TMI Blog2020 (12) TMI 236X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee subsequent to the search - HELD THAT:- A perusal of the assessment order shows that the assessee filed its return of income declaring total income - AO has not rejected the book results nor passed the order under section 144 - Since the assessee has shown income of ₹ 31,41,11,880/- which is much more than the amount of ₹ 20,24,39,341/-, therefore, such income, even if treated as bogus, has already been taxed and therefore, the addition of the same again will amount to double taxation which the ld. CIT(A) has rightly deleted. There is nothing on record to suggest that the assessee has booked any other part of expenditure in the Profit Loss Account, therefore, we find merit in the argument of the ld. counsel that the addition is a double addition which the ld. CIT(A) has rightly deleted - Decided in favour of assessee. - ITA Nos. 6834/Del/2014 & 4713/Del/2015 - - - Dated:- 27-10-2020 - SHRI R.K. PANDA, ACCOUNTANT MEMBER AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER For the Assessee : Shri Gautam Jain, Advocate Shri Ashwini Kumar, CA For the Revenue : Shri A.K. Mishra, Sr. DR ORDER PER R.K. PANDA, AM: ITA No.6834/Del/2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r a huge premium of ₹ 1,990/- per share. From the balance sheet filed by the assessee, the AO noted that the earning per share of the company as on 31.03.2010 was ₹ 226.73 which is as under:- Year Ended 31.03.2011 Year ended 31.03.2010 Profit after tax for the year ₹ 26,81,17,058/- ₹ 11,02,83,438/- Weighted average no. of equity shares ₹ 5,17,5,534/- Rs,4,86,411/- Basic Diluted Earning per share ₹ 518.02 ₹ 226.73 5. Since the shares were issued at a huge premium, it created doubts in the mind of the AO. Therefore, to verify the identity and credit worthiness of the share applicants and genuineness of the transaction, the AO asked the assessee to prove the three ingredients within the meaning of Section 68 of the IT Act. The assessee, in its submissions filed various details such as copy of the income-tax return, bank statements of the share applicants, their confirmations, etc. From the various details furnishe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ointed out above it was necessary to verify whether the person signing the share application form or confirmation is genuine or not, hence the assessee was insisted for production of the subscriber. iii) Not even a single subscriber is produced even after allowing a time of around two months at the convenience of the assessee. iv) Hence the assessee has failed to prove the identity of the subscriber. v) The assessee has also failed to prove the creditworthiness of the subscriber because cheques are deposited in the account immediately before the cheques issued to the assessee. Further the creditworthiness of the subscriber is not proved because there had not been any balance in the account and the profit as per P L account was Nil or a very small amount. vi) All the subscribers have forgotten the money invested after giving cheques to the assessee. None of them has got any income from the investment. They have incurred heavy loss which is not humanly probable. vii) In all the companies from whom share application money has been received a pattern has been observed regarding the gross receipt and the securities premium received during the year. The gross receipt is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d transportation of goods could not be reconciled with inward/outward gate registers. Subsequently, a survey u/s 133A was also conducted in the premises of the assessee company on 20th September, 2013. Accordingly, the assessee company was required to furnish proof of purchase of goods from SEL Manufacturing Co. Ltd., and also to prove as to where the goods were sold and the details of loading and unloading expenses. During the assessment proceedings, the AO confronted the assessee to substantiate its transaction with SEL Manufacturing Co. Ltd. Rejecting various explanations given by the assessee and observing that the assessee failed to substantiate the sale and purchase with the above mentioned company, the AO made addition of ₹ 20,24,39,341/- to the total income of the assessee by observing as under:- From, the facts noted above it is clear that the assessee company is involved in bogus transactions of purchase and sales, this is corroborated from the facts that neither records were found with others parties i.e. SEL manufacturing company nor with the assessee company. The total payments for such bogus purchase is at ₹ 1108961370/- and total payments received for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Investment Company Ltd. - 7,50,00,000/ - 8. Pushpa Yarns Pvt Ltd. - 1,00,00,000/- 9 Shubam Yarns Pvt. Ltd. Pan. AAGCS8023C 1,06,20,000 9,98,25,000/- 20,17,00,000/- 28,98,25,00/- 9. He observed that the assessee company issued shares to above 8 companies at a huge premium of ₹ 2,490/- per share. From the audited balance sheet of the assessee company, he noted that earning per share of the assessee company as on 31.03.2012 was only ₹ 49.27 per share which is as under:- Year Ended 31.03.2012 Year ended 31.03.2011 Profit after tax for the year ₹ 2,95,61,231/- ₹ 26,81,1 7,058 Weighted average no. of equity