TMI Blog2021 (6) TMI 486X X X X Extracts X X X X X X X X Extracts X X X X ..... ischarged the burden of proof casted by section 68 of the Act in respect of share capital premium it collected. And according to assessee, without finding any infirmity in the documents produced by the assessee in respect of identity, creditworthiness and genuineness of the transaction, no addition u/s 68 of the Act was warranted and the Ld CIT(A) after considering and appreciating inter-alia these facts have deleted the addition. - Decided in favour of assessee. Disallowance u/s. 56(2) (viib) - difference of the book value and issue value - HELD THAT:- We note that the difference of the book value and issue value is meagre/negligible, therefore, we do not find any infirmity in the action of the Ld. CIT(A) in deleting the addition, so we confirm the same. Disallowance of excess depreciation of electrical installation - HELD THAT:- We note that the assessee has claimed depreciation on electrical installation @15% applicable for plant and machinery whereas the A.O has considered the rate of depreciation of electrical installation at 10% each and disallowed 5% on depreciation claimed by the assessee. We note from the items mentioned in the Ld. CIT(A) s order which goes on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e confirm the decision of the Ld. CIT(Appeals) in deleting the addition Interest expense claimed by assessee as paid to the lender parties which consists of parties from which loan as obtained, as well as from parties to whose opening/closing balance of loan was added back - HELD THAT:- As these loans were brought forward loans as on 01.04.2014 and which has been squared up /repaid by the assessee in this assessment year itself, which fact is evident by perusal of pages 178 to 188 of the paper book and it is noted that there was no fresh loan from these three parties and we note that the opening loan with interest due to them were repaid in this year through banking channel after duly deducting TDS. So the question of disallowing the interest given by the assessee to these three (3) parties also cannot be accepted and we are of the opinion that the Ld. CIT(Appeals) rightly deleted the same. Unexplained cash credit - HELD THAT:- Assessee has discharged its onus casted upon it to prima facie prove the identity, creditworthiness and genuineness of the share-subscribers and the share capital and premium collected by it. And the additional requirement of source of source of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (AY 2014-15)] 2. This is an appeal preferred by the Revenue against the order of the Commissioner of Income Tax (Appeals)-4, Kolkata dated 21.10.2019 for AY 2014-15. Though the Revenue has raised 17 grounds, the sole issue is against the action of Ld. CIT(A) in deleting the addition of ₹ 7,69,71,990/- u/s 68 of the Income Tax Act, 1961 (hereinafter the Act ). 3. Brief facts of the case as noted by the AO are that the assessee company is engaged in the business of manufacturing of cotton yarn and trading of synthetics yarn and cotton yarn. The A.O noted that the assessee company has raised share capital to the tune of ₹ 2,79,34,200/- and share premium @₹ 590 totalling ₹ 16,48,11,780/- during the relevant assessment year (herein after in shortA.Y). In order to verify the identity, creditworthiness and genuineness of shareholders, the AO issued notice u/s. 133(6) of the Act to the shareholders. The AO noted that notices u/s. 133(6) in case of following six (6) shareholders i.e. (i) M/s Pragati Complex Advisory Pvt. Ltd. at 70, Nalini Seth Road, 1st Floor, Kollkata-700007, (ii) M/s Richfield Vintrade Pvt. Ltd. at 8, Lyons Range, Kolkata-700001, (iii) M/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by conducting field enquiry at their respective addresses to verify the identity, genuineness of the shareholders, and since this action did not give any result about the existence of these companies in their given addresses, and since these share holders/subscribers could not place any credible evidence to prove that they were in genuine business activity by giving details of their establishment, the staff etc., he did not accept the share capital and premium supposed to have been given by them and made the addition of ₹ 7,69,71,990/-. According to the Ld. CIT-DR, the Ld. CIT(A) has mistakenly drawn inferences in favour of assessee which impugned action according to the Ld. CIT-DR was not based on relevant materials; and the Ld. CIT-DR pointed out that though the Ld. CIT(A) during appellate proceedings had directed the A.O to carry out investigation by issuing section 133(6) notice, pursuant to which, when the A.O had issued summons u/s 131of the Act, instead of notices u/s 133(6) as directed by him, the Ld. CIT(A) found fault with the action of the A.O and has given relief even by taking note that the share applicant companies directors had in fact presented themselves in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve the nature and source of the credit of share capital premium collected by it in this assessment year. However, according to her, the A.O at the fag end when the assessment was going to get time barred, hurriedly issued notices u/s 133(6) of the Act only to fourteen (14) companies out of twenty two (22) share applicant companies from whom all the assessee had collected share capital premium; and out of which nine (9) notices could be served and since six (6) parties could not be served because of change of address, and the AO has drawn adverse inference against these six (6) share subscribers, without awaiting for their response from them.Moreover, according to the Ld. AR, the A.O while making the addition of ₹ 7.69 crores u/s 68 of the Act has not made any addition of the share capital received by the assessee from these six (6) companies[details will be discussed (infra) with the aid of charts]which means according to the Ld. AR, the A.O on one hand has accepted the share capital subscribed by these companies, however he did not accept the share premium subscribed by them and made addition u/s 68 of the Act, which action of AO according to the Ld. AR, is erroneous. Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Dreamvalley Merchants Pvt Ltd 7,80,000 46,02,000 53,82,000 9 Pragati Complex Advisory Pvt Ltd 21,11,000 1,24,54,900 1,45,65,900 10 Richfield Vintrade Pvt Ltd 26,20,000 1,54,58,000 1,80,78,000 11 Laxmiputra Tradecomm Pvt Ltd 26,97,000 1,59,12,300 1,86,09,300 12 Ramdot Suppliers Pvt Ltd 22,42,100 1,32,28,390 1,54,70,490 13 Jintan Mercantile Pvt Ltd 18,84,000 1,11,15,600 1,29,99,600 14 Needful Projects Advisory Pvt Ltd 21,84,000 1,28,85,600 1,50,69,600 15 Mangalkamana Merchants Pvt Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,54,58,000 3 LaxmiputraTradecomm Pvt. Ltd 26,97,000 1,59,12,300 4 Jintan Mercantile Pvt. Ltd 18,84,000 1,11,15,600 5 Newzone Vintrade Pvt. Ltd 18,84,100 1,11,16,190 6 Brijbhumi Commosale Pvt. Ltd 18,50,000 1,09,15,000 TOTAL 1,11,46,100 7,69,71,990 9. According to the Ld. AR, during appellate proceedings, the Ld. CIT(A) has called for a remand report from the AO. And the AO during the remand proceedings, had issued summons u/s 131 of the Act to principal officers of the aforesaid six companies on 04.06.2019 directing them to appear before him with books of accounts, bank statement for A.Y 2014-15. According to the Ld. AR in the remand report, the A.O had observed that none appeared before him pursuant to even the summons being served upon them. [ However, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompanies also (i.e. six companies), then why the A.O after having accepted their identity, creditworthiness and genuineness in respect of share capital from these following six companies, didn t accept the premium from them and made the addition. These six companies are hereinafter referred to as companies under Serial C: Companies under (Serial C) i) Brijbhumi Commosale Pvt. Ltd ii) Newzone Vintrade Pvt. Ltd iii) Jintan Mercantile Pvt. Ltd iv) LaxmiputraTradecomm Pvt. Ltd v) Richfield Vintrade Pvt. Ltd vi) Pragati Complex Advisory Pvt. Ltd. 13. According to Ld. A.R, the Ld. CIT(A) after perusal of the remand report from the A.O noted that the only fault which the A.O could find against these companies under Serial Cwas that the field enquiry made by the Department could not trace out these companies at their respective addresses. According to the Ld. AR, other than simply saying that field enquiry could not trace out these companies, the AO has not spelled out what enquiry was conducted by him. And on the other hand, the Ld. CIT(A) has taken note that no field enquiry report was found in the assessment folder/records. Therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Pvt. Ltd. and (vi) M/s Brijbhumi Commosale Pvt. Ltd. According to the A.O, the notices were returned back by the postal authorities since it could not be served upon them. Further, according to the A.O, the field enquiry by the A.O to verify the genuineness of the company did not yield any result. So he showcaused the assessee as to why the share capital premium received from the aforesaid six(6) companies should not be added u/s 68 of the Act. Further according to the A.O, the certificate of incorporation of the company, document of bank channel etc. cannot be in all cases tantamount to satisfactorily discharge of onus of the assessee to prove the identity, creditworthiness and genuineness of the transactions, since in this case, neither notices u/s 133(6) of the Act could be served upon them nor the field enquiry could trace these companies in the given addresses,therefore, he drew adverse inference in respect of these aforesaid six (6) share subscribing companies at Serial C (supra)and made the addition u/s 68 of the Act in respect of share premium of ₹ 7,69,71,990/-. 15. On appeal the Ld. CIT(A) has deleted the addition and the issue before us is whether the acti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Ld. CIT(A) had given direction to AO to issue notices u/s 133(6) to these companies at their new addresses while calling for remand report and the AO had issued summons u/s 131 to these companies in their new address to produce their respective Principal Officers, and pursuant to which (after summons being served upon them) they claim to have been produced, when the AO was not present in his office, which fact also the Ld. CIT(A) has taken note of in his order at page 16 27. [Though this averment of assessee has been contested by the AO, however the AO has not placed any material/evidence/affidavit to support his assertion, so we cannot discount the Ld CIT(A) observation on this. And AO has not commented adversely about serving of summons to these six (6) companies] so the inference drawn is that the summons u/s 131 of the Act were served upon these share subscribers. So in the light of the facts and circumstances discussed, the AO s action to have drawn adverse inference against these six (6) companies only on the basis of nonservice /field enquiry at the fag end of assessment proceedings cannot be countenanced and therefore we agree with the Ld CIT(A) on this observation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us year. In this case the legislative mandate is not in terms of the words shall becharged to income-tax as the income of the assessee of that previous year . TheHon ble Supreme Court while interpreting similar phraseology used in section 68 has held that in creating the legal fiction the phraseology employs the word may and not shall . Thus the un-satisfactoriness of the explanation does not and need not automatically result in deeming the amount credited in the books as the income of the assessee as held by the Supreme Court in the case of CIT v. Smt. P. K. Noorjahan [1999] 237 ITR 570. 