TMI Blog2021 (4) TMI 162X X X X Extracts X X X X X X X X Extracts X X X X ..... treated the share capital/ share premium and or loan and advances appearing in the balance sheet of aforesaid assessee companies as alleged introduction of unaccounted funds of the assessee companies into the regular books of account which has been added u/s.68 - HELD THAT:- Assessees herein filed detailed documentary evidences in the form of duly signed confirmation of investors/lenders (parties), details of PAN, copies of ITR, duly establishing the identity of the parties and genuineness of the transactions. Assessee also filed bank statements of the parties duly establishing the creditworthiness of the parties to invest in the share capital of or advance loans to the Assessee Companies. What has been disputed is the creditworthiness and this is because, they do not have much revenue from operations and were showing marginal income. However, nowhere the Assessing Officer has disputed the funds available in their balances sheets, duly accounted for and the source from such funds have come. All the Subscribers/ Lenders are corporate entities having separate legal identity who are regularly assessed to tax and complying with all statutory requirements. One very important fact her ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ose cases that it is unaccounted money of the assessee companies which has been routed through them or it is their unaccounted money which has been invested in the assessee company. In absence of any such finding or material, no adverse inference can be drawn in the case of the assessee companies. Thus, the identity and the creditworthiness of the investor/subscriber company stands fully established and so also the genuineness of the transaction. No reason or justification for sustaining such an addition of share capital or share premium under the deeming provision of Section 68. We are in tandem with the arguments raised by the ld. counsel and the explanation given by him in view of supporting documents as dealt and incorporated above and are accepted. In the result additions as made by the AO on this score are directed to be deleted. Fresh addition made by the CIT (A) by making enhancement on account of alleged commission income - addition of new source of income is beyond the scope of enhancement by the CIT (A) - HELD THAT:- Such an addition made by the ld. CIT (A) is definitely beyond the scope of jurisdiction conferred upon the ld. CIT(A) on u/s.251 by introducing new ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) without giving opportunity to the Assessing Officer in violation of Rule 46A. First of all, it has been clarified that no additional evidences were submitted except for assessment orders passed by the Income Tax Department which is part of the income tax records cannot be construed as additional evidences and therefore such ground is devoid of any merits and same is dismissed. - I.T.A. No. 4691, 5736, 6070, 5744, 5741, 5742, 5740, 5832, 5650, 5831/DEL/2016, I.T.As. No.5974/DEL/2017 & 6401, 5398, 5526, 2920/DEL/2017, I.T.A. No. 2019 & 510, 5397, 5527, 9287, 9357, 509/DEL/2019 And I.T.A. No.2024/DEL/2012 - - - Dated:- 18-3-2021 - SHRI AMIT SHUKLA AND SHRI PRASHANT MAHARISHI, JJ. Appellant by: S/Shri S.K. Tulsiyan, Adv., Ashwani Kumar, CA, Bhoomija Verma, Adv., Aditya Kumar, CA and Bhavesh Jindal, CA Respondent by: Ms. Sunita Singh, CIT-D.R. ORDER SHRI AMIT SHUKLA, J. The aforesaid bunch of 22 appeals relating to above named 16 assessees pertain to quantum of assessment passed u/s 143(3) for the assessment years 2012-13 and 2013-14 arising out of 9 separate impugned appellate orders. The issues involved in all the 22 appeals are arising out of identical s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A.Y Asses sment Order u/s Quantum of addition(s) made by the Ld. A.O Details of original return date of filing of ITR income declared 1. Angel Cement Pvt. Ltd. -Share Capital sec 68 -Current liabilities (payables) sec 68 31.03.2015 2012-13 143(3) 66,00,00,000 54,70,00,000 26.09.2012 3,803/- 2. Delight Resorts Pvt. Ltd. -Share Capital section 68 -Advance section 68 -50% disallowance of employee benefit expenses 30.03.2015 2012-13 143(3) 10,00,00,000 66,56,47,519 5,22,890 29.09.2012(-) 3,80,468/- 3. Delight Resorts Pvt. Ltd. - Advance section 68 30.11.2016 2014-15 143(3) 37,70,00,000 30.09.2014 47,080/- 4. Jawahar Credit Holdings Pvt. Ltd. - Share Capital secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 29.09.2012 2,77,294/- 13. Sukhna Steel Pvt. Ltd. - Share capital (including bonus shares of Rs. 16,80,000/-) section 68 26.03.20 15 2012-13 143(3) 26,16,80,000 20.09.2012 7,844/- 14. Sunlight Tours Travel Pvt. Ltd. - Share Capital (including bonus share of Rs. 12,01,68,000/-) section 68 26.03.2015 2012-13 143(3) 52,01,68,000 29.09.2012 3,69,875/- 15. Super Star Agency Pvt. Ltd. Share Capital section 68 27.03.2015 2012-13 143(3) 42,25,00,000 22.09.2012 4,840/- 16. Supreme Placement Services Pvt. Ltd. - Share capital (including bonus shares of ₹ 12,43,00,000/-) section 68 27.03.2015 2012-13 143(3) 72,43,00,000 29.09.2012 9,73,438/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. Order u/s Quantum of Addition Confirmatio n (C) or Deletion (D) by the Ld. C.I.T (A) Appeal before the Hon ble ITAT filed by Revenue (R) or Assessee(A) 1. Angel Cement Pvt. Ltd. -Share Capital sec 68 -Current liabilities (payables) sec 68 2012-13 143(3) 66,00,00,000 54,70,00,000 Deleted (D) D R R 2. Delight Resorts Pvt. Ltd. -Share Capital section 68 -Advance section 68 -50% disallowance of employee benefit expenses 2012-13 143(3) 10,00,00,000 66,56,47,519 5,22,890 D D D R R Not challenged 3. Delight Resorts Pvt. Ltd. - Advance section 68 2014-15 143(3) 37,70,00,000 D R 4. Jawahar Credit Holdings Pvt. Ltd. -Share Capital section 68 -Alleged Undisclos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (including bonus shares of ₹ 20,63,40,000) section 68 2012-13 143(3) 80,63,40,000 D R 13. Sukhna Steel Pvt. Ltd. - Share capital (including bonus shares of 16.80 lacs) section 68 2012-13 143(3) 26,16,80,000 D R 14. Sunlight Tours Travel Pvt. Ltd. - Share Capital (including bonus share of 12,01,68,000) section 68 2012-13 143(3) 52,01,68,000 D R2 15. Super Star Agency Pvt. Ltd. Share Capital section 68 2012-13 143(3) 42,25,00,000 D R 16. Supreme Placement Services Pvt. Ltd. - Share capital (including bonus shares of ₹ 12.43 crores) section 68 2012-13 143(3) 72,43,00,000 D R3 17. G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the necessary ingredients of section 68, whereas in few cases the Ld. CIT(A)s have upheld the additions made by the A.Os u/s 68 on the ground that the concerned Assessees have availed accommodation entries in the garb of share capital and/or loans advances. In the remaining cases the Ld. C.I.T(A)s have opined that the Assessees have essentially worked as entry providers for providing facility to route transactions in lieu of certain commission income. Another peculiar fact to be noted is that, even with respect to the same Assessee, divergent views have been taken by different officers at the first appellate stage in relation to similar additions u/s 68 made in different A.Ys. For instance:- In SI. No. 6 - Kasper Information Technology Pvt. ltd. wherein addition u/s 68 has been deleted by the Ld. CI.T(A) for A.Y. 2012-13 as against SI. No. 7 - Kasper Information Technology Pvt. ltd. wherein similar addition u/s 68 has been confirmed by the Ld. CIT (A) for A.Y. 2013-14. In Sl. No, 17- Globus Real Infra Pvt. Ltd. A.Y 2012-13 wherein addition u/s 68 has been deleted by the CIT(A) as against Sl. No. 18 - Globus Real Infra Pvt. Ltd. A.Y. 201314 wherein similar addition u/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment appealed against. Ground 3: That the Ld. C.I.T(A)-05, New Delhi erred in making fresh addition of ₹ 1,47,00,000/- and thus enhancing the income of the Appellant to the said extent without issuing a prior show cause notice as mandated u/s 251(2) of the Act for providing a reasonable opportunity to the Appellant of showing cause against such enhancement, thus resulting in gross violation of principles of natural justice. 3. Jingle Bells Aluminium Pvt. Ltd. (Cross appeal) [ITA NO. 5397/DEL/2019] 2012-13 N.A. As per the Revised Grounds of Appeal filed on 19.10.2020 Ground 1: The Ld. C.I.T.(A)-05, New Delhi while correctly deleting the addition of ₹ 62,00,00,000/- made by the Ld. A.O. u/s 68, erred in making fresh addition of ₹ 1,24,00,000/- to the income of the Appellant Company on account of alleged charges received by the Appellant Company @ 2% for providing facility to route the impugned transaction of ₹ 62,00,00,000/- purely on the basis of surmises and conjectures although the same is not backed by any substantive or tangible ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... natural justice. 5. Kasper Information Technology Pvt. Ltd. [ITA NO. 510/DEL/ 2019] 2013-14 Ground 1: Ld. C.I.T(A) was not justified to uphold addition of ₹ 16 crores made by the A.O on account of balance share capital/premium as an alleged unexplained cash credit u/s 68 on the ground that appellant had failed to discharge the onus cast on it at mandated by the said section and that the appellant has failed to prove the creditworthiness, genuineness and identification of the Investors NA 6. Landsky Real Estate Pvt. Ltd. ITA NO.509/ DEL/2019] 2013-14 Ground 1: Ld. C.I.T(A) was not justified to uphold addition of ₹ 16 crores received by the appellant company on account of balance share capital/premium as alleged unexplained cash credit u/s 68 on the ground that the appellant company had failed to discharge the onus cast on it by the said section. Ground 2: Ld. C.I.T(A) was not justified to uphold addition of ₹ 2.60 crores on account of advances taken by the appellant comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... grounds challenging confirmation of deletion by the ld. CIT (A) on the addition made by the Assessing Officer u/s.68 on account of sums credited in the books of the assessee in the form of share capital/share premium and / or loans and advances as a lead case. 7. We will take up the appeal in the case of M/s. Jawahar Credit and Holdings Pvt. Ltd., in ITA No.5398/Del/2019 for the Assessment Year 2012-13 as a lead case. Ld. Assessing Officer noted that the company was engaged in the activities of investment in shares in various companies. On perusal of the balance sheet, he noticed that during the year under consideration the company has received ₹ 4,35,00,000/- as share capital and ₹ 69,15,00,000/- as share premium by issue of ₹ 3 lac fully paid up share at the face value of ₹ 10 each and a premium of ₹ 190 per share; and further ₹ 15 lac partly paid share converted into fully paid up share @ 90 from the following parties:- SI.No. Name of the parties Share Capital Share Premium Total 1 Bhushan Finance Pvt. Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... received. 3. Name of the person, who offered the shares of the company on behalf of JCHPL. Also submit offer prospects in this regard. Also provide justification of buying the share premium supporting with documentary evidences. 4. Name of the person (Mediator) through whom the deal was negotiated for making investments in share/share application money. 