TMI Blog2020 (3) TMI 595X X X X Extracts X X X X X X X X Extracts X X X X ..... Ld. AO was clinched with tangible information from investigation wing which suggested possible escapement of income in the hands of the assessee. In our opinion, nothing more was required at this stage since Ld. AO had sufficient reasons to form such a belief. Therefore, we do not find much substance in assessee s legal grounds. Ground Nos. 1 to 3 stand dismissed. - I.T.A. No. 631/Mum/2019 And I.T.A. No.632/Mum/2019 - - - Dated:- 12-3-2020 - Shri Mahavir Singh, VP And Shri Manoj Kumar Aggarwal, AM For the Assessee : Mr. Vimal Punmiya- Ld. AR For the Revenue : Ms. Kavita P. Kaushik-Ld. DR ORDER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. As per the provisions of Section 68 of the Income Tax Act, 1961, where any sum is found credited in the assessee s books and assessee offers no explanation about the nature and source thereof or the explanation furnished is found to be unsatisfactory, the sum so credited may be charged to Income-Tax as the income of the assessee of that previous year. A proviso has been inserted to the said section by Finance Act, 2012 w.e.f. 01/04/2013 to provide that where the assessee is a company and the sum so credited consists of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Private Limited [88 Taxmann.com 502]. The Hon ble Delhi High Court followed the said decision in Pr. CIT V/s Adamine Construction Pvt. Ltd. [107 Taxmann.com 84] against which revenue s Special Leave petition was dismissed by Hon ble Supreme Court reported at 107 Taxmann.com 85. Similar is the position of decision of Hon ble Delhi High Court rendered in Pr. CIT V/s Himachal Fibers Ltd. [98 Taxmann.com 72] against which revenue s Special Leave Petition was dismissed by Hon ble Supreme Court reported at 98 Taxmann.com 173. Similar is the decision of Hon ble High Court of Madhya Pradesh in Pr. CIT V/s Chain House International Pvt. Ltd. [98 Taxmann.com 47] against which revenue s Special Leave Petition has recently been dismissed by Hon ble Supreme Court on 18/02/2019 reported at 103 Taxmann.com 435. 3. Similar is the recent decision of Hon ble Bombay High Court in Pr. CIT V/s Ami Industries (India) Pvt. Ltd. [ITA No. 1231 of 2017, dated 29/01/2020) which has been rendered after considering the principles laid down by Hon ble Supreme Court in its recent decision titled as Pr.CIT Vs. NRA Iron Steel Pvt. Ltd. [412 ITR 161]. The Hon ble Court held as under: - 10. Mr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vides that if there is any cash credit disclosed by the assessee in his return of income for the previous year under consideration and the assessee offers no explanation for the same or if the assessee offers explanation which the Assessing Officer finds to be not satisfactory, then the said amount is to be added to the income of the assessee to be charged to income tax for the corresponding assessment year. 14. Section 68 of the Act has received considerable judicial attention through various pronouncements of the Courts. It is now well settled that under Section 68 of the Act, the assessee is required to prove identity of the creditor; genuineness of the transaction; and credit worthiness of the creditor. In fact, in NRA Iron Steel (P) Ltd (supra), Supreme Court surveyed the relevant judgments and culled out the following principles: 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 sati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... credits in terms of identity, genuineness of the transaction and creditworthiness of the creditors were available, without any infirmity in such evidence and the explanation required under Section 68 of the Act having been discharged, Assessing Officer was not justified in making the additions. Therefore, the additions were deleted. 19. In appeal, Tribunal noted that before the Assessing Officer, assessee had submitted the following documents of the three creditors: a) PAN number of the companies; b) Copies of Income Tax return filed by these three companies for assessment year 2010- 11; c) Confirmation Letter in respect of share application money paid by them; and d) Copy of Bank Statement through which cheques were issued. 20. Tribunal noted that Assessing Officer had referred the matter to the investigation wing of the department at Kolkata for making inquiries into the three creditors from whom share application money was received. Though report from the investigation wing was received, Tribunal noted that the same was not considered by the Assessing Officer despite mentioning of the same in the assessment order, besides not providing a copy of the same to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the transactions. In so far credit worthiness of the creditors were concerned, Tribunal recorded that bank accounts of the creditors showed that the creditors had funds to make payments for share application money and in this regard, resolutions were also passed by the Board of Directors of the three creditors. Though, assessee was not required to prove source of the source, nonetheless, Tribunal took the view that Assessing Officer had made inquiries through the investigation wing of the department at Kolkata and collected all the materials which proved source of the source. 22. In NRA Iron Steel (P) Ltd (supra), the Assessing Officer had made independent and detailed inquiry including survey of the investor companies. The field report revealed that the shareholders were either non-existent or lacked credit-worthiness. It is in these circumstances, Supreme Court held that the onus to establish identity of the investor companies was not discharged by the assessee. The aforesaid decision is, therefore, clearly distinguishable on facts of the present case. 21. Therefore, on a thorough consideration of the matter, we are of the view that the first appellate authority had r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the facts and circumstances of case and in law, Ld. CIT(A) erred in confirming initiation of penalty proceeding u/s.274 r.w.s 271 (1) (c) of Income Tax Act 1961. 