20. The main plank on which the AO made the addition in the assessment proceedings was non-service of notice and in the remand proceedings was because the directors of the share subscribers did not turn up before him. In such a case the Hon'ble Apex Court in the case of Orissa Corpn. (P) Ltd. (supra) 159 ITR 78 and following the same, the Hon'ble Gujarat High Court, in the case of Dy. CIT v. Rohini Builders [2002] 256 ITR 360 /[2003] 127 Taxman 523 , has held that onus of the assessee (in whose books of account credit appears) stands fully discharged if the identity of the creditor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , once it is found that an assessee has actually taken money from depositor/lender who has been fully identified, the assessee/borrower cannot be called upon to explain, much less prove the affairs of such third party, which he is not even supposed to know or about which he cannot be held to be accredited with any knowledge. In this view, the Hon'ble Court has laid down that section 68 of Income-tax Act, should be read along with section 106 of Evidence Act. The relevant observations at page 260 to 262, 264 and 265 of the report are reproduced herein below:- While interpreting the meaning and scope of section 68, one has to bear in mind that normally, interpretation of a statute shall be general, in nature, subject only to such exceptions as may be logically permitted by the statute itself or by some other law connected therewith or relevant thereto. Keeping in view these fundamentals of interpretation of statutes, when we read carefully the provisions of section 68, we notice nothing in section 68 to show that the scope of the inquiry under section 68 by the Revenue Department shall remain confined to the transactions, which have taken place between the assessee and the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 106 of the Evidence Act and section 68 of the Income- tax Act will be that though apart from establishing the identity of the creditor, the assessee must establish the genuineness of the transaction as well as the creditworthiness of his creditor, the burden of the assessee to prove the genuineness of the transactions as well as the creditworthiness of the creditor must remain confined to the transactions, which have taken place between the assessee and the creditor. What follows, as a corollary, is that it is not the burden of the assessee to prove the genuineness of the transactions between his creditor and sub-creditors nor is it the burden of the assessee to prove that the sub-creditor had the creditworthiness to advance the cash credit to the creditor from whom the cash credit has been. eventually, received by the assessee. It, therefore, further logically follows that the creditor's creditworthiness has to be Judged vis-a-vis the transactions, which have taken place between the assessee and the creditor, and it is not the business of the assessee to find out the source of money of his creditor or of the genuineness of the transactions, which took between the creditor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ********** Keeping in view the above position of law, when we turn to the factual matrix of the present case, we find that so far as the appellant is concerned, he has established the identity of the creditors, namely, Nemichand Nahata and Sons (HUF) and Pawan Kumar Agarwalla. The appellant had also shown, in accordance with the burden, which rested on him under section 106 of the Evidence Act, that the said amounts had been received by him by way of cheques from the creditors aforementioned. In fact the fact that the assessee had received the said amounts by way of cheques was not in dispute. Once the assessee had established that he had received the said amounts from the creditors aforementioned by way of cheques, the assessee must be taken to have proved that the creditor had the creditworthiness to advance the loans. Thereafter the burden had shifted to the Assessing Officer to prove the contrary. On mere failure on the part of the creditors to show that their subcreditors had creditworthiness to advance the said loan amounts to the assessee, such failure, as a corollary, could not have been and ought not to have been, under the law, treated as the income from th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e by producing sufficient materials in support of the loan transaction, the onus shifts upon the Assessing Officer and after verification, he can call for further explanation from the assessee and in the process, the onus may again shift from the Assessing Officer to assessee. 16. In the case before us, the appellant by producing the loan-confirmation-certificates signed by the creditors, disclosing their permanent account numbers and address and further indicating that the loan was taken by account payee cheques, no doubt, prima facie, discharged the initial burden and those materials disclosed by the assessee prompted the Assessing Officer to enquire through the Inspector to verify the statements. 