5. Copy of application form in respect of share application money paid to JCHPL. 6. Copy of acknowledgement of receipt share application Form and share certificate. 7. Copy of share certificate of the above company (JCHPL). 8. Please state what is the current status of these shares, whether these are still in your possession or have been sold. 9. In case the above certificates have been sold, please confirm with respect to your bank statement. Also give the name/address/PAN of the party to whom these shares of JCHPL have been sold. 10. Please provide the cop of ITR/Balance Sheet/Computation of Income for the A. Y. 2012-13 and the year in which the transaction mentioned in point no.9 above has been made, reflecting clearly the above transactions in respective balance sheets of your com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... investor company to decide the premium which it can command and the wisdom of an investor as to whether he would be willing to pay the same. In the given case the calculation of premium which the Assessee Company could command was based on its future plans and the expected inflows therefrom with facts and projections were found to be acceptable to the investors and accordingly no adverse view can be arrived at with regard to the same. 10. The Assessing Officer further asked the assessee company to furnish details of business activities done by the company, year wise details of dividend received during the year and the last three years, year wise break up of profit and loss account incurred by the assessee during the year and last three years, details of EPS and book value of shares, details of declaration of premium received during the year. In response the assessee had filed its detailed reply vide letter dated 20.03.2015 as mentioned by the Assessing Officer. Further the assessee again was required the identity, genuineness and creditworthiness of the subscribers in view of Section 68 the assessee had filed confirmation and bank statement the gist of which have been reprod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer observed that these subscriber company and individual investment did not have their own creditworthiness and they were just an accommodation entry. He further observed that on perusal of the financials of the assessee company it can be seen that it has not done any business activity and the major part of the turnover derived from the dividend and miscellaneous income. He has also analyzed the books profit of the assessee company before issue of share on premium as on 31.03.2011 which was as under: A. Equity 1. Share Holder's funds (in Rs.) Share Capital 88000000 Reserves Reserve and Surplus 172746598 Total 260746598 No. of shares 10150000 Value per share 25.68 per share 2. Profit /Loss of the company Profit/Loss A.Y. 2011-12 114440 A.Y. 2012-13 (820515) 11. Thus, from the above he ded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom pages 21 to 28 of the appellate order. 14. After considering the entire gamut of facts and the material on record, Ld. CIT(A) observed and held as under:- 6.1 I have gone through the submissions by the appellant, assessment order, report of AO, rejoinder by appellant and perused the case laws relied upon. 6.2 The appellant has raised two grounds of appeals which is related to the addition of ₹ 73,50,00,000/- and interlinked. Therefore, both the issues are taken together. 7. It is seen from the assessment order that appellant has not provided proper confirmation at the first instance, however, notices issued u/s 133(6) of the Act to the investors, has been replied with. There is no financial capacity of various investors to subscribe share capital with high premium in the appellant company. The appellant expressed their inability to produce the directors of the investor companies or the individuals. It is also seen by the AO that the amount has been received by the investors, just before subscribing the shares in the appellant company. The subscribers did not have their own creditworthiness as in most of the cases the amount has been received on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot the mandate of the law in the year under appeal. The amendment of section 68 w.e.f. 01.04.2013 cannot be held, or interpreted, to be retrospective in nature. The appellant has also relied on decisions of the Hon'ble High Court of Delhi wherein it has been held that share capital cannot be assessed in the hands of the company even if the subscribers to the increased share capital were held to be not genuine. Such addition could only be made in the hands of the alleged bogus share holder. The order of the Hon'ble Delhi High Court in the case of CIT vs. Lovely Exports Pvt. Ltd. 299 ITR 268 has been upheld by the Apex Court. In the case of CIT vs. Kamdhenu Steel and Alloys Ltd. 206 Taxman 254, the Hon'ble Delhi High Court has held that the assessee cannot be fastened with the liability u/s 68 unless a causal connection between the cash deposit in the bank and the assessee is established. The Hon'ble Delhi High Court in the case of ClT vs. Nova Promotors and Finlease (P) Ltd. has held that the AO is duty bound to investigate the creditworthiness of the creditor and genuineness of the transaction. Where the complete particulars of the share applications are furnished t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to other companies for such amount received, same address etc. shows that the appellant company and its investors, especially companies are nothing but a creation of paper companies to transfer its funds from Bhushan Steel Ltd. and other individuals related to them, to various companies as shown in flow chart, through the appellant company. 7.8 As stated earlier, there is no worth/reserve of the appellant company nor any business carried out, the investor companies and other persons are also hot carrying out any visible business activity, therefore, this is nothing but routing of its funds by the Bhushan Steel Ltd. and its related parties where neither the investors and other persons nor the appellant company are ultimate beneficiary. The funds received were given to the other companies, as soon as it is received and the assets in the balance sheet is shown in the form of investment in shares for the share application money and premium thereon received. The appellant has also not given any cogent reasoning for the fund flow shown by the AO in his report. 7.9 Therefore, looking to the facts and circumstances of this case where basic requirement to justify the identity, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... antabile (Left), Sintex (No such firm), Supreme (no such firm) (Page 4, Para 3.2) The assessee adopted a prevaricate and non-cooperation attitude (Page 6, Para 3.5) The confirmations submitted by the assessee are not even self-serving to prove ICG of the transactions. ICG of the transaction is not established. (Page 6, Para 3.5) Simply furnishing PAN or Assessment particulars/ address is not enough, as they do not facilitate cross verification. (Page 7, Para 3.6 AO s order) Genuineness and creditworthiness of these parties remain unverified. The assessee failed to discharge its onus completely. (Page 7, Para 3.7 AO s order) No sufficient balance in bank accounts, cheque issued to assessee cleared by way of receipt of transfer entry from another associated concern, nature of transaction reveal they are not real business transactions, similar to trade of an entry operator. Thus amount received can be termed as bogus accommodation entry received by assessee (Page 7, Para 3.7 AO s order). List of case laws relied upon by the A.O CIT V NR Portfolio Pvt Ltd. CIT V Nova Promoters and Finlease Pvt Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he details must have been filed before their respective AO's. Therefore it can be said that these companies are very much present at the given address and has got all necessary establishments (Page 37/38 CIT(A) order). The AO did not bring any adverse material to reject the explanations and evidences submitted by the appellant except noncompliance of 131 and 133(6) (Page 38 CIT(A) order). Neither any person has given any statement nor has made any allegation against these companies(Page 38 CIT(A) order) The reasons given by AO are very generic in nature and not backed by any concrete evidence(Page 38 CIT(A) order). There was no cash deposit in the bank accounts of the parties from share capital received(Page 38 CIT(A) order). List of case laws relied upon by CIT(A) MoD Creatiosn Pvt Ltd V Income Tax Officer (2013) 354 ITR 282 (Delhi) CIT V Kamdhenu Steel and Alloys Ltd and Others. 206 taxmann 254 Delhi CIT V Gangeshwari Metals Pvt Ltd (2013) 30 taxmann.com 328 CIT V Oasis Hospitalities (2011) 333 ITR 119 (Delhi) ITO V Neelkanth Finbuild ITA No. 2821/Del/2009 dated 01/04/2015 ITO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accounts including assessee s bank account (Page 5 AO s Order) ICG of the transaction and the investor are deeper and obstructive than mere completion of paper work or documentation (Page 8 AO s Order). Assessee is a private limited company, neither came out with any public issue nor issued any advertisement, still failed to produce the persons who invested towards share capital shows that the transactions are merely accommodation entry (Page 8/9 AO s Order) In a private limited company, it is generally not difficult on part of assessee to produce persons who have invested substantially toward share capital (Page 9 AO s Order). Sequence of events like, failure on assessee s part to bring directors of subscriber companies, failure to file future project reports, huge investments made into assessee company in the second year of operation, indicates that what is apparent is not real and only a colorable device to convert unaccounted money without paying any taxes (Page 9 AO s Order). There is no presumption that a cash credit is genuine merely because a payment was made by cheque. Assessing authority shall accept cash credit only if the transaction is true ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lanations of appellant with either genuineness or creditworthiness (Page 30, Para 3.3 CIT(A) s Order). Therefore it is held that appellant has filed necessary details regarding identity and creditworthiness(Page 30, Para 3.3 CIT(A) s Order) Regarding addition related to advances recived during the year : That the amount received as advance have been adjusted against sale of shares in case of four companies and balance refunded and wholly refunded in case of one company (Page 31, Table Para 4.1 CIT(A) s Order). Appellant filed relevant documents from the creditors (Page 31, Table Para 4.1 CIT(A) s Order) Creditors doing regular business and advance adjusted against sale of shares (Page 31, Table Para 4.1 CIT(A) s Order). Assessment in case of the most of the creditor have been completed U/s 143(3) of the Act (Page 32, Table Para 4.1 CIT(A) s Order). That AO did not conduct any further inquiry to suggest that creditors do not have creditworthiness or transactions are not genuine (Page 32, Table Para 4.1 CIT(A) s Order). Ratios of judicial precedents discussed in previous ground (Share ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , creditworthiness and identity are deeper and obstructive (Page 8, 2nd Para) It may, as in the present case, required