shares ₹ 5,99,945/- ₹ 5,17,534/- Basic Diluted Earning Per Share ₹ 49.27 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pacity to deposit such a huge amount as share application money. He asked the assessee to produce the principal officers of the above companies for his examination. According to the AO, on the specified date, the assessee company failed to produce the principal officers of the applicant companies. He deputed the Ward Inspector to verify the premises of all eight companies and serve summons u/s 131 of the Act. However, the Inspector reported that no such business activity was being carried on from the addresses as given by the assessee and either these are residential premises or no business activity is being carried on from those premises. The AO, therefore, confronted the same to the assessee and asked him to produce the principal officers of the eight companies for his examination. However, the assessee failed to produce the principal officers of the above companies. In view of the above, the AO, relying on various decisions and invoking the provisions of section 68 of the IT Act, made an addition of ₹ 28,98,25,000/- to the total income of the assessee. While doing so, he summarized his findings the details of which are as under:- i) All of the subscribers were not know ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not fetching any income to him over a time. Moreover these companies are having very low income and thus its sources from where they invested such a huge amount in the share application money could not be ascertained when such a huge share premium of ₹ 2490 was given compared to actual earning per share of ₹ 49 as reported in the audited balance sheet of the assessee company. xiii) In the case of the assessee apparent is not real as detailed discussion made in the order. xiv) Further, a very important point to be noted is that the share holding pattern of the applicant companies was also examined and found that these companies are being promoted and operated by the family members of the promoters of the assessee company and all these companies are directly or indirectly interconnected with each other and controlled by same people known to each other. Thus, in such a situation the onus on the assessee is heavier than under the normal circumstances and in the instant case, the assessee company failed to discharged its onus even in the normal circumstances to produce the subscribers who have invested such a huge amount of share application at such a huge share prem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed, it was submitted that it was the prerogative of the Board of Directors of the company to decide the amount of the premium. The details of working of the earning from share was given before the CIT(A) according to which it came to ₹ 3,812/-. It was accordingly argued that the charging of the premium of ₹ 1,990/- per share was fully justified. It was argued that since the assessee has duly substantiated the identity and credit worthiness of the investor companies and the genuineness of the transaction, therefore, the addition of ₹ 20.17 crore made by the AO is uncalled for. 12.3 So far as assessment year 2012-13 is concerned, it was submitted that the assessee had filed all details such as confirmations, bank statements, balance sheets, PAN details, income-tax return copy etc., to substantiate the identity, creditworthiness and genuineness of the share applicants. It was submitted that the assessee had justified the basis of charging of such share premium. It was argued that the assessee being an unlisted company, the networth has to be determined as per the Companies Act, 1956 and Rule 11UF of the Income-tax Rules, 1962 according to which the average of book ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... during the course of search in the premises of M/s SEL Manufacturing Company Ltd. or during the course of survey u/s 133A of the Act at the premises of the assessee company. It was submitted that only on the basis of statement of Mr. Sanjiv Garg, MD, recorded during the course of survey the AO held that the assessee was involved in issuing bogus sales and purchase bills which was never stated by Mr. Garg in his statement. It was submitted that during the current year the assessee company had a turnover of ₹ 600/- crore which includes both manufacturing and trading activity. It was argued that the assessee had also traded in yarn worth ₹ 110/- crore which includes the purchases made from M/s SEL Manufacturing Co. Ltd. of ₹ 29.16 crore. Similarly, out of the total sales of ₹ 131/- crores, the sales made to SEL Manufacturing Co. Ltd. amounted to ₹ 44 crores only. It was argued that the adverse view taken by the AO with regard to the transaction with SEL Manufacturing Co. Ltd. is not correct and was not based on any adverse findings. It was argued that the transaction with M/s SEL Manufacturing Co. Ltd. was duly recorded in the books of account which was r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bove cash creditors is concerned, the appellant had filed before the Ld. AO, the name, address, PAN and copy of income tax return along with confirmation letters from the cash creditors. This was got verified by the Ld. AO by issue of notice u/s 133(6), which is evident by a copy