7. On the facts and circumstances of the case and law the Ld. CIT (A) erred in set-asiding for fresh calculations of interest under section 234A, 234B and 234C of the Income Tax Act, 1961. Facts on record would reveal that the assessee being resident corporate assessee stated to be engaged as builders developers was subjected to an assessment u/s 143(3) r.w.s. 147 on 22/12/2017 wherein the income of the assessee was determined at ₹ 207.60 Lacs after certain addition u/s 68 for ₹ 207 Lacs as against returned income of ₹ 0.60 Lacs e-filed by the assessee on 30/09/2011 which was processed u/s 143(1). 5.2 Subsequently, upon formation of belief that certain income escaped assessment in the hands of the assessee, the case was reopened as per due process of law vide issuance of notice u/s 148 dated 24/02/2017. The reasons for reopening were duly communicated to the assessee. In response, the assessee offered original return of income. No objections were filed against initiate of reassessment pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hri Rajesh Agarwal, an associate of the group, in his statement under oath u/s 131, made admission of sum of ₹ 11.13 Crores as undisclosed income of the group. However, the said statement was retracted immediately on 16/10/2014 by submitting an affidavit that the statements were extracted by applying undue influence without there being any incriminating evidences on record. 5.5 The findings of search operations revealed that entities of Shri Rajesh Agarwal received unsecured loan / share application money of around 30 Crores from various Kolkata based parties. Shri Rajesh Agarwal was stated to be director of around 28 entities including that of assessee. It transpired that the assessee company received total share capital of ₹ 432.22 Lacs during financial years 2008-09 to 2011-12. The amount disclosed with respect to the assessee entity was ₹ 90.45 Lacs for financial years 2008-09 to 2011-12. However, it was noted that money also came from 25 other entities also which had common addresses with admitted as well as non-admitted companies /common directors with admitted as well as non- admitted companies. It also transpired that the entities of Shri Rajesh Agarwal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which have invested in the investor companies. Therefore, Ld. AO had sufficient reason to believe that income had escaped assessment in the hands of the assessee. Therefore, the legal grounds challenging reassessment proceedings were dismissed. The reasons that triggered reassessment proceedings have been extracted in para 6.0 of the impugned order, which we have perused. 6.3 On merits, the assessee assailed the quantum addition by way of elaborate submissions which have been extracted in para 7.1 of the impugned order. The assessee drew attention to the documents submitted by the assessee with respect to investor entities to establish their identity, creditworthiness and genuineness of the transactions. It was submitted that each and every shareholder confirmed the stated transactions therefore, findings rendered by Ld.AO run contrary to the provisions of Sec. 68. The assessee maintained that by submitting these details, it had discharged the primary onus of proving the stated transactions. All the investor entities had enough funds to invest in the assessee company. Reliance was placed on catena of judicial pronouncements to support the said submissions. These have already ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he AO. This also is incorrect as the AO had in-depth information not only about the 11 companies which have invested in the assessee company but also about the 67 companies which have invested in the said 11 companies. The AO had made exhaustive enquiry and analysis before reaching to this conclusion. The Learned Counsel has also alleged that the Third Party Unilateral Act cannot be the basis of addition but the addition, in this case, has been made not on the basis of Third Party Unilateral Act but on the basis of the assessee's own admission supported by other corroborative evidences. In the light of these facts and circumstances, the addition made by the AO is confirmed. The grounds of appeal are dismissed. Aggrieved the assessee is under further appeal before us. 7. We have carefully heard the arguments advanced by respective representatives and perused relevant material on record including documents placed in the paper-book. We have also deliberated on various judicial pronouncements as cited before us. We have already appreciated the settled legal position regarding addition u/s 68 as enumerated by us in the opening paragraphs. Our adjudication to the subject matter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntities in the following manner: - No. Name of Investor Amount of Share Capital invested Share Capital of investor entity Reserves of Investor entities Net worth of investor entities 1 Limelight Dealcom P. Ltd. 15,00,000 16,85,000 3,01,30,806 3,18,15,806 2 Classic Commotrade P. Ltd. 5,00,000 6,51,800 2,70,49,015 2,77,00,815 3 Divy Prakash Suppliers Pvt. Ltd. 25,00,000 1,00,02,450 33,68,50,695 34,68,53,145 4 Goldy Dealcom P. Ltd. 25,00,000 7,21,000 3,04,44,166 3,11,65,166 5 Nextgen Tradecom P. Ltd. 20,00,000 57,65,000 10,76,35,000 11,34,00,000 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d CIT(A) has gone by irrelevant considerations to confirm the impugned additions. The object clause of the investor entities would have no relevance vis- -vis proposed additions in the hands of the assessee u/s 68. It is trite law that no additions could be made merely on the basis of suspicion, conjectures or surmises. 8.5 The Ld. DR has relied upon the case of Hon ble Supreme Court in Sumati Dayal Vs CIT (80 Taxman 89) Durga Prasad More (82 ITR 540 26/08/1971). No doubt that the revenue authorities were not required to put blinkers while looking at the documents produced before them. They were entitled to look into the surrounding circumstances to find out the reality of the documents produced before them. However, we find that no such inquiries have been made by the authorities except for the allegations that the share capital was bogus in nature. Nothing was brought on record that to substantiate the fact that the assessee s unaccounted money was routed in the books in the garb of share capital. 8.6 The entirety of facts and circumstances as enumerated hereinabove do not convince us to concur with the stand of Ld. CIT(A). The impugned additions, in our considered o ..... 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