entail a deeper scrutiny (Page 8, 2nd Para AO s order) It would be incorrect to state that the onus stands discharged if the transaction is done through banking channels or account payee instruments (Page 8, 3rd Para AO s order) Case laws relied upon by A.O Kale Khan Mohammad Hanif V CIT (1963) 50 ITR 1,4 (SC) Sreelekha Banerjee V CIT (1963) 49 ITR 112 (SC) Nanak Chandra Laxman Dass V CIT (1983) 140 ITR 151 (All.) A. D. Jayaveerapandia Nadar V CIT (1964) 54 ITR 401 (Mad.) Oriental Wire Industries P Ltd V CIT (1981) 131 ITR 688 (Cal.) Sikri Co. Pvt Ltd V CIT (1977) 106 ITR 682 (Cal.) VeljiDeoraj Co. V CIT (1968) 68 ITR 708 (Bom.) AnrajNarainDass V CIT (9151) 20 ITR 562 (Punj.) K. M. Sandhukhan Sons Pvt Ltd V CIT (1999) 107 Taxman 402/ 239 ITR 77 (Cal.) Shankar Industries V CIT (1978) 114 ITR 689 (Cal.) CIT V Kerala Road Lines (1986) 162 ITR 669 (Ker.) Nova Promoters Finlease CIT V Nipun Builders Developers [2013] 350 ITR 407 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t have their own creditworthiness, as the money come into their account seldom rests for a day, finds its destination immediately. It seems an accommodation entry to evade tax (Page 6, Para 3.6.1 AO s Order) Assessee company has not done any business activity, major part of turnover is derived from dividend and miscellaneous income (Page 6, Para 3.7.1 AO s Order) Past performance totally ignored for valuation of company, did not bring anything on record to justify bright future prospect of the company which could enhance its profitability leading to higher valuation (Page 7, Para 3.7.2, Sub Para (a)- AO s Order) EPS is negative, major net income constitutes miscellaneous income nothing to do with objectives of company, difficult to digest why investors would invest in such a company which has no future objectives. Prima facie appears that subscribers are well aware of nature of transactions (Page 8 AO s order) Assessee failed to justify charging of premium (Page 8 AO s order) Transaction between assessee company and its investor s are unusual in nature and character, transactions being offmarket unable to verify, conc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant company is not showing any worthwhile income and has limited reserves and surplus (Page 35, Para 7.5 CIT(A) s order) Appellant company has not given any satisfactory reply regarding fund flow (Page 35, Para 7.6 CIT(A) s order) Though the documentation is complete in all respects like banking channel, confirmation etc considering inability to produce directors, it seem that appellant company and its investor are nothing but a creation of paper companies to transfer funds from Bhushan Steel Ltd through appellant company (Page 36, Para 7.7 CIT(A) s order) No reserves/ No funds nor any business, it is nothing but routing of funds by Bhushan Steel (Page 36, Para 7.8 CIT(A) s order) The basic requirement to justify the identity, creditworthiness and genuineness of the transaction has been prima facie established.(Page 36, Para 7.9 CIT(A) s order) Neither the appellant company nor the investors are ultimate beneficiary of the transactions but there is routing of funds from Bhushan Steel Ltd. The funds received are given to other companies as soon as they are received(Page 36, Para 7.9 CIT(A) s order) Therefore, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has also failed to bring directors of the investor company (Para 3.10.2, Page 12 AO s order) Merely filing some papers in support of transaction cannot be termed as genuine transaction.(Para 3.10.9. Page 16 AO s order) Case laws relied upon by the A.O McDowell Co Ltd. [1985] 154 ITR 148 Workmen of Associated Rubber Industry Ltd V Associated Rubber Industry [1986] 157 ITR 77 (SC) CIT V Sree Meenakshi Mills Ltd 63 ITR 609 (SC) CIT V Durga Prasad More 82 ITR 540 (SC) Bombay Oil Industries Ltd V DCIT [2000] 82 ITD 626 CIT V Frostair (P) Ltd ITA No. 183 0f 2002 and 1638 of 2006 CIT V Youth Construction (P) Ltd 44 taxmann 364 CIT V Precision Finance Pvt Ltd (1994)208 ITR405 Nova Promoters Finlease (P) Ltd (High Court of Delhi) Mancherial cement V Income Tax Officer ITA No. 115/Hyd/2012 Nipun Builders and Developers Pvt Ltd )Delhi HC) ITA No. 120/2012 Vaibhav Cotton Co Ltd Indore V Assessee ITA No. 253/Ind/2010 Indore Bench The assessments U/s 143(3) of the Act in case of investor companies have been completed accepting the contention of the said co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 68 Share capital/ share premium ₹ 46 crores (Share Capital 8 cr and premium thereon 38 cr) Assessee has not filed any confirmation from parties, but submitted a chart showing increase in share capital share premium, giving names addresses of parties (Page 5 6, Para 3, sub para 3(A)(i) of AO s order). In order to verify ICG of introducers of share capital/ premium, notices U/s 133(6), which remained uncomplied, no confirmation ever received not even till date of passing of order. (Para 3(A)(ii) Page 6 AO s order). Assessee failed to bring the directors of the investor company along with books of accounts and confirmation to prove the identity of the contributors. No confirmations and return/PAN of parties cross verification not possible onus is on the assessee to prove the ICG - assessee failed to discharge onus. assessee s own money routed these concerns (Para 4(A)(i) page 8 AO s order). Evidence available impeaching the credentials of the investor companies and their directors (Para 4(A)(i) page 8 AO s order). Amt received through private placement contribu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment order regarding any statement of any person, providing entry. No material brought on record to conclusively prove the share capital originated from appellant company returned in the form of share capital. No mandate of the law to look into the source of source for the year under consideration. The amendment of section 68 w.e.f. 01.04.2013 cannot be held, or interpreted, to be retrospective in nature Assessee cannot be fastened with the liability u/s 68 unless a causal connection between the cash deposit in the bank and the assessee is established. (relying upn Lovely Exports and Kamdhenu Steel Para 7.4 Page 22 23 of CIT(A) s order) Where the complete particulars of the share applications are furnished to the AO and the AO has not conducted any enquiry into the same or has no material in his possession to show that those particulars are false, then no addition can be made in the hands of the company u/s 68. (Para 7.4 Page 23 CIT(A) s order) The appellant company and its investor companies are nothing but a creation of paper companies to transfer its funds from alleged Bhushan Steel Ltd. to various companies, through the appellant company and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nstant case. (Para 4.6.3, Page 5- AO s order) The assessee has brought nothing on record to justify its bright future prospect to increase profitability and ultimately increasing its valuation.(Para 4.6.3, page 5 AO s order. Difficult to digest why investor invested in such a company which has no future for running any profit (Para 4.6.3, Sbu-Para (b), page 6 AO s order) Prima facie appears that subscribers and assessee company are well aware of transactions (Para 4.6.3, Sbu-Para (C), page 6 AO s order) The transaction entered into by the assessee is sham transaction, the credit of funds in the form of share capital/ share premium being used for investing in other companies at premium.(Para 4.6.4 Sub- Point (3) Page 6/7 AO s order). Efforts made by assessee to change the color of transaction and not justified it case in spite of opportunities(Para 4.6.4 Sub-Point (4) Page 6/7 AO s order). The case of the assessee for the AY 2012-13 is also pending disposal in which addition on same ground was made and the assessee has failed to discharge its onus because merely filing some papers in support of transaction cannot be termed as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ] Focus Exports Pvt Ltd [111 DTR 0012 (Del)] Rathi Finlease Ltd (215 CTR 429 MP) Korlay Trading Co. (232 ITR 820 (Cal)) SumatiDayal (214 ITR 801 (SC)) Power Drugs Ltd (245 CTR 623 (P H)) Azeem Investment Pvt Ltd (252 CTR 0217 (Del.)) Major Metals Ltd (359 ITR 450 (Bom)) Independent Media Pvt Ltd (25 taxmann.com 276 (Delhi)) Neelkanth Ispat Udyog Pvt Ltd (81 DTR 0214) Frostair Pvt Ltd [92 DTR 393 (Del)] Rajani Hotels Ltd [79 DTR 185 (Mad)] MAF Acedemy Pvt Ltd [361 ITR 02858 (Delhi) Tarika Investment Properties Pvt Ltd [221 taxmann 0014 (Del)] Empire Buildtech Pvt Ltd [366 ITR 110 (Delhi)] Kundan Investment Ltd (263 ITR 626 (Cal)) Nova Promoters Finlease (P) Ltd (342 ITR 169 (Del)) Ultra Modern Exports Pvt Ltd [220 taxman 165 (Delhi)] 28. LandskyReal Estate Pvt Ltd Assessee s Appeal 2013-14 Section 68 Share apital - ₹ 16 crores Advances received - ₹ 2.6 crores Regarding share capital of ₹ 16 crores: The assessee company h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 9, Para 5.4 AO s Order) Case laws relied upon by the A.O McDowell Co Ltd. [1985] 154 ITR 148 Workmen of Associated Rubber Industry Ltd V Associated Rubber Industry [1986] 157 ITR 77 (SC) CIT V Durga Prasad More 82 ITR 540 (SC) Bombay Oil Industries Ltd V DCIT [2000] 82 ITD 626 CIT V Sri Meenakshi Mills Ltd 63 ITR 609 CIT V Frostair (P) Ltd ITA No. 183 0f 2002 and 1638 of 2006 CIT V Youth Construction (P) Ltd 44 taxmann 364 Bombay Oil Industries ltd V DCIT [2000] 82 ITD 626 CIT V Precision Finance Pvt Ltd (1994) 208 ITR 405 Bharati Pvt Ltd V CIT W.B. (1978) 111 ITR 991 (Cal.) Mancherial cement V Income Tax Officer ITA No. 115/Hyd/2012 Nipun Builders and Developers Pvt Ltd )Delhi HC) ITA No. 120/2012 CIT V Nova Promoters Finlease Pvt Ltd [2012] 206 Taxman 207 Vaibhav Cotton Pvt Ltd, Indore V Assessee ITA No. 253/Ind/2010 No reason to interfere with the AO on the issues and AO has already discussed in detail(Page , 27, Para - 4.2.3.6 CIT(A) s Order). AO has discussed that the appellant has failed to discharge the onus cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orthiness of investment is highly unlikely. Therefore, it is treated as assessee s own concealed income. (Page 6 AO s Order) Because the assessee could not produce the principal officer(s) of the investor companies and notices sent U/s 133(6) returned or no reply is received lead to a conclusion that the said transaction is not genuine and the assessee has introduced his own money in the garb of share capital/ share application.(Page 6 AO s order) Notices issued to majority of the parties returned unserved except in case of three parties of which reply was received from two parties only(Table at Page 5 AO s order). Out of the parties who replied to notice sent U/ s 133(6) their creditworthiness is highly unlikely basis their returned income of ₹ 413/- and ₹ 4,43,811/- and the amount contributed by them was ₹ 8,70,00,000 each (Page 6 AO s order). The assessee neither has brand value nor it has any past performance history nor any future prospect not any such asset which would increase its profitability to attract such huge premium.