of such confirmation filed by the appellant before me. The Ld. AO having started the investigation u/s 133(6), has not given any finding nor has discussed about the proceeding u/s 133(6) in the impugned order. The Ld. AO's observations were inconsistent, as in the concluding Para no.2, he had held that none of the subscribers were known to the any of the employees or even to the M.D., while at page no.3-4 of the order, he has given detailed finding that all 6 companies that have invested in share capital of the assessee company are related to appellant's group and has given details of the Director and promoter of all 6 companies and their shareholding. On careful consideration, I hold that the identity of all the 6 companies which have invested in the appellant company stood duly proved before the AO and disregarding the relevant evidences gathered by the Ld.AO himself during the course of inqui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on letters from the 6 investor companies, copy of their bank statements, copy of its own bank statement, which show that the appellant had received such share capital in cheque through the banking channel. No adverse observation had been made by the Ld. AO in this regard, while discussing the inquiry in this regard in the Para 1, however, in the conclusion summarized at Para 2 of the order, the AO has mentioned about some enquiry carried out by the Inspector. However, the specific details of the investor companies given in the Para 2 in respect of which the enquiry was conducted, shows that the Ld. AO has not applied mind and has perhaps mixed up the facts of the case with some other case. Evidently, no enquiry was carried out by the Ld. AO through any Inspector in the case of the appellant and thus, I hold that there is no adverse observation with the Ld. AO regarding genuineness of these transactions. Similarly, the observation that all shares allotted were transferred before 31.3.2012 is also based on incorrect facts. 6.5.2 On careful consideration, I find that these transactions were made through the banking channel and the Ld AO was provided with a copy of the bank statemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... figures of receipts for sales and payments for purchase made in trading account (which includes trading with M/s SEL Manufacturing Co. Ltd.). On careful consideration, without prejudice to the specific facts of the case, I find there are a few major fallacies in the action of the Ld. AO. First, on pure accounting grounds, it is evident that the appellant had made total payments for trading purchases of ₹ 110,89,61,370/- and total receipts for trading sales of ₹ 131,14,00,711/-, which have been booked in the accounts. Accordingly, it is evident that the resulting difference of ₹ 20.24 Crores has already been offered to tax by the appellant. The same difference of ₹ 20.24 Crores cannot be taxed again, as done by the Ld. AO, as it tantamount to double addition, which is in violation of the principle of the equity and justice. Second, it is also evident that the Ld. AO had taken adverse view regarding the transactions of the appellant with M/s SEL, including purchases of ₹ 29.16 Crores and Sales of ₹ 44 Crores, however, the AO has held entire trading transactions (even with other parties) as bogus, without any adverse finding/evidence in respec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ree short statements made by the MD of the company during the course of the statement recorded u/s 133A before the investigation wing, without having been corroborated by any adverse evidence, is not sufficient to hold that the entire trading activity of the appellant company was bogus. 6.9 Besides this, the appellant's plea was that its trading activity included consignment sale for M/s SEL, which has its factory located at Shimla, while the appellant has its manufacturing unit/godown located in Ludhiana and both these companies are Star export houses. There is no provision in law nor is there any business prudence to first take delivery of the traded goods (sold on consignment basis) at Ludhiana and then to sell it to potential buyers elsewhere. Apparently, the appellant had effected delivery of the trading goods from M/s SEL to the buyers directly by using the trucks/vehicles of its own or sometimes by incurring freight expenses. Details of relevant expenses were furnished before the Ld. AO and also before me. Taking into account the above evidences, I find that relying only on the semantics with regard the reply of Mr. Sanjiv Garg, M.D. limited to 3 short questions, cann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... belong to Himachal Yarn Ltd. and its associate Group Shiva group, based in Ludhiana and only one company M/s Apoorva Leasing Finance and Investment Company Ltd., based at New Delhi is an outside company in which none of the promoters of Himachal Yarn Group and Shiva group are interested. This fact has been acknowledged by the Ld. AO at several places in the assessment order to buttress the argument that the onus on the appellant company was much heavier compared to any other case. History of investigation 6.3.2 It is seen that the Ld. AO had first asked the appellant to substantiate bonafide of the share application money received by the appellant, by issue