24. In a case where the issue was whether the assessee availed cash credit as against future sale of product, the AO issued summons to the creditors who did not turn up before him, so AO disbelieved the existence of creditors and saddled the addition, which was overturned by Ld. CIT(A). However, the Tribunal reversed the decision of the Ld. CIT(A) and upheld the AO s decision, which action of Tribunal was challenged before the Hon'ble High Court, Calcutta in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itworthiness. As rightly pointed out by the learned counsel that the Commissioner of Income-tax (Appeals) has taken the trouble of examining of all other materials and documents, viz., confirmatory statements, invoices, challans and vouchers showing supply of bidis as against the advance. Therefore, the attendance of the witnesses pursuant to the summons issued, in our view, is not important. The important is to prove as to whether the said cash credit was received as against the future sale of the product of the assessee or not. When it was found by the Commissioner of Income-tax (Appeals) on facts having examined the documents that the advance given by the creditors have been established the Tribunal should not have ignored this -fact finding. Indeed the Tribunal did not really touch the aforesaid fact finding of the Commissioner of Income-tax (Appeals) as rightly pointed out by the learned counsel. The Supreme Court has already stated as to what should be the duty of the learned Tribunal to decide in this situation. In the said judgment noted by us at page 464, the Supreme Court has observed as follows: The Income-tax Appellate Tribunal performs a judicial function under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould enquire from the Assessing Officer of the creditor as to the genuineness of the transaction and whether such transaction has been accepted by the Assessing officer of the creditor but instead of adopting such course, the Assessing officer himself could not enter into the return of the creditor and brand the same as unworthy of credence. So long it is not established that the return submitted by the creditor has been rejected by its Assessing Officer, the Assessing officer of the assessee is bound to accept the same as genuine when the identity of the creditor and the genuineness of transaction through account payee cheque has been established. We find that both the Commissioner of Income Tax (Appeal) and the Tribunal below followed the well-accepted principle which are required to be followed in considering the effect of Section 68 of the Act and we thus find no reason to interfere with the concurrent findings of fact recorded by both the authorities. 26. Our attention was also drawn to the decision of the Hon'bleSupreme Court while dismissing SLP in the case of Lovely Exports as has been reported as judgment delivered by the CTR at 216 CTR 295: Ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the appeal filed by the Revenue. After hearing the learned counsel for the appellant and after going through the decision of the Supreme Court in the case of Cl. T. vs. M/s. Lovely Exports Pvt. Ltd. [supra], we are at one with the Tribunal below that the point involved in this appeal is covered by the said Supreme Court decision in favour of the assessee and thus, no substantial question of law is involved in this appeal. The appeal is devoid of any substance and is dismissed. 28. Our attention was drawn to the decision of the Hon'ble High Court, Calcutta in the case of Commissioner Of Income Tax vs M/s. Nishan Indo Commerce Ltd dated 2 December, 2013 in INCOME TAX APPEALNO.52 OF 2001 wherein the Court held as follows: The Assessing Officer was of the view that the increase in share capital by ₹ 52,03,500/- was nothing but the introduction of the assessee's own undisclosed funds/income into the books of accounts of the assessee company. The Assessing Officer accordingly treated the investment as unexplained credit under Section 68 of the Income Tax Act and added the same to the income of the assessee. Being aggrieved, the assessee filed an app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y and in any case without giving the assessee adequate opportunity of representation and/or hearing. Learned Tribunal agreed with the factual findings of the learned Commissioner and accordingly the learned Tribunal dismissed the appeal of the Revenue and affirmed the decision of the learned Commissioner. Mr. Dutta appearing on behalf of the petitioners cited judgment of the Division Bench of this Court in Commissioner of Income Tax Vs. Ruby Traders and Exporters Limited reported in 236 (2003) ITR 3000 where a Division Bench of this Court held that when Section 68 is resorted to, it is incumbent on the assessee company to prove and establish the identity of the subscribers, their credit worthiness and the genuineness of the transaction. The aforesaid judgment was rendered in the context of the factual background of the aforesaid case where, despite several opportunities being given to the assessee, nothing was disclosed about the identity of the shareholders. In the instant case, the assessee disclosed the identity and address and particulars of share allocation of the shareholders. It was also found on the facts that all the shareholders were in existence. Only n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rties who had allegedly advanced the fund. In our opinion, both the Commissioner of Income-tax (Appeals) and the Tribunal below were justified in holding that after disclosure of the full particulars indicated above, the initial onus of the assessee was shifted and it was the duty of the Assessing Officer to enquire whether those