(Page 6 AO s order) In view of above share capital and share premium is being added ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers Finlease (P) Ltd (342 ITR169 (Del)) and hasreached a conclusion thatappellant through variousdocuments submitted toestablish ICG, it wouldconstitute acceptableproof or acceptableexplanation by theassessed. (Page 26 CIT(A) s order) 10. Starlight Consumer Electronics Pvt Ltd. Revenue s appeal 2012-13 Section 68 Share capital/ share premium - ₹ 32.25 crores Other liabilities - Rs ₹ 30.18 crores Total addition - ₹ 62.43 crores The assessee failed to discharge its onus. In such a case the source and nature of transaction need to be proved beyond doubt.(Page 7 AO s order) As the replies received so late after the assessee was apprised about the same, there is a possibility that assessee itself has sent the replies in response to notice U/s 133(6), therefore it shows the IG as dubious. (Page 4 AO s order) Basis the inspectors report there is no such company, no signboard, neighbor also revealed that they are not aware about any such company. Incomplete replies received that too only after assessee was apprised about non-compliance to n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... almia 207 ITR 89 Sunil Sidhartha V CIT 156 ITR 507 CIT V Biju Patnaik 160 ITR 674 (SC) Shankar Industries V CIT 114 ITR 689 (Cal) Dhanlakshmi Steel Re-rolling Mills V CIT 228 ITR 780 (AP) Malabar Agricultural Co Ltd V CIT 229 ITR 548 (Ker) CIT V Precision Finance P. Ltd 208 ITR 465 (Cal) KNC Chandrashekhar V ACIT 66 TTJ 355 (ITAT Bangalore) CIT V United Commercial and Industrial Co. Pvt Ltd 187 ITR 596 (Cal) CIT V Durga Prasad More (1971) 82 ITR 540 (SC) ITO V K. Jayaraman (1987) 168 ITR 757 (Mad.) CIT V NeelkanthaIspat Udyog CIT(A) has made analysis of the net worth of the investor companies which is fair enough to make investment. Although CIT(A) has not commented upon the same. (Page 31 Table CIT(A) order) AO has not brought any adverse material to reject the explanations/ evidences filed by the appellant. It is not the case of AO that any person has given any statement or made allegation against these companies. The reasons given by AO are very generic and not backed by any concrete evidence (Page 31/43 CIT(A) s order) No cash de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T CIT Durga Prasad More ITO V K Jayaraman CIT V Divine Leasing Finance Anand Woolen Mills Pvt Ltd V CIT CIT V Sophia Finance Ltd CIT V Korlay Trading Co Mittal Belting and Machinery Stores CIT V Biju Patnail Roshan Di Hatti V CIT Shankar Industies V CIT Malabar Agricultural Co Ltd V CIT CIT V Precision Finance Pvt Ltd CIT V United Commercial Industrial Co Ltd CIT V Nipun Builders CIT V NR Portfolio 11. Stylish Constructio n Pvt Ltd Revenue s Appeal 2012-13 Section 68 Share capital/ share premium - Rs. 30 Crores Other liabilities - ₹ 31.60 crores Dissallowa nce U/s 14A r.w. rule 8D - ₹ 23,32,813 [₹ 5 lacs Sustained by the CIT(A)] The assessee failed to discharge its onus. In such a case the source and nature of transaction need to be proved beyond doubt.(Page 6/10 AO s order) The replies to notice U/s 133(6) were received after the fact they being uncomplied for a period of 10-15 days after they were issued, crea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... td (342 ITR 169 (Del)) CIT V Nipun Builders Developers [2013] 350 ITR 407 (Del) CIT V N.R. Portfolio PVt Ltd (ITA No. 1018 1019 of 2011) Mittal Belting and Machinery Stores V CIT 253 ITR 341 CIT V Kariary Trading Co Ltd (1998) 232 ITR 820 SumatiDayal V CIT 214 ITR 801 CIT V L. N. Dalmia 207 ITR 89 Sunil Sidharatha V CIT 156 ITR 507 (SC) CIT V Biju Patnaik 160 ITR 674 (SC) Roshan Di Hatti V CIT 107 ITR 938 (SC) Shankar Industries V CIT 114 ITR 689 (Cal.) Dhanlakshmi Steel Rerolling Mills V CIT 228 ITR 780 (AP) Malabar Agricultural Co. V CIT 229 ITR 548 (Ker) CIT V Precision Finance Ltd 208 ITR 465 (cal) K. N. C. Chandrashekhar V ACIT 66 TTJ 355 (ITAT Bangalore) CIT V united Commercial and Industrial Company Pvt. Ltd. 187 ITR 596 (Cal.) CIT V Durga Prasad More (1971) 82 ITR 540 (SC) ITO V K. Jayaraman (Mad.) (1987) 168 ITR 757 The appellant has established the ICG of the transactions. The AO did not bring any finding on record to reject the explanations/ evidences submitted by appellant Neither any person has give ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . (Page 47 CIT(A) order). The appellant has established the ICG of the transaction. Regarding addition U/s 14A The appellant company filed its return after making disallowance U/s 14A on account of expenses attributable to earning exempt income. (Page 56 CIT(A) s order). CIT(A) basis the case laws restricted the disallowance to the amount of ₹ 5,00,000 for the sake of substantive justice,as it cannot exceed the amount of exempt income which in the instant case is ₹ 9,94,717 and deleting the addition of ₹ 23,32,813 made by the AO. Case laws relied upon by the CIT(A) MOD Creation Pvt Ltd V ITO [(2013) 354 ITR 282 (Delhi)] CIT V Kamdhenu Steel Alloys Ltd Others [(2012) 206 taxman 254 (Delhi)] CIT V Oasis Hospitalities P. Ltd [(2011) 333 ITR 119(Delhi)] ITO V Rakam Money Matters P Ltd 2821/Del/2011 ACIT V Kisco castings Pvt Ltd 34 taxmann.com 37 CIT V Fivest Ltd [2014] 44 taxmann.com 356 (Delhi) CIT V Gangeshwari Metals Pvt Ltd (2013) (30Taxmann.com328) CIT V Lovely Exports [2008] 216 CTR 195 (SC) ITO V Neelkanth Finbuild Ltd. ITA No. 2821/ Del/ 2009 ITO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... well aware of the fact of bogus credits in its books, it has chosen not to subject itself investigation/ enquiry conducted by the department. Merely that the transaction was conducted through proper banking channel does not substantiate the genuineness of transaction. Since the payments were transferred to other companies as and when they were received, the creditworthiness of the investor does not in any way gets established. The assessee has failed to produce the directors of the investor companies. Case laws relied upon by the A.O CIT V Divine DivineLeasing Finance Ltd Nova Promoters Finlease (P) Ltd (342 ITR 169 (Del)) CIT V Nipun Builders Developers [2013] 350 ITR 407 (Del) CIT V N.R. Portfolio PVt Ltd (ITA No. 1018 1019 of 2011) Kale Khan Mohammad Hanif V CIT [1963] 50 ITR 1 (SC) CIT V Oasis Hospitalities 333 ITR 119 (Delhi) 2011 Roshan Di Hatti [1977] 107 ITR (SC) CIT V Kariary Trading Co Ltd (1998) 232 ITR 820 SumatiDayal V CIT 214 ITR 801 CIT V R. N. Dalmia 207 ITR 89 The appellant has established the ICG of the transaction. The AO did n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ys Ltd Others [(2012) 206 taxman 254 (Delhi)] CIT V Oasis Hospitalities P. Ltd [(2011) 333 ITR 119 (Delhi)] ITO V Rakam Money Matters P Ltd 2821/Del/2011 ACIT V Kisco castings Pvt Ltd 34 taxmann.com 37 CIT V Fivest Ltd [2014] 44 taxmann.com 356 (Delhi) CIT V Oasis Hospitalities Pvt Ltd (333 ITR 119 Delhi) CIT V Lovely Exports [2008] 216 CTR 195 (SC) 13. Sukhna teel Pvt Ltd Revenue s appeal 2012-13 Section 68 Share capital/ share premium- ₹ 26.168 crores (includes ₹ 16,80,000 On account of issue of bonus shares) As per inspector s report no company existed at such address,no directors were found, premises don t belong to investor company (Page 2, Table AO s order) Verification of bank statement revealed that investor companies received funds back to back arrangement. Creditworthiness could not be found satisfactory with respect to huge amount of funds arrangement (Page 2 AO s order) Assessee failed to explain why these companies agreed to invest in unlisted companies when there is no sco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sh credit but only a transfer entry representing capitalization of reserves and surplus and is not hit by section 68 of the Act.(Page 42 CIT(A) s order) The appellant has established the ICG of the transactions.(Page 41 CIT(A) s order) Case laws relied upon by the CIT(A) MOD Creation Pvt Ltd V ITO [(2013) 354 ITR 282 (Delhi)] CIT V Kamdhenu Steel Alloys Ltd Others [(2012) 206 taxman 254 (Delhi)] CIT V Gangeshwari Metals Pvt Ltd (2013) 30 taxmann.com 328 CIT V Oasis Hospitalities P. Ltd [(2011) 333 ITR 119 (Delhi)] ITO V NC Cables Ltd. ITA No. 4122/Del/2209 ITO V Rakam Money Matters P Ltd 2821/Del/2011 ACIT V Kisco castings Pvt Ltd 34 taxmann.com 37 CIT V Fair Finvest Ltd [2014] 44 taxmann.com 356 (Delhi) CIT V Oasis Hospitalities Pvt Ltd (333 ITR 119 Delhi) CIT V Lovely Exports [2008] 216 CTR 195 (SC) CIT V Expo Globe India Ltd. [2014] 51 taxmann.com 208 (Delhi) Differentiated the following judgments: CIT V Nova Promoters Finlease (P) Ltd [(2012) 342 ITR 169 (Delhi)] Roshan Di Hatti V CIT [(1977) 107 ITR 938 (SC)] CIT V Nipun Builders ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny person has given any statement or made allegations against the company. There is no cash deposits in the bank accounts of the parties from whom share capital/ premium has been received. Entire amount received through banking channels, depositors have confirmed of having deposited money in the company, no evidence that funds received emanated from coffers of the assessee. Assessee has allotted shares for the share application money received. With regard to bonus shares the provisions of section 68 are not applicable since the amount in question does not represent fresh credit in the books of account. Assessee established ICG, addition wrt share capital and share premium and bonus issue deleted. CIT(A) has differentiated the following case laws: A. CIT vs. Nova Promoters page 31 B. Roshan Di Hatti (SC) -pg 32 C. CIT vs. Nipun Builders Developers CIT(A) has relied upon the following case laws: M/s. MOD Creations Pvt. Ltd. V ITO 354 ITR 282 (Del) CIT Vs. Kamdhenu Steel Alloys Ltd. (Del) 206 taxmann 254 (Del) CIT Vs. Gangeshwari Metals Pvt. Ltd. (2013) 30 taxman.com 328 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atti [1977] 107 ITR (SC) CIT(A) has made analysis of the creditworthiness of the investors and observed that no adverse inference has been drawn by Ld. AO with reference to funds received by appellant company. (Page 29 CIT(A) s order) CIT(A) has observed that addition has been made by AO on ground that replies U/s 133(6) were incomplete, no compliance was made U/s 131 and the inspector s report that no such companies exist (Page 29 CIT(A) s order). AO did not bring any adverse material to reject the explanations and evidences submitted by appellant (Page 29 CIT(A) s order) Neither any person has given any statement nor made any allegation against these companies (Page 29 CIT(A) s order) Reasons given by AO are very generic and not backed by any concrete evidence (Page 29 CIT(A) s order) No cash deposit in the bank account of investors (Page 29 CIT(A) s order)Transaction took place through normal banking channel (Page 29 CIT(A) s order) Parties involved positively confirmed (Page 29 CIT(A) s order) No iota of evidence to prove that money actually emanated from coffers of appellant company (Page ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee but still it did not furnish the details (Page 7 AO s order). Assessee failed to produce the persons to verify the claim (Page 9 AO s order) The assessee failed to discharge its onus . In such a case the source and nature of transaction need to be proved beyond doubt.(Page 9 AO s order). Since the assessee was well aware of the fact of bogus credits in its books, it has chosen not to subject itself investigation/ enquiry conducted by the department.