -11, Kolkata in ITA No. 1493/K0l/2013 , the relevant excerpt of which is reproduced as under A perusal of the order of the Ld. CIT further shows that there are a number of companies in this regard, doing the business of money laundering under the guise of share capital introduction .... Allegedly various documents in respect of share capital ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts in other shell companies. How once the controlling interest is taken, then the balance sheet has to be cleaned. The balance sheet which now holds in current assets the unquoted shares of other shell companies and loans and advances get cleaned by again liquidating these current assets. Now these current assets representing the share application money or the inventories being shares in the unquoted companies are sitting at a premium because these shares have also been applied for and purchased at a premium. How this money was brought back into the company has not been examined. When this has come back has not been examined and who are the people responsible when these transactions took place has not been examined. Here the second round of laundering of unaccounted funds is done. Much less being examined the details are not available nor given. This is because the inventories are also shares of shell companies and no investor worth his salt would acquire the shares of such shell companies at such premium. The question would arise also as to whether any of these shell companies in which the assessee company has made the investment, have also been sold or transferred, In such a case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar. Only the assessee knows the intricacies of its accounts. It is for the assessee to prove its m of share capital/application money introduction and its affairs in respect of its accounts. Merely dumping papers and documents on the table of the assessing authority does not in any way mean compliance. The burden of proof cannot be shifted on the revenue by cart loads of documents. The documents submitted must be explained. We do understand the predicament of the assessee in so far as if any responsible person appears then he would have to answer many unpleasant questions which could lead to the reopening of assessments in multiple assessment years and multiple assesses. But then what has been created and knotted up by the assessee must be answered and unraveled only by the assessee and none else would know the facts better than the assessee itself. Further, it would be relevant to refer and to place reliance on decisions of the Hon'ble Supreme court on this issue, which are as under: 4.6 CASH CREDIT (Sec. 68) (I) Kale Khan Mohammed Hanif vs. CIT 50 ITR 1 (SC):- Whether the burden of proving the so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Vs. Precision Finance Pvt. Ltd .. (1994) 208 ITR 465, 470 (Cal). It is also reiterated that the manner of payment by the account payee cheque is also not sacrosanct and this cannot make a bogus transaction as genuine one as held in [CIT Vs. Precision Finance Pvt. Ltd., ($) 208 ITR 465, 470, 471 (Cal). Cf. Nizam Wool AGENCY Vs. CIT, (1992) 193 ITR 318, 320 (All)] CIT vs. Sophia Finance Ltd. [(1993) 113 CTR (Del) FB 472] A Full Bench held in the context of Section 68 of the Act that (i) the assessee has to prima facie prove (1) the identity of the creditor/subscriber (2) the genuineness of the transaction namely whether it has been transmitted through banking or their indisputable channels, (3) the creditworthiness or financial strength of the creditor/subscriber ii) If the relevant details of the address and PAN identity if the creditor/subscriber are furnished to the Department along with copies of shareholders register, share application forms, share transfer register etc, it would constitute acceptable proof or acceptable explanation by the assessee. iii) The Department would not be justified in drawing adverse i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ged to secure documents such as their income tax returns as well as bank account particulars in such circumstances. Assessing officer was justified in drawing adverse inference and adding amount in question to assessee's taxable income under section 68. 5. Rick Lunsford trade Investment Ltd. vs CIT:- R2016 - TIQL-2007-SC-IT(Supreme Court) wherein Hori'ble Supreme Court dismissed SLP upholding that it is open to the Revenue Department to make addition on account of alleged share capital u/s 68, where the assessee company has failed to show genuineness of its shareholders. 6. CIT vs. Empire Builtech (p) Ltd. (366 ITR 110):- Where Honble Delhi High Court held that in respect of share application money, under section 68 it is not sufficient for assessee to merely disclosed address and identities of shareholders, it has to show genuineness of such individuals or entities. 