of a questionnaire dated 27.5.2014 (served upon the appellant on 26.8.2014) vide Item No. 4. In response to this, the appellant vide letter dated 31.12.2014, had filed Written confirmation letters, Copy of ITRs and the relevant bank statements from all the 8 investor companies, to support identity, genuineness and creditworthiness of the aforesaid cash credits. The Ld. AO again issued another questionnaire dated 20.1.2015, in which these details were again asked vide Item No. 2. To this, the appellant informed vide the le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sh creditors for examination namely; M/s Gal Coltex and M.s Shubham Yarns (P) Ltd. and Deep Toold (p) Ltd. I find that no inquiries were carried out by the AO at the time of personal disposition of Mr Sanjeev Garg on 11.3.2015 regarding the share application money or the unsecured loans received from M/s Gal Coltex and M.s Shubham Yarns (P) Ltd. and Deep Tools (P) Ltd, as no statement was recorded nor there is mention of further enquiry on the note sheets. 6.3.4 On 13.3.2015, the appellant produced Mr Pradeep Makkar, the Principal officer in the first 4 companies mentioned in Table-3 above. The Ld. AO in the note sheet dated 13.3.2015 noted that Sh. Pradeep Makkar, CA attended and filed power of attorney from 5 companies namely; Shubam Yarns Pvt. Ltd, Pushpa Yarn Pvt. Ld, Himachal Yarns Pvt., Garg Fincap Ltd., Gal Cottex Pvt. Ltd. I find that no enquiries were carried out by the Ld. AO from Mr. Pradeep Makkar with regarding the share application money received from the 5 companies in which he was Principal Officer and unsecured loans received from M/s GAL Coltex and M/s Shubham Yarns Pvt. Ltd. The AO insisted that the Principal Officer of these companies may be produced. The cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss in respect of the above 5 companies in response to the 1st questionnaire itself, on 31.12.2014. The relevant balance sheets were filed subsequently, which show that all these companies had significant own funds, which were much higher than the amount of share application money paid to the appellant company. The bank statements show that the entire amount was paid to the appellant by cheque and in the bank statement, there were no cash deposits. Undisputedly, there was no doubt about the whereabouts of these companies even in the Inspector's report. The Ld. AO however, treated the share application money received from these companies as unexplained, on the grounds that the principal officers of these companies were not produced, however, the appellant had given the list of Principal Officers to the AO on 23.2.2015. Further, on 11.3.2015 Mr. Sanjeev Garg, Principal Officer in Pushpa Yarns Pvt. Ltd. appeared before the Ld. AO, while Mr. Pradeep Makkar who is Principal Officer in the other 4 companies appeared before the AO on 13.3.2015. Both of them were not questioned on the basis of evidences filed by the appellant before the AO on 31.12.2014 in the form of Bank statement, IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agers of Shiva Groups denied existence of these two companies at the premise from which the entire Shiva Groups operates. The appellant submitted that the concerned inspector (Sh. Jogender Singh) had visited the premise at 8L, Model Town, Ludhiana, and had asked about these two companies and since the Directors of the said companies and the concerned person dealing with the accounts were away from the office for a short time, Mr. Ramesh Malhotra, GM, Accounts, informed this to the Inspector and request to wait for one hour. It was informed that the Inspector told Mr. Malhotra that he had to visit other offices in Ludhiana and hence, he would come back after some time, however, he did not return to the premise. In support, the appellant filed an affidavit from Sh. Ramesh Malhotra. In was informed that Mr. Ramesh Malhotra was the Principal Officer of these companies and this information was already given to the AO vide letter dated 23.2.2015, however, the Inspector did not carry out any enquiry from Mr. Ramesh Malhotra. FINDINGS 6.5.3 On careful consideration of the above facts, it is evident that the appellant had furnished evidences before the AO on 31.12.2014 in the form of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the appellant, the Inspector was requested to wait for some time as the concerned Director and the person dealing with books of account was away, however, the Inspector left by stating that he had to cover other offices and shall come back. I also find that the Inspector had met Mr. Ramesh Malhotra, who is the Principal Officer of the company, as informed by the appellant vide letter dated 23.2.2015. Therefore, the Inspector could have carried out enquiries from him for which purpose, the Ld. AO had repeatedly asked the appellant to produce the Principal Officer of the company. Moreover, since evidently, the Inspector reported that from the premises at 8L, Model Town, Ludhiana, the other companies of Shiva Group operate and as informed by the appellant that such premise was owned by 'Shiva' group, there is no credibility in the report of the Inspector, based on the enquiry from the Principal Officer himself of these 2 companies (Mr. Ramesh Malhotra) that these 2 companies of Shiva Group did not exist