(Page 9 AO s order) Case laws relied upon by the A.O Nova Promoters Finlease (P) Ltd (342 ITR 169 (Del)) CIT V Nipun Builders Developers [2013] 350 ITR 407 (Del) Kale Khan Mohammad Hanif V CIT [1963] 50 ITR 1 (SC) CIT V Oasis Hospitalities 333 ITR 119 (Delhi) 2011 Roshan Di Hatti [1977] 107 ITR (SC) Addition made by AO on ground that replies to notice U/s 133(6) are incomplete, no compliance to summons U/s 131 and the investor s report that companies did not exist at the address (Page 29 AO s order). The AO did not bring any adverse material to reject the explanations and evidences submitted by the appellant (Page 29 AO s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... con Pvt Ltd Revenue s Appeal 2012-13 Section 68 Share Capital and share premium ₹ 98.494 crores (includes 17,09,40,0 00/- on account of bonus issue Assessee failed to prove ICG of transactions with the investor companies.(Page 8 AO s order) Notices sent U/s 133(6) returned undelivered with remarks none existed . Basis the inspectors report, all the five investors, no company was found at the address, no directors were found, person staying there denied saying that this address does not belongs to the investor in question. (Table, page 4/5 AO s order) Investor companies received funds back to back arrangement (Page 4- AO s order) Summons issued U/s 131 remain un-complied (Page 4- AO s order). Assessee has willfully desisted from furnishing any details/ particulars/ documents/ to prove genuineness of the amount received from parties (Page 5- AO s order). Assessee offered no explanation about as to why these investors agreed to invest when there is no scope for making an exit out of investment. (Page 6- AO s order). It has not been explained why share ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by it (Page 33 CIT(A) s order). There was no cash deposit into the bank accounts of the companies from whom share capital/ share application money received.(Page 32 CIT(A) s order). Differentiated the following case laws: Nova Promoters Finlease (P) Ltd (342 ITR 169 (Del)) Roshan Di Hatti [1977] 107 ITR (SC) CIT V Nipun Builders Developers [2013] 350 ITR 407 (Del) Relied upon the following case laws: MOD Creation Pvt Ltd V ITO [(2013) 354 ITR 282 (Delhi)] CIT V Kamdhenu Steel Alloys Ltd Others [(2012) 206 taxman 254 (Delhi) CIT V Gangeshwari Metals Pvt Ltd (2013) 30 taxmann.com 328 ITO V NC Cable ITA No. 4122/Del/2009, ITAT Delhi Bench CIT V Oasis Hospitalities P. Ltd [(2011) 333 ITR 119 (Delhi)] ITO V Rakam Money Matters P Ltd 2821/Del/2011 ACIT V Kisco castings Pvt Ltd 34 taxmann.com 37 CIT V Fair Fivest Ltd [2014] 44 taxmann.com 356 (Delhi) CIT V Expo Globe India Ltd [2014] 51 taxmann.com 208 (Delhi) ITO V Neelkanth Finbuild Ltd ITA No. 2821/Del/2009 CIT V Lovely Exports [2008] 216 CTR 195 (SC) 18. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en credit to the assessee. The amount introduced by the assessee under the garb of share capital and unsecured loan is the undisclosed income of the assessee within the meaning of section 68 (page 16 of the A.O s order) Case laws relied upon by the A.O: Kale Khan Mohd. Hanif V CIT (SC) 50 ITR 1, CIT V N. R. portfolio Pvt Ltd 206 (2014) ITA No. 204/2002 CITR V Nipun Builders and Developers (2013) 350 ITR 407 (Del.) Shankar Ghosh V ITO [1985] 23 TTJ (Cal.) 20, Roshan Di Hatti V CIT [1977] 107 ITR (SC) CIT V DurghaParsad More (1971) 82 ITR 540 (SC) CIT V Durga Prasad More (1971) 82 ITR 540 (SC) SumatiDayal V CIT (1995) 214 ITR 801 (SC) A Rajendran Others V ACIT (2006) 204 CTR (Mad) 9 Hacienda Farms (P) Ltd V CIT (2011) 239 CTR (Del) 212 Major Metals Ltd V UOI and Ors. (2012) 251 CTR (Bom) 385 Pradeep Kumar Loyalka V ITO (1997) 59 TTJ (Pat)(TM) 655 ACIT V Sampat Raj Ranka (2001) 73 TTJ (Jd) 642 Mc Dowell Ltd. V CTO (1985) 154 ITR 148 (SC) CIT V Youth Construction Pvt Ltd 44 taxmann 364 Wood Polymer Ltd. Bengal Hotels Limited, 40 Company Ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prove the genuineness and the creditworthiness of investor companies, assessee intentionally avoiding furnishing details on time and producing directors of investor companies by seeking adjournments time and again and not attending hearings (Page 7, Para 5.12 AO a order). Assessee failed to bring difference in rate of shares issued to four companies (Page 7, Para 6.2 AO a order) The assessee failed to justify reasons for major development between the night of 23rd and 24th which led to price increase from 10 to 200 per share (Page 7, Para 6.2 AO a order). No prudent investor would invest in such a company without any income; except when both the parties are hand in glove (Page 7, Para 6.3 AO s order) It is modus-operandi of entry operators to make few transactions at high and few at low price(Page 8, Para 6.4.2 AO s order). Assessee has not brought anything on record to support that any dividend has been declared by it (Page 9, Para 6.6 AO s order) Perusal of bank statement of investors reveal that they are receiving huge amounts from various other companies and transferring funds to other companies, not doing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heet, Assessment Orders of the investors/lenders to establish source of funds in the hands of investor/lender companies. That the A.O has not brought any adverse material to reject the explanations and evidences submitted by the Assessee except alleging the non-compliance of notices issued 131 and 133(6) in case of certain investors. That neither the Assessee nor the investor companies ore ultimate beneficiaries but there is routing of funds from Bhushan Steel Ltd. and/or Bhushan energy Ltd. (specifically held so in 3 cases vie. Jawahar Credit Holdings Pvt. Ltd. (A.Y. 2012-13}, Jingle Bells Aluminium Pvt. Ltd. (A.Y. 2012-13) and Kasper Information Technology Pvt. Ltd. (A. Y. 2012-13) That nothing is mentioned in the assessment order regarding any statement of any person providing entry to the Assessee. That there is no denial at any stage of assessment proceedings by any of the subscribers of share capital of having deposited money in the Assessee Company. That replies to notices issued u/s 133(6} were received from several investor companies. That no material has been brought on record by the A.O to conclusively prove that the share capital originated from Asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... summons u/s.131. That few share applicants and lender companies have same address and common directors. That there was no reason why the appellant could not produce principal officers/directors of companies when the entire money came from the same group and the appellant also belonged to the same group. The pattern of money movement raised suspicion of accommodation entries. Arguments on behalf of the Assessee 18. Before us, ld. counsel for the assessee submitted that the Assessing Officer without bringing on record any cogent material and evidence whatsoever has alleged that all the assessees herein availed accommodation entries wherein they have deduced their own unaccounted/undisclosed funds into their books of account in the garb of share capital and or loans and advances. Whereas the assessee s case all throughout has been that these are mere routing/movement of accounted funds of Bhushan Energy Ltd. (BEL) in the form of share capital and or loan and advances through web of group companies into the assessee companies and subsequently reintroduction of such funds into regular accounts of BEL. The concept of accommodation entries would be applicable where entrie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which has resulted into multiple addition into same stream of funds in the hands of multiple assessee s including all the assessees herein. By way of an example, he has cited many such instances viz.,:- In the case of Track Casting (India) Pvt Ltd. (at SI. No. 19 of Annexure 1), an addition of ₹ 31 crores has been u/s 68 made on account of funds received from various parties in the form of share capital, where the A.O. has treated such share capital as representing the unaccounted funds of M/s. Track Casting (India) Pvt. Ltd. for A.Y. 2012-13, Further, in the case of Sukhna Steel Pvt. Ltd. (A.Y. 201213) (i.e., Assessee at SI. No. 13 in the said chart), out of total additions of ₹ 21.168 crores made u/s 68 in the said case, an addition of ₹ 19.60 crores has been made on account of funds received as share capital from Track Casting (India) Pvt. Ltd, treating the same as representing the unaccounted funds of Sukhna Steel Pvt. Ltd. Thus, the sum of ₹ 31 crores has first been treated as undisclosed funds belonging to M/s. Track Casting (India) Pvt. Ltd. Thereafter, ₹ 19.60 crores sourced out of the said funds of ₹ 31 crores, when paid by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inted out that the funds representing the impugned credits in the form of share capital/share premium or loan and advances do not belong to any of the shares herein and the ultimate source of the impugned fund lies in the regular books of account of Bhushan Energy Ltd. and ultimately all these funds have been routed back to the Bhushan Energy Ltd. Though he admitted that these fund flow statement is in the nature of additional evidence for which petition for under Rule 29 of ITAT Rules 1963 have been filed separately. He harped upon the fact that in all these cases there is no involvement of unaccounted fund or undisclosed income of the assessee companies in the entire chain of transaction and no material has been brought on record by the Assessing Officer to prove that share capital and loan and advances have been originated from the unaccounted money of the assessee companies or any other group companies who have subscribed to the shares or made investment. In fact, if at all there is circular transaction, then it amongst these very companies who are connected with the Bhushan group and the entire amount are accounted for in the books of Bhushan Energy Ltd. They are not the ultim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the factum of routing of accounted funds of BSL (through its subsidiary company, BEL) via the Assessees herein has been categorically recognized by the Ld, CIT(A) in the cases of Jawahar Credit Holding Pvt. Ltd. (A.Y. 2012-13), Jingle Bells Aluminium Pvt. Ltd. (A.Y. 2012-13) and Kasper Information Technology Pvt. Ltd, {A.Y. 2012-13). The Ld. CIT(A) (being the same officer who has disposed of the appeals in all the three cases) has deleted the addition made by the respective A.O(s) u/s 68 with the following common findings: That the basic requirement to justify the identity, creditworthiness and genuineness of the impugned transactions has been prima facie established by the Assessee. That neither the Assessee nor the investors are the ultimate beneficiary of the transactions but there is routing of funds from Bhushan Steel Ltd. (through its subsidiary company, BEL). The funds received are given to other companies as soon as they are received. That accordingly, the additions made by the A.O are outside the ambit of section u/s 68 as the Assessee has merely provided facility to route the impugned transactions. 