7. In the case of ITO Ward 9(1) vs. Sohail financials Ltd. ITA No. 4867/Del./2011 Asstt. Year, 2008-09, the Hon'ble ITAT has upheld the addition made by the Assessing officer on account of share application money and share premiu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e tile judgement by this Bench was delivered 011 July 25, 1989. There, tile Bench, after, considering the decision in Daulatram Rawatmull v. CIT (1967) 64 ITR 593, observed as follows,' There is no dispute as to tile fact th at the cash credit account was appearing in tile assessee's tea garden books of account i.e. business books of account. Tile cash credits continued throughout tile accounting period. The assessee's Main activity was tile cultivation, manufacture and sale of tea. For the Assessment Year 1974-75, tile Tribunal on all identical set of facts upheld tile view of tile commissioner of Income Tax (Appeals) that, in such circumstances, the amount included as undisclosed income under Section 68 of tile Act should be treated as business income. Tile principles laid down by this Court in Daulatram Rawatmull v. CIT (1967) 64 ITR 593 will apply to tile facts of tile case too. Further, the Act has also been amended to deny set off of loss for such kind of income but tile amendment is effective from 01.04.2017. In view of the above, the ground of appeal raised by the appellant is allowed and tile A.O. is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act as under:- 4. The learned DR submitted that the share capital and share premium amount credited in the books of account of the assessee company represented cash credit u/s 68 and since the primary onus to establish the identity and the capacity of the concerned share applicants as well as to prove the genuineness of the relevant transactions was not satisfactorily discharged by the assessee, addition u/s 68 was rightly made by the AO by treating the same as unexplained cash credit. He contended that the Ld.CIT(A) however did not appreciate the facts and circumstances involved in the assessee's case and deleted the addition made by the AO u/s 68 inter alia on the ground that there being no inflow of cash, section 68 was not applicable. He contended that the reliance of the Ld. CIT(A) on the decision of Hon'ble Calcutta High Court in the case of Jatia Investment Co. (supra) to come to this conclusion is clearly misplaced in as much as the facts involved in the said case before the Hon'ble Calcutta High Court were entirely different. He submitted that only notional entries were found recorded in the said case and there was no real transactions invol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the identity and capacity of the concerned share applicants as well as genuineness of the relevant transactions having been established by the assessee on evidence, addition made by the AO us 68 was not sustainable on merit also. He, therefore, strongly supported the impugned order passed by the Ld. CIT(A) giving relief to the assessee on this issue and urged that the same deserves to the upheld. 6. We have considered the rival submissions and also perused the relevant material available on record. It is observed that its shares were issued by the assessee company during the year under consideration it premium to certain companies in lieu of the shares held by the said companies and there was thus no inflow of cash involved in these transactions. The said transactions were entered into in the books of account of the assessee company by way of journal entries and it did not involve any credit to the cash amount. The learned DR at the time of hearing has not brought anything on record to rebut or controvert this position. He however has contended by relying on the decision of Hon'ble Madhya Pradesh High Court in the case of V.I.S.P. (P) Ltd. (supra) as well as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ir lordship that when the cash did not pass at any stage and since the respective parties did not receive cash nor did pay any cash, there was no real credit of cash in the cash book and the question of inclusion of the amount of the entry as unexplained cash credit could not arise. In our opinion, the ratio of this decision of the Hon'ble Jurisdictional High Court in the case of Jatia Investment Co. (supra) is squarely applicable in the facts of the present case and the Ld. CIT(A) was fully justified in deleting the addition made by the AO u/s 68 by holding that the said provision was not applicable. We adopt the detailed reasoning mutatis mutandis to hold that both the learned authorities have erred in law and on facts in treating the sum in issue of ₹3.25 crores as unexplained cash credits. The same is directed to be deleted. Necessary computation shall follow as per law. The assessee succeeds in its former grievance whereas the Revenue s sole substantive ground and main appeal ITA No.910/Kol/2019 fails. 6. Next comes assessee s second substantive ground that both the lower authorities have erred in disallowing its depreciation claim of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15 2,66,93,202* 15,28,22,677 Misc. fixed assets 2,20,497 -- 2,20,497 15 33,074 1,87,423 Electrical installation 3,89,23,727 2,104 91,831 3,88,34,000 15 58,25,100 3,30,08,900 Computer 1,12,245 1,12,245 60 67,347 44,898 Furniture fixture 18,900 18,900 10 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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