particulars were correct or not and if the Assessing Officer was of the view that the particulars supplied were insufficient to detect the real share applicants, to ask for further particulars. The Assessing Officer has not adopted either of the aforesaid courses but has simply blamed the assessee for not producing those share applicants. In our view, in the case before us so long the Assessing Officer was unable to arrive at a finding that the particulars given by the assessee were false, there was no scope of adding those money under section 68 of the Income- tax Act and the Tribunal below rightly held that the onus was validly discharged. We, thus, find that both the authorities below, on consideration of the materials on record, rightly applied the correct law which are required to be applied in the facts of the present case and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of identity, creditworthiness and genuineness of the transaction, no addition u/s 68 of the Act was warranted and the Ld CIT(A) after considering and appreciating inter-alia these facts have deleted the addition. 31. Further we note that the A.O had accepted the share capital subscribed by the six corporate entities at Serial C. The Ld. A.R in this context had drawn our attention to page 52 of the paper-book (supra) wherein the details of the share capital and premium received during this assessment year i.e. AY 2014-15 from twenty two (22) parties are given and the A.O had made only addition in respect of six (6) companies, so the implied inference is that he had accepted the share capital and premium from the rest of the share subscribers i.e. sixteen (16) companies itself, when the assessee has filed the very same documents of other share-subscribers. So according to Ld. A.R, this action of AO in drawing adverse inference against six(6) companies at Serial C is per-se is bad being arbitrary and irrational in nature when on the same set of documents, the AO accepted their share capital premium and did not accept that of companies at Serial C which according to Ld. A.R is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dicate the legality of the action of Ld. CIT(A), first of all, let us have a look at section 68 of the Act. And we note that the relevant assessment year [A.Y] before us is A.Y 2014-15 wherein we note that a Proviso has been inserted by Finance Act 2012 w.e.f. 01.04.2013 in section 68 of the Act which is applicable for this relevant AYand for ready reference relevant and applicable in this case of section 68 of the Act with the aforesaid proviso is reproduced as under: Cash Credits Section 68. Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year. [Provided that where the assessee is a company ( not being a company in which the public are substantially interested), and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee-company shall be deem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in the cases of an assessee which is a corporate entity (not being a company in which the public are substantially interested) claims to have received share application money, share capital, share premium or any such amount, then with effect from 01.04.2013, while giving the explanation to the AO regarding the nature and source of such sum credited in its books, the share subscribors has to offer the proof of source of source of the share application money, share capital, share premium. So, we note that till AY 2012-13, the requirement of law as per section 68 of the Act was that when there is a credit entry in the books, then assessee was required to satisfy the AO in respect of the nature and source (i.e. First source from which it received) and that position of law remains in force till now also, except that after 01.04.2013 (i.e. AY 2013-14) onwards when an assessee company (not public company) if they collect share application money, share capital, share premium then an additional burden is imposed by the first proviso to bring to the notice of AO the source of source of the credit entry i.e. source of the share applicant which had been invested in the assessee company. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stands satisfied. Therefore, in the peculiar facts and circumstances of the case as discussed, it cannot be held that the assessee had not discharged its onus of proving the source of source of the share capital and premium. Here it has to be taken note that the share premium of ₹ 590/- per share the A.O has accepted, because he has accepted that from the other sixteen (16) companies, therefore, valuation of the share (premium) of the assessee i.e, ₹ 590/- per share is not in dispute. In such a scenario, when the A.O is satisfied with the identity, creditworthiness and genuineness of the six companies at Serial C by his action of accepting the total share capital of ₹ 1,11,46,100/- subscribed by them, his action of not accepting the share premium from these very same six (6) companiesof ₹ 7,69,71,900/-, is not tenable/un-reasonable/irrational and on this score we concur with the view of the Ld. CIT(A). Therefore, we find no infirmity in the impugned order of the Ld. CIT(A) in giving relief to the assessee on this issue. However, for completeness, we would like to examine the identity, creditworthiness of the six (6) share subscribers shown at Serial C and ge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... invested by them in the assessee is discernible as under: Sl No Name of the Party Source of Investment Capital Reserves Sum invested in assessee s business 1 Pragati Complex Advisory Pvt Ltd 66-70 of PB ₹ 7,57,92,433 (Page 58 of PB) ₹ 1,45,65,000 2 