23. Ld. Counsel further pointed out that several in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmations received from the parties. (b) Details of PAN - which conclusively prove that the said shareholder companies are all existing income-tax assessees. (c) Copies of ITR Acknowledgment of the parties for the relevant assessment years. (d) Assessment Orders of the parties for the relevant assessment years. B. As far as the genuineness of the transactions is concerned, the Assessees filed the bank statements of the investors/lender companies which prove conclusively that the Assessees had received the impugned funds from the said investors/lenders and it came from the coffers of the said parties. The impugned sums were received through authorized banking channels which prove the genuineness of the transactions. The investors/lenders have also duly confirmed the fact of their having deposited money in the Assessee Company in the form of share capital and corroborated their confirmations with copies of Income-tax Returns, bank statements etc. C. Further, the creditworthiness of the investors/lenders is dearly established from the fact that share capital/premium/loans etc. was received by the Assessee company by way of account payee cheques through normal banking channe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the parties have directly responded to the Assessing Officer and furnish all the requisite information in response to notices u/s.133(6). Even otherwise also, there is no legal obligation on the assessee to produce director or other representative etc. before the Assessing Officer and this failure by itself could not justify addition where the assessee has produced extensive materials and evidences and also pointing out that regular assessment u/s.143(3)/147 have been made in the case of those funds. In support, he relied upon the following judgments: i. Pr.CIT vs. Rakam Money Matter (P) Ltd. (2018) 94 CCH 333 (Del HC). ii. The Hon ble Bombay High Court in the case of CIT vs. M/s. Orchid Industries Pvt. Ltd. in ITA No. 1433 of 2014 iii. CIT vs. Jalan Hard Coke Ltd. reported in (95 taxmann.com 330) iv. CIT vs. Diving Leasing Finance Ltd. (2007) 158 TAXMAN 440 (Del) v. Crystal Networks (P) Ltd. vs. CIT, 353 ITR 171 vi. ITO, Ward-12(4), Kolkata Vs. M/s. Saktideep Suppliers Pvt., ITA No.2444/kKol/2016 (ITAT Kolkata) 28. Thus, mere non production of directors and in some cases non service of notices u/s.133(6) cannot be adversely viewed, because in most of the cases all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 00,000 Share Capital deleted ITAT (Assessee herein at Sl. No. 16) C.I.T(A) Janitor Infrastructure Pvt. Ltd ₹ 15,00,00,000 A.Y.2012-13 147 ₹ 36,00,00,000 Share Capital converted partly to fully NA Sintex Consumer Electronics Pvt. Ltd B) Share Capital Partly Paid Up:- ₹ 2,00,00,000 A.Y.2012-13 143(3) ₹ 78,22,80,000 Share Capital deleted ITAT (Assessee herein at Sl. No. 9) C.I.T(A) A.Y.2012-13 147 1)₹ 3,90,00,000 Advance Rececived NA 2) ₹ 3,90,000 Commission Expense ( 3.9 Cr @ 1%) Delight Resorts Pvt.Ltd. A.Y. 2012-13:- Advance Received Reinforce Recr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 147 ₹ 4,04,000 Commission Income(debit credit ₹ 8.08 Cr @ 0.5%) NA C.I.T(A) Houston Buildwell Pvt.Ltd. ₹ 20,00,00,000 A.Y. 2012-13 147 ₹ 92,00,000 Commission Income (Share Capital ₹ 46 Cr @ 2%) NA C.I.T(A) B) Share Capital Partly Paid Up:- Quadrel Infrastructure Pvt.Ltd. ₹ 2,00,00,000 A.Y. 2012-13 147 ₹ 73,70,07,363 Share Capital Unexplained Credit NA C.I.T(A) Kasper InformationTechnology Pvt.Ltd. 2. A.Y. 2013-14:- A) Share Capital converted into Partly Paid Up to Fully paid up Landsky Real Estate Pvt.Ltd ₹ 8,00,00,000 A.Y. 2013-14 143(3) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... B) Share Capital Partly Paid Up ₹ 75,00,000 A.Y. 2012-13 143(3) ₹ 42,25,00,000 Share Capital Deleted ITAT (Assessee herein at Sl. No. 15) Stylish Constructi on Pvt.Ltd. 1. A.Y. 2012-13:- B) Other Current Liabilites Marvelous Cement Pvt.Ltd. ₹ 5,70,00,000 A.Y.2012-13 147 ₹ 2,58,86,811 Commission Income NA C.I.T(A) Matchless Infrastruct ure Pvt.Ltd. ₹ 5,00,000 A.Y.2012-13 147 ₹ 4,63,00,000 Other current liabilities NA C.I.T(A) Venus Recruiter Pvt.Ltd. ₹ 6,00,00,000 A.Y.2012-13 147 1) ₹ 10,00,00,000 Unexplained Credit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C.I.T(A) JAWAHAR CREDIT HOLDINGS PRIVATE LIMITED ₹ 1,58,000 (BONUS) A.Y. 2012-13 143(3) ₹ 73,50,00,000 Share Capital Fresh Addition on account of alleged commission income ITAT (Assessee herein at Sl. No. 4) Sunlight Tour Travel Pvt.Ltd. A.Y. 2012-13:- A) Share Capital:- Sukhna Real Estate Pvt.Ltd. ₹ 5,46,84,000 (bonus) A.Y.2012-13 143(3) ₹ 80,63,40,000 Share Capital Deleted ITAT (Assessee herein at Sl. No. 12) Navayuga Consultancy Pvt.Ltd ₹ 5,46,84,000 (bonus) A.Y.2012-13 147 ₹ 15,00,00,000 Share Capital NA C.I.T(A) Delight Resorts Pvt.Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A) Share Capital fully Paid Up:- Stylish Construction Pvt.Ltd. ₹ 4,82,19,600 (bonus) A.Y. 2012-13 143(3) 1. ₹ 30,00,00,000 Share Capital: deleted ITAT (Assessee herein at Sl. No. 11) 2. ₹ 31,60,00,000 Other Current Liabilites Globus Realinfra Pvt ltd (Formerly Known As Sur Buildcon Pvt Ltd) 2. A.Y. 2012-13:- A) Share Capital fully Paid Up:- TREMEND OUS MINING MINERALS PRIVATE LIMITED ₹ 3,40,40,000 (bonus) A.Y. 2012-13 147 ₹ 25,00,00,000 Share Capital NA C.I.T(A) JAWAHAR CREDIT HOLDINGS PRIVATE LIMITED ₹ 25,00,00,000 A.Y. 2012-13 143(3) ₹ 73,50,00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /lenders had adequate funds for making the impugned investments/deposits in the assessee-companies. Further, the Assessee(s) have also filed the audited accounts of the investor/lender companies which clearly depict that such investors/lenders had sufficient net worth (i.e. share capital plus reserves surplus) and/or borrowings to make the impugned investments/deposits in the Assessee(s) herein. As held by the Hon'ble Bombay High Court in the case of PCIT vs. Ami Industries (supra), cited supra, that it is not necessary that the investments/loan should be made by the investors/lenders out of their taxable income only. The same may be made out of borrowed funds. Therefore, the objections raised by the Ld. A.O.s that in the instant case that the bank statements of the investor/lender companies revealed that they had received huge amounts from other companies which were subsequently transferred to the Assessee(s) herein is of no aid to the Department, On the contrary, the same only goes to show the availability of adequate funds (whether out of borrowed funds or funds received in the form of share capital by the investors/lenders from other entities) in the bank accounts of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... received the impugned amount from the creditor/investor by way of cheques, the assessee must be taken to have proved that the creditors/investors had the creditworthiness to advance the loans/share capital. Thereafter, the burden shifts to the A.O. to prove the contrary. (vi) On failure on the part of the creditors/investors to show that their sub-creditors and creditworthiness to advance the said amounts to the assessee, these amounts as a corollary, cannot under the law, be treated as the assessee's income from the undisclosed sources, when there is neither direct nor circumstantial evidence on record that the said loan amounts/share capital actually belongs to, or are owned by, the assessee. (vii) In order to fasten liability on the assessee, the A.0 is required to show that the amounts, which have come to the hands of the creditors/investors from the hands of the sub-creditors, are actually received by the subcreditors from the assessee. 32. Applying the above judicial principles to the cases at hand, the Assessees herein filed detailed documentary evidences in the form of duly signed confirmation of investors/lenders (parties), details of PAN, copies of ITR, duly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 2012 with effect from 1st April, 2013. Thus, it would be effective only from the Assessment Year 2013-14 onwards and not for the subject Assessment Year. In fact, before the Tribunal, it was not even the case of the Revenue that Section 68 of the Act as in force during the subject years has to be read/understood as though the proviso added subsequently effective only from 1st April, 2013 was its normal meaning. The Parliament did not introduce to proviso to Section 68 of the Act with retrospective effect nor does the proviso so introduced states that it was introduced for removal of doubts or that it is declaratory'1. Therefore it is not open to give it retrospective effect, by proceeding on the basis that the addition of the proviso to section 68 of the Act is immaterial and does not change the interpretation of Section 68 of the Act is immaterial and does not change the interpretation of Section 68 of the Act both before and after the adding of the proviso. In any view of the matter the three essential tests while confirming the pre-proviso Section 68 of the Act laid down by the Courts namely the genuineness of the transaction, identity and the capacity of the investor h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3(3) PB-7B Pgs. 1-24 Pgs. 25-39 Landsky Real Estates Pvt. Ltd. A.Y. 2013-14 A. Share Capital 16 crores (i) ₹ 8 crores (ii) ₹ 8 crores B. Current Liabilities Other payables (i) ₹ 1.30 crores (ii) ₹ 1.30 crores (i) Winfields Iron Steel Pvt. Ltd. (ii) Quadrel Infrastructure Pvt. Ltd. (i) Cantabile Minerals Minings Pvt. Ltd. (ii) Angel Cement Pvt. Ltd. (i) Confirmation/ ITR/ Bank statement/ Audited Accounts/ Asst. Order 143(3) (ii) Confirmation/ ITR/ Bank statement/ Audited Accounts/ Asst. Order 143(3) (i) Confirmation/ ITR/ Bank statement/ Audited Accounts (ii) Confirmation/ ITR/ Bank statement/ Audited Accounts PB-8B Pgs. 1-15 Pgs. 16-29 Pgs. 30-43 Pgs. 44-58 Globus Real Infra Pvt. Ltd. (earlier known as Sur Buildcon Pvt. Ltd.) A.Y. 2013-14 A. Share Capital 5.60 crores: (i) ₹ 1.20 crores (ii) ₹ 1.40 crores (iii) ₹ 80 lacs (iv) ₹ 1 crore (v) ₹ 1.20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d existence. (vi) The investments made by the investors/lenders in the Assessee companies have been duly confirmed by the investors/lenders and their confirmations have been placed on record. (vii) The subscribers to the share capitals did subscribe to the share capital of the Assessee-companies and shares were duly allotted to them in most of the cases. (viii) There is no denial at any stage of the assessment proceedings by any of the investors/lenders of having deposited money in the Assessee-Companies. (ix) The impugned amounts have been received through undisputed banking channels. (x) There is no cash deposit in the bank account of the parties from whom the impugned amounts by way of share capital/ share premium/loans have been received. (xi) The documents submitted by the Assessee(s) establish that the money came from the investor s/lender s account and is nowhere connected with the Assessee companies. (xii) There is no proof or evidence to suggest that the impugned sums actually emanated from the coffers of the Assessee companies or represented the undisclosed incomes of the Assessee companies. (xiii) The A.Os have not brought on record or confronted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee to discharge onus u/s. 68 and comes to the conclusion that transaction of receiving money as share capital was not a genuine one primarily because the premium charged by the Assessee was much higher than the prevalent market trend, the action of the A.O was not tenable unless the A.O had brought on record some material