at 8L, Model Town, Ludhiana. Looking to the facts of the case, it is very probable that the Inspector did not prefer to wait for the accountant/Director and thought of re-vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion with ROC as reliable evidence to support identity of that company and has relied upon the decision in the case of Dashratlal Agrawal (Supra). FINDINGS 6.7 On careful consideration of the above facts and the results of the enquiry, I find that first of all, it is evident that at no stage during the assessment proceeding, the Ld. AO had confronted the appellant about the above report of the Inspector about non existence of the company at the given address. Under the circumstances, the AO has not discharged the onus on the appellant, therefore, the appellant was pretended from rebutting in the matter. 6.7.2 Without prejudice, the said M/s Apoorva Leasing Finance and Investment Company Ltd. is a listed company, having share capital plus reserve of over ₹ 183 Crores. For the purpose of being a listed company, a company has to follow compliance requirements of several stock exchanges, SEBI and Registrar of Companies on a regular basis. Therefore, merely on the basis of an enquiry, the authenticity of which remains doubtful, it cannot be held that the said company was a bogus company. During the course of appellate proceedings, the appellant was asked to explain as to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ank statements of that company clearly shows that there was no cash deposit prior to issue of cheque to the appellant company. The Ld. AO has not examined the bank statement, however, during the appellate proceeding, the source of funds in the hands of M/s Apoorva Leasing Finance and Investment Company Ltd. were examined, which show that the funds were primarily provided by M/s Anuvijay Investment Ltd. The appellant was asked to furnish a copy of the ITR, Bank statement of that company as also the written confirmations from its Directors, which were filed before me on my directions. No infirmity was observed by me. Under the circumstances, no adverse observation can be made on the genuineness of the source of the funds to M/s Apoorva Leasing Finance and Investment Company Ltd. It is also seen that that company has total share capital plus reserve of over ₹ 180 Crores, therefore, it had the adequate capacity to make advance towards share application money in the appellant company of ₹ 7.5 Crores. Accordingly, the creditworthiness of that company also stands proved. 6.7.4 in view of the above, as identity, genuineness and creditworthiness in respect of M/s Apoorva Leas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of Sofia Finance Ltd. are not squarely applicable to the case of the appellant. The AO holds that like those cases in the case of the appellant, identity of two subscribers could not be proved and that the Principal Officers of the other companies did not appear in responses to the summons. However, as discussed above, the Principal Officers in respect of the 6 companies had already appeared before the AO, while the Inspector deputed by the Ld. AO himself acknowledges meeting Mr. Ramesh Malhotra, who is the Principal Officer in M/s Brijeshwari Taxtiles Pvt. Ltd. and m/s Shiva Spin Fab Pvt. Ltd. at the office of those companies at Ludhiana. In view of detailed discussion in the regard, the finding of the AO that these companies did not exist at the given address, where all other companies of the Shiva Group existed, has been held by me to be baseless. With regard M/s Apporva Leasing Finance and Investment Co. Ltd. it has been observed by me that the fact of non-serving of summons was not brought in the knowledge of the appellant and hence it is evident that the Ld. AO has not discharged onus in this regard. In view of this, the appellant does not get any help from the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore him regarding genuineness and creditworthiness in respect of any of the share applicants. In view of this, in my considered view, the decision in the case of Dasrath Lai Aggrawal (supra), cannot be applied to the case of the appellant. In the case of Shekhawati Capital Finlease Pvt. Ltd. vs. ITO (supra), the addition was made u/s 68 on the ground that the appellant could not prove the creditworthiness of the subscribers, who evidently were not produced before the AO. However, in the case of the appellant, based on the evidence on record, the creditworthiness of the share applicants stands proved. In view of this, that decision also cannot be applied in the case of the appellant. 6.10 In view of the above facts, it is evident that the appellant had substantiated the identity, genuineness and creditworthiness in respect of all the 8 investor companies, in respect of which supporting evidences were filed before the AO, on which no adverse evidence could be drawn. The Ld. AO's reservation was only with respect to non production of principal officers, however he failed to appreciate that the appellant had already produce principal officers in respect of 6 companies. Further, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d cash credits u/s 68 of the Income Tax Act. ii. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of ₹ 20,24,39,341/- made on account of income from undisclosed sources ignoring the fact that all the purchases and sales proved bogus during the course of search and survey. iii. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred on holding that provisions of section 145(3) were not applied despite the fact that all the purchases and sales was found bogus and the same has elaborately discussed in the assessment order and that is tantamount to rejection of books of accounts u/s 145(3). iv. The appellant craves leave to add, amend, modify, vary, omit or substitute any of the aforesaid grounds of appeal at any time before or at the time of hearing of the appeal. ITA No.4713/Del/2015 i. Whether on the facts and circumstances of the case, Ld. CIT(A) has erred in deleting the addition on account of unexplained cash credit under section 68 of the Income Tax Act, 1961 amounting to ₹ 28,98,25,000. ii. Whether on the facts and in the circumstances ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vs. Titan Securities Ltd., 32 taxmann.com 306 (Del); x) CIT vs. Youth Construction Pvt. Ltd., 44 taxmann.com 364 (Del); xi) CIT vs. Ultra Modern Exports (P) Ltd., 40 taxmann.com 458 (Del); xii) CIT vs. NR Portfolio Pvt. Ltd., 264 CTR 258 (Del); xiii) Beutex India Pvt. Ltd. vs. CIT, 18 taxmann.com 09 (Del); xiv) CIT vs. Precision Finance (P) Ltd., 208 ITR 465 (Cal); and xv) PCIT vs. Bikram Singh, 399 ITR 407 (Del). 18. He also relied on the recent decision of the Delhi Bench of the Tribunal in the case of ITO vs. KNS Realtors Pvt. Ltd., vide ITA No.1286/Del/2014, order dated 24th August, 2020 and drew the attention of the Bench to para 16 to 18 of the said order. He accordingly submitted that when the assessee has not produced the principal officers of the applicant companies in spite of several opportunities given, therefore, merely because the assessee has filed various papers, the CIT(A) was not justified in deleting the addition by ignoring the crucial fact that the onus shifted to the assessee once the AO asked him to produce the principal officers. Since the onus was not discharged by the assessee, the AO had rightly treated the credits as unexplained. He ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of their own for the purpose of making investment in the assessee company. The assessee has duly proved the creditworthiness of all the six share subscribers who have invested in the assessee company. So far as the establishment of genuineness of transaction is concerned, he submitted that the ld. CIT(A) has accepted the copy of confirmation, bank statement of investors, assessees own bank statements and has held that the transactions are genuine. So far as assessment year 2011-12 is concerned, the ld. CIT(A) has also given a finding that no enquiry was carried out by the AO through Inspector in the case of the subscribers and the AO has not applied his mind and perhaps mixed up with the facts of the case of some other case. Further, the AO has also not applied the provisions of Rule 11UF of IT Rules, 1962, for making the valuation of net worth of the assessee company. 23. So far as assessment year 2012-13 is concerned, the ld. counsel while relying on the order of the CIT(A) submitted that the various evidences filed before the AO have not been rebutted by him. He has not raised any query regarding various evidences furnished before him during the course of assessment proceedin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssed under section 143(3) of the Act and all the six shareholders have complied to the notice issued under section 133(6) of the Act. 24.1 So far as assessment year 2012-13 is concerned, he submitted that out of the eight shareholders five are common to assessment year 2011-12 except M/s Balmukhi Textiles (P) Ltd. There are only three new shareholders, i.e., M/s Garg Fincap, M/s Pushpa Yarns (P) Ltd. and M/s Apoorva Leasing Finance and Investment Company Ltd. He submitted that in respect of M/s Garg Fincap Ltd. and M/s Pushpa Yarns (P) Ltd., Mr Sanjeev Garg was produced on 11th March 2015. Similarly, Mr. Pradeep Makkar was produced on 13th March 2015 who is the principal officer of four companies, namely, (1) Himachal Yarns (P) Ltd; (2) M/s Garg Fincap Ltd.; (3) Shubam Yarns (P) Ltd.; and (4) Gal Cottex (P) Ltd.. So far as M/s Apoorva Leasing Finance and Investment Company Ltd., is concerned, the same company was assessed under section 153C/153A of the Act for assessment year 2010-11 and is a listed company with reserves of ₹ 120/- crores. Referring to various pages of the paper book, the ld. counsel submitted that the assessee has discharged the burden cast on it by produ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t and also contradictory. So far as the allegation of the AO that the assessee has issued the shares at a huge premium is concerned, he submitted that provisions of Section 56(2)(viib) of the Act is not applicable in the year under consideration and is applicable from financial year 2012-13 relevant to assessment year 2013-14. So far as the allegation of the AO that Inspector had given a report that the shareholders are not available at the given address is concerned, he submitted that the report of the Inspector is not a valid evidence. Further, nonproduction of shareholders/directors cannot be a ground for making an addition if the addition is on