to show that confirmation and other evidence placed by the Assessee was not genuine, he could not have simply discarded the documents produced by the Assessee. Since the provisions of sec 56(2)(viib) of the Act is introduced w.e.f from 01.04.2013 cannot be applied retrospectively. Reliance was placed on decision of Hon'ble Bombay High Court in the case of CIT Vs Green Infra Limited ITA No. 1162 of 2014 Dt: 16.01.2017 and CIT vs. M/s. Gagandeep Infrastructure Pvt. Ltd. (PB 95-98) MANU/MH/1274/2017 : (2017) 394 ITR 680 (Bom). Similarly, in the case of CIT vs. Anshika Consultants Pvt. Ltd. (2015) 93 CCH 16 (Del HC), the Hon ble Jurisdictional High Court opined that the fact that the assessee company charged higher premium or not, should not have been subject matter of the enquiry-Instead, issue must involve amount invested by share applicants were from legitimate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 68 2012-13 78,22,80,000 18,22,80,000 D The deletion of addition u/s 68 to the extent of bonus issue has not been contested by the Department. PB-9A, page 10 5. Sunlight Tours Travel Pvt. Ltd.: Share Capital (including bonus shares of 12,01,68,000) section 68 2012-13 52,01,68,000 12,01,68,000 D The deletion of addition u/s 68 to the extent of bonus issue has not been contested by the Department. PB-14A, page 11 6. Supreme Placement Services Pvt. Ltd. Share capital (including bonus shares of ₹ 12.43 crores) section 68 2012-13 72,43,00,000 12,43,00,000 D The deletion of addition u/s 68 to the extent of bonus issue has not been contested by the Department. PB-16A, page 10 38. In all these cases, the ld. CIT(A) has held that Section 68 is not applicable on increase in share capital on account of issue of bonus shares. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that as against the common allegation made by the Ld. A.O(s) in the 19 cases herein that the Assessee-companies have availed accommodation entries in the garb of share capital and/or loans advances, the Ld. C.I.T (A)(being the same officer who has disposed of the appeals in all the three cases) in the aforesaid three cases has opined that the Assessees have not availed any accommodation entries but have merely provided facility to route the funds from Bhushan Steel Ltd. in lieu for an estimated commission income of 2%. Thus, the Ld. C.I.T(A) has implied a role reversal of the Assessees herein whereas the A.Os have alleged that the Assessees herein are the recipients of accommodation entries, the Ld. C.I.T(A) has treated them as entry providers/ jamakharchi companies , providing facility to route transactions in lieu of commission income. The orders of the Ld. C.I.T(A) in the said three cases to the extent the same assess fresh sources of income (being the alleged commission income @ 2% for providing facility to route funds) have been challenged by the Assessees above named in their respective appeals filed before this Hon ble ITAT. 41. The relevant observations of the Ld. C. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... routing the finances, therefore, the addition to the extent of ₹ 1,47,00,000/- is sustained for charges received in providing such entries, not disclosed by the appellant. For the balance amount, the appellant gets a relief. Jingle Bells Aluminium Pvt. Ltd. 2012-13 7.9 As stated earlier, there is no worth/reserve of the appellant company nor any business carried out, the investor companies are also not carrying out any visible business activity, therefore, this is nothing but routing of its funds by the Bhushan Steel Ltd. where neither the seven investor companies nor the appellant company are ultimate beneficiary. The funds received were given to other companies, as soon as it is received and the assets in the balance sheet is shown in the form of investment in shares for the share application money and premium thereon received. The appellant has also not given any cogent reasoning for the fund flow shown by the A.O in his report. 7.10 Therefore, looking to the facts and circumstances of this case where basic requirement to justify the identity, creditworthiness and genuineness of the transaction has been prima fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as been prima facie established but looking to the fact and analysis as narrated above, these transactions are found to be for routing finances of M/s. Bhushan Steel Ltd., through these companies and therefore these companies are just paper companies where appellant is not the ultimate beneficiary because it has further passed on those funds to five companies as shown in the chart above. 7.10 In view of above, it is to be stated that as per the market practice and also seen in various cases, the said person (in this case appellant) charges the amount to provide such entries which is generally 2% of the total transactions. Therefore, considering that the appellant has been providing the facility to route these financial transactions, the 2% of the total amount is treated as undisclosed income of the appellant, not shown in its return of income. This comes to ₹ 92,00,000/-. 7.11 Since the details have been duly provided with respect to the referred companies and the additions are out of the ambit of provisions of section 68 of the Act due to the reason that these investor companies are held to be just a paper company or conduit in the case of other investors for pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Union Tyres (1999) 240 ITR 556 (Del) (iv) CIT Vs. National Company Ltd. (1993) 199 ITR 445 (Cal) (v) CIT Vs. Associated Garment Makers (1992) 197 ITR 350 (Raj) (vi) Sterling Vs. ITO (1975) 99 ITR 236 (Kar) (vii) Hari Mohan Sharma v. ACIT, Circle 63(1), New Delhi [2019] 110 taxmann.com 119 (Delhi-Trib). 44. Without prejudice, he submitted that even otherwise also, since all the Assessees herein are essentially group companies under common management and/or control, the question of charging any commission income for providing facility to route the funds of another group company does not arise. The impugned additions have been made by the Ld. C.I.T(A) solely on the basis of surmises, conjectures, suspicion and on the basis of what he deems to be a prevalent practice in the market and not on the strength of any tangible material or evidence on record. Thus, in light of the settled and trite position of Law, i.e., suspicion however strong can t take the place of proof, as has been laid down in the judgments of the Hon ble Apex Court in Lalchand Bhagat Ambica Ram vs. CIT reported in (1959) 37 ITR 288 (SC), Umacharan Shaw reported in 37 ITR 271 and Omar Salay Mohamed Sait ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2,23,660/- The Assessee is engaged in the business of supply of manpower which forms the pre-dominant part of its business activity. As would be evident from the Profit Loss Account of the Assessee, the receipts from service charges on account of supply of manpower amounts to ₹ 3,63,28,155/- as against which the receipts from dividend (exempt u/s 10) amounts only to ₹ 9,94,717/- for A.Y. 2012-13. It was stated that, almost all the expenses incurred are directly relatable to the activity of providing manpower services and no part of the expenses is relatable, either directly or indirectly, to the earning of dividend income which as clearly evident from the financial statements of the Assesseecompany constitutes a miniscule part of the total activity of the Assessee-company. However, to be on a safe side, the Assessee-company made a suo-moto disallowance of the total indirect expenses debited in its Profit Loss Account for the impugned A.Y. 2012-13. It was stated that apart from the indirect expenses enlisted above, all the remaining expenses debited in the P L A/c are directly related to the business of supply of manpower and have no nexus whatsoeve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penditure directly related to the earning of exempt income; (ii) interest expenditure not directly attributable to any particular activity; and (iii) amount equal to one-half per cent of the average value of investments, income from which does not form part of total income; It was stated that no expenses were found by the A.O to have been incurred by the Assessee with respect to expenses referred to under the first two limbs. As regards the third limb dealing with proportionate disallowance w.r.t. other indirect expenses not directly attributable to any particular income or receipt, the Ld. A.O has made a further disallowance of ₹ 23,32,813/- (i.e ₹ 25,56,473/- less ₹ 2,23,660/- disallowed suo moto by the Assessee) u/s. 14A by purportedly applying the formula prescribed under Rule 8D(2)(iii) of the Act overlooking the fact that the Assessee had already made a suo moto disallowance of the entire indirect expenses (not directly connected with the activity of supply of manpower) in its computation of income. Further, defying any logic, the Ld. A.O presumed that the Assessee had incurred total expenses of ₹ 25,56,473/- to earn exempt dividend income of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ground No 4 That the Ld. C.I.T(A) erred in accepting additional evidence under Rule 46A without giving any opportunity to the A.O in respect of evidences of shareholders assessment proceedings supporting documents. 52. In regard to the above, it has been submitted before us that no additional evidences were submitted by the aforesaid Assessee(s) in course of the appellate proceedings before the Ld. C.I.T (A). The impugned evidences referred to by the Ld. A.O(s) as additional evidences in the Departmental Appeals in the aforesaid cases are the Assessment Orders passed by the Income-tax Department in the cases of the investors/lenders. Since these orders were passed by the Income-tax Department, they constitute part of the Records of the Income-tax Department and cannot be construed as additional evidences. Therefore, the contention of the Department that additional evidences were filed by the aforesaid Assessee(s) in course of the appellate proceedings before the Ld. C.I.T(A)(s) is devoid of any merit and as such, the Departmental appeal in this respect deserves to be dismissed. Arguments on behalf of the Revenue: 53. On the other hand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e us at the time of hearing. We had already discussed in the foregoing paragraphs the issues involved in all the appeals filed by the Department as well as by the assessee, and we have found that in all the appeals the similar facts are permeating and issues involved are interlinked and inextricably interconnected. The major issue pertains to addition u/s.68 in the form of share capital/share premium and loan and advances; and in assessees appeal, addition have been made on account of alleged undisclosed commission income which has been added by the ld. CIT(A) exercising his power of enhancement u/s.251(1)(a). The grounds in all the appeals have already been summarized above in the foregoing tables and since same material facts and issue are permeating through; therefore, we are giving our consolidated decision which would apply mutatis mutandis in all the appeals where similar issues are involved. 56. The common grounds taken by the Assessing Officer almost in all the appeals for making the addition u/s.68 in the hands of various assessee s which may be broadly culled out from the assessment orders can be summarized in the following manner: That the Assessee introduced i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t performance history, no future prospect-so as to attract such high premium. Thai the Assessee offered no explanation as to why the companies agreed to invest in unlisted company where there was no scope for making an exit out of investments. That the investor and Assessee Company are nothing but a creation of paper companies. That the person should have some sign of identification other than merely on paper These signs could be place of work, staff members, actual transaction, recognition in eye of public, sign board, etc. Actual identity and business does not get proved by these passive documents when in fact no actual or passive business is being carried on. That the Assessee has not brought anything on record to support that any dividend has been declared by it, That a perusal of the bank statements of the investor companies reveal that they are receiving huge amounts from various other companies and transferring funds to other companies. 57. In so far as the finding of the ld. CIT (A) while deleting the addition u/s.68 are also by and large and similar which can be broadly be summarized as under: That the basic requirement to justify identity, credit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tablished. That where complete particulars of the share applications are furnished to the A.O and the A.O has not conducted any enquiry into the same or has no material in his possession to show that those particulars are false, then no addition can be made in the hands of the company. That the Investor companies are having adequate reserves to make investments. That the source of funds by the investor companies in the Assessee in its share capital stands explained. That the investor companies are all assessed to tax in their respective jurisdictions. That the judgment of Stellar is applicable only where shares are issued in the names of non-existing persons, which is not the situation in the instant case. That without proof of having introduced untaxed money by promoters or dubious antecedents, adverse view cannot be taken. That the provisions of section 68 are not applicable for bonus shares since the amount in question does not represent any fresh credit but only a transfer entry representing capitalization of reserves and surplus and is not hit by section 68. That the Assessee failed to establish the identity creditworthiness of the investors/lenders a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... morandum explaining the Finance Bill, 2012 while introducing the proviso was with an object to curve out the pernicious practice of conversion of unaccounted money through masquerade of investments in the share capital of a company especially in the cases of closely held companies. In fact, the very purpose of introduction of Section 68 in the Income-tax Act, 1961 was to bring to tax bogus credits recorded in the regular books of account maintained by the assessee for any previous year in order to camouflage black money as white money (mostly introduced into the regular books of account in the form of capital receipts such as share capital, loans, advances etc. or in the form of bogus income chargeable to tax at a lower rates) without having to pay taxes thereon or paying taxes at a lower rate. Section 68, thus has no applicability where there is no involvement of any unaccounted or undisclosed funds of the assessee which have been introduced into the books of the assessee by way of cash credit. It does not apply to cash credits which appear merely on account of rotation or movement of accounted or disclosed funds between group entities as has happened in the instant case. For sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f credit, i.e., identity and creditworthiness of the lender/subscriber companies and genuineness of the transaction. As discussed above the primary documents by the lender/subscriber companies have been filed which included confirmation, their bank statement, their income return, balance sheet and profit and loss account, most importantly, assessment orders passed in Lender/ Subscriber Companies for the same assessment years, that is, A.Y. 2012-13 2013-14 passed u/s.143(3)/147 and catena of other details. All these details have neither been controverted nor have been rebutted by the Assessing Officer. By and large identities cannot be disputed. What has been disputed is the creditworthiness and this is because, they do not have much revenue from operations and were showing marginal income. However, nowhere the Assessing Officer has disputed the funds available in their balances sheets, duly accounted for and the source from such funds have come. All the Subscribers/ Lenders are corporate entities having separate legal identity who are regularly assessed to tax and complying with all statutory requirements. One very important fact here in this case are that in all the cases Subscr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... found that the entire details of share applicants were made available to the Assessing Officer, including PAN, confirmations, bank statements, their balance sheets and profit loss accounts and certificates of incorporation, etc. Assessing Officer had not undertaken any inquiry or investigation of the veracity of above documents. Hence Tribunal has rightly held that without doubting the document, the Assessing Officer cannot make the addition only on presumption that low return of income is sufficient to doubt the creditworthiness of the share holders. The Assessee by producing the above documents has discharged its initial onus of showing the genuineness and creditworthiness of the share holders. Same ratio will apply here also. Further, even for the sake of repetition, one very peculiar fact as incorporated above is that, in most of the cases of the investor company s assessments have been made u/s.143(3) or u/s 147, wherein either their source of fund have been accepted or certain additions have been made based on scrutiny examination. It is not a case where there is any cogent finding in those cases that it is unaccounted money of the assessee companies which has been routed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a was also raised before the Ld. CIT (A)s, except for the fact that now before us, he has tried to demonstrate the flow of money from Bhushan Energy Ltd. to the group companies and that all these funds have come from the accounted funds duly recorded in the books of the Bhushan Energy Ltd. and the books of the lender companies. Since the fund flow chart to explain the source of the funds and rotation of funds amongst the group companies is one of the vital factors which impinge upon the case of the assessee companies, therefore, these are made part of this order and are annexure to this order running into 38 pages, which contains the addition made by the Assessing Officer from the figures given in the balance sheet; and flow of funds from one company to other. All the entries are verifiable from the bank statements placed before us. 66. In support of the fund flow statements, balance sheets and the bank statement of all these companies have been filed separately before us and has been demonstrated with one to one correlation of the entries therein. The theory of fund flow statement was also raised before the ld. CIT (A) for which remand report was also called for which has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n made by the ld. CIT (A) by making enhancement on account of alleged commission income in three cases. Though as discussed above, the ld. CIT (A) has deleted the addition made u/s.68 on the ground that no unaccounted funds have come in the bank account of the assessee companies, nevertheless, has held that assessee company might not have not availed any accommodation entry but has merely provided facility to route the fund of Bhushan Steel Ltd. in view of some of alleged commission @ 2%. This finding is purely based on guesswork and surmises. In nutshell, ld. CIT (A) has treated the accommodation entry, i.e., jamakharchi providing facility to route transaction in view of some commission income. The relevant findings of the ld. CIT (A) in all the three cases have already been incorporated above. First of all, it is neither the case of the Assessing Officer nor has been discussed in any of the assessment orders. What ld. CIT (A) is trying to do is, introducing a new source of income and that to be based on some hypothetical presumption. No show cause notice has been issued to the assessee. Ld. CIT (A) before fastening such presumptive addition in the hands of the assessee company. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ources of investment will result in addition in the hands of the assessee under a different provision of law and will not have much relevance in the estimation of sales and gross profit rate adopted by the A.O. Any addition on account of unexplained investment would constitute a new source of income which was not the subject-matter of assessment before the A.O and, therefore, it was not open to the first appellate authority to direct the A.O to conduct enquiry on the said four points .-CIT vs. Shapoorji Pallonji Mistry (1962) 44 ITR 891 (SC) : TC 7R.576 and CIT vs. Rai Bahadur Hardutroy Motilal Chamaria (1967) 66 ITR 443 (SC) : TC 7R.590 applied. [paras 11 12] 70. From the various judgments relied upon by the ld. counsel on this point, the proposition which can be culled out are as under: (i) That the C.I.T.(A) has no jurisdiction to travel beyond the subject matter of the assessment or beyond the record, i.e. the return of income and the assessment order; and his power of enhancement relates only to that income which has been subjected to the process of assessment. (ii) That the process of assessment includes not only taxing an income but also holding that a particu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aw in view of Section 14A(2). Thus, there was no reason for making any addition over and above the suo moto disallowance made by the assessee. However, the ld. CIT (A) has found it reasonable to restrict the disallowance u/s.14A to ₹ 5 lacs, which in our opinion is fully justified and therefore, we hold that the balance addition of ₹ 18,32,813/- has rightly been deleted by the ld. CIT(A). 74. In the case of Angel Cement Pvt. Ltd for Assessment Year 2012-13; in the case of Delight Resorts Pvt. Ltd. for Assessment Year 2012-13; and Stylish Construction Pvt. Ltd. for Assessment Year 2012-13, the Department has challenged the alleged admission of additional evidence by the ld. CIT (A) without giving opportunity to the Assessing Officer in violation of Rule 46A. First of all, it has been clarified that no additional evidences were submitted except for assessment orders passed by the Income Tax Department which is part of the income tax records cannot be construed as additional evidences and therefore such ground is devoid of any merits and same is dismissed. 75. In the result, the appeals of the Revenue are dismissed and the appeals of the assessee are allowed. 76. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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