account of non-compliance of summons issued under section 131 of the Act. So far as the various decisions relied on by the AO as well as the ld. DR are concerned, he submitted that all those decisions are distinguishable and not applicable to the facts of the present case. 26. The ld. counsel submitted that even otherwise also non-production of subscribers/directors could not be a ground for making addition. For the above preposition, he relied on the decisions of the Hon ble Delhi High Court in the case of CIT vs Value Capital Servic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hiv Dhooti Pearls Investment Ltd. xiii) 299 ITR 286 (Del) CIT vs. Divine Leasing Finance Ltd xiv) 330 ITR 298 (Del) CIT vs. Dwarkadhish Investment (P.) Ltd. xv) 333 ITR 119 (Del) CIT vs. Oasis Hospitalities (P) Ltd. xvi) 354 ITR 282 (Del) MOD Creations (P) Ltd. vs. ITO xvii) 361 ITR 147 (Del) CIT v. Expo Global India Ltd. xviii) 361 ITR 220 (Del) CIT v. Kamdhenu Steel and Alloys Ltd, xix) 366 ITR 110 (Del)CIT vs, Empire Buildtech (P) Ltd. xx) 380 ITR 289 (Dei) CTT v. Five Vision Promoters (P.) Ltd. xxi) ITA No. 71/2019 (Del) Pr. CIT vs. Priyatam Plaschem Pvt. Ltd. BOMBAY HIGH, COURT i) ITA No. 66/2016 dated 10.4.2017 Pr. CIT v. Paradise Inland Shipping (P) Ltd. ii) 397 ITR 136 (Bom) CIT v. Orchid Industries (P) Ltd. iii) 394 ITR 680 CIT v. Gagandeep Infrastructure (P) Ltd, iv) 403 ITR 415 (Bom) dated 17.04.2018 Pr. CIT vs. Veedhata Tower Pvt. Ltd. ALLAHABAD HIGH COURT i) 350 ITR 220 (All) CIT vs, Jav Dee Securities and Finance Ltd. ii) 350 ITR 222 (All) CIT vs. Misra Preservers (P) Ltd. - MADHYA PRADESH HIGH COURT i) 356 ITR 65 (MP) CIT vs. Peoples General Hospital Ltd CALCUTTA HIGH COURT i) ITA No. 263/2011 GA No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o. 2799/D/2018 dated 21.6.2019 Champ Info Software vs. PCIT ix) 163 ITD 491 (Chd-Trib,) Nirmal Rani vs. DCIT x) 173 ITD 30 (Mumbai-trib.) ITO vs. Iraisaa Hotels (P) Ltd. d) That nature of income and source of income can be examined only by the Assessing Officer of the shareholder and not by the Assessing Officer of the assessee i) ITA No. 263/3011 GA No. 2856/2011 (Cal) dated 21.9.2011 CIT vs. Dataware (P) Ltd. ii) 366 ITR 232 (P H) CIT vs. Varinder Rawlley iii) 237 Taxman 104 (Del) CIT vs. Shiv Dhooti Pearls Investment Ltd. iv) 103 ITR 344 (Pat) Saraogi Credit Corporation vs. CIT v) 59 ITR 632 (Assam) Tola Ram Daga vs. CIT vi) 49 ITR 273 (Mad) S. Hastimal vs. CIT vii) 151 ITR 150 (Pat) Additional CIT. Bihar vs. Hanuman Aggarwal viii) 154 ITR 244 (Pat) Addl. CIT vs. Bahri Brothers (P) Ltd. ix) 87 ITR 349 (SC) CIT vs. Daulat Ram Rawatmull x) ITA No. 3133/Del/2018 dated 25.6.2018 Moti Adhesives (P) Ltd. vs, ITO xi) ITA NO. 1162/Kol/2015 dated 14.6.2018 ITO vs. Wiz-Tech Solutions (P) Ltd. xii) ITA 1463/Kol/2010 dated 21.6.2013 Sri Nirmal Kumar Bose vs. ITO xiii) ITA No. 2677/Kol/2013 dated 25.7.2014 Jyoti Saraf vs. ITO e) The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 212/2012 dated 11.4.2012 (Del) CIT v. Goel Sons Golden Estate (P) Ltd. iv) 342 ITR 169 (Del) Nova Promoters Finlease (p) Ltd v) ITA No. 645/2012 dated 13.1.2015 (Del) Funnay Time Finvest Ltd vi) 361 ITR 220 (Del) CIT vs. M/s Kamdhenu Steel and Alloys Ltd. vii) ITA No. 71/2015 dated 12.8.2015 (Del) CIT v. Vrindavan Farms (P) Ltd. viii) ITA No. 3342/D/2013 ITO v. XO Infotech Ltd. 27.2 So far as the order of the CIT(A) in deleting the addition of ₹ 20,24,29,341/- in assessment year 2011-12 representing difference of sale and purchase made by the assessee with M/s SEL Manufacturing Company Ltd. is concerned, he submitted that the ld. CIT(A) has given justifiable reasons while deleting the addition. He submitted that the assessee had made total payments for trading purchases at ₹ 110,89,61,370/- and had shown total receipts for trading sales at ₹ 131,14,00,711/- which have been booked in the accounts. Accordingly, it is evident that the resultant difference of ₹ 20.24 crores has already been offered to tax by the assessee. Therefore, the sum of ₹ 20.24 crores could not have been taxed again by the AO which amounted to double addition. F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the rival arguments made by both the sides, perused the orders of the AO and the CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. The common issue for assessment year 2011-12 and 2012-13 is regarding the order of the CIT(A) in deleting the addition of ₹ 20,17,00,000/- for A.Y. 2011-12 and ₹ 28,98,25,000/- for assessment year 2012-13 which was made by the AO under section 68 of the Act. A perusal of the assessment order shows that the AO made addition of ₹ 20.17 crores in respect of following six parties for assessment year 2011-12 and ₹ 28.29 crores in respect of 8 parties for 2012-13 the details of which are as under:- SL. No. Particulars of the Subscribers Amount of share application money received in F.Y. 2010-11 Amount of share application money received in F.Y. 2011-12 1. Himachal Yarn Formerly Himachal Steel Udyog Ltd. PAN: AABCH0451J 7,07,10,000 1,50,40,000/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he revised grounds of appeal has deleted the words group companies which the AO has mentioned in both the assessment years that the subscriber companies are group companies. It is also his submission that all these companies are assessed to tax and in subsequent year also the share application money in respect of three of the companies has been accepted under section 143(3) as per the direction of the Joint Commissioner under section 144A. Further, the principal officers of some of the companies were produced before the AO but the AO chose not to record their statements. It is also his submission that the AO has mixed up the facts of some other case with that of the assessee and has proceeded to make the addition on misconception of facts and misunderstanding. According to him, since the assessee has discharged the burden cast on it, therefore, no adverse view should have been taken and, therefore, the ld. CIT(A) has rightly deleted the addition. 30. We find some force in the above argument of the ld. Counsel. A perusal of the assessment order shows that the AO at Page 3 of the assessment order for assessment year 2011-12 has mentioned as under:- The share holding pattern ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Garg Fincap Ltd. of ₹ 2.37 crores and ₹ 1 crore in A.Y. 200708 and 2009-10 respectively. 33.1 So far as assessment year 2011-12 is concerned, a perusal of the Order sheet notings which was forwarded by the AO shows that on 24th March 2014, the AO discussed the case with the assessee s representative and asked him to produce the principal officers of six companies for his examination fixing the hearing date on 28th March 2014 and passed the order on 31st March 2014, but, there is no entry on 28th March 2014 as to what has happened. On being pointed out to the CIT-DR regarding the above, he submitted that whatever order sheet entry has been provided by the AO is before the Bench and the Bench can take a view on this. 33.2 So far as assessment year 2012-13 is concerned, on 13th March 2015, Shri Pradeep Makkar attended the proceedings and filed the power of attorney from Shubham Yarns (P) Ltd., Himachal Yarns Ltd., M/s Garg Fincap Ltd. and M/s Gal Cottex (P) Ltd.. However, the AO has not recorded the statement of Mr. Pradeep Makkar although he is fully aware that he is the director-cum-shareholder of the assessee company as well as the principal officer of above four ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 31.03.2014 as mentioned earlier at para 33.1 of his order. 33.5 So far as assessment year 2012-13 is concerned, Shri Pradeep Makkar and Shri Sanjeev Garg were produced before the AO. However, no statement was recorded. A perusal of copy of letter dated 23.02.2015 addressed to the AO by the assessee shows that the assessee had categorically given the names of the principal officers of the companies/entities who have subscribed to the equity capital of the company. At clause 19 of the said letter reads as under:- GAL/2014-15/ Dated, 23.02.2015 The Deputy Commissioner of Income Tax, Circle 10(1), New Delhi. Sub: Submission of information for Assessment proceedings for assessment year 2012-13. Dear Sir, .. .. 19. Following are the principal officer of the companies/entities who have subscribed to the equity capital of the company. Name of the subscriber Principal officer of the Company i) GAL Cottex (P) Ltd. Sh. Pardeep Makkar ii) Shubham Yarns (P) Ltd. Sh. Pardeep Makkar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) has given the average of book value and EPS based share valuation at ₹ 3,812/- which is as under:- CALCULATION OF THE BOOK VALUE OF SHARE OF THE COMPANY A) Calculation of Book value of Equity Shares 31-03-2011 Equity Capital 596000 Nos ₹ 59,60,000.00 Preference Capital 20,00,000 Nos ₹ 20,00,00,000.00 General Reserve ₹ 23,45,12,144.00 Capital Revaluation Reserve ₹ 31,38,63,258.00 Capital Reserve ₹ 30,00,000.00 Security Premium Account ₹ 23,82,50,000.00 Surplus/Profit Loss Account ₹ 46,94,42,087.00 Total Shareholders Fund Rs.l,46,50,27,489.00 Less Preference Capital ₹ 20,00,00,000.00 Amount Attributable to Equity Shareholders Rs.l,26,50,27,489.00 Weighted average number of equity share 517534 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 475/- per share of the face value of ₹ 10/- each. The AO had given a finding that the assessee company had not carried out any business either during this year or in the preceding year. The AO had also found some cash transactions in the bank account of the share applicant companies before they invested in the assessee company. Under these circumstances, the AO took the view that the assessee company had routed some of its funds to bring the share capital into it. However, in the instant case, the company is showing huge profits year after year starting from A.Y. 2004-05 running into crores and assessments have been completed u/s 143(3) from a.Y. 2004-05 till A.Y. 2014-15 except for A.Y. 2005-06 which is under 143(1). Further, the AO had analysed the holding of shares of the applicant companies and had given a finding that all these companies are group companies and are directly or indirectly operated by the promoters of the assessee company. Therefore, in our view the above decision relied on by the ld. DR is not applicable to the facts of the present case. The various other decisions relied on by the ld. DR are also not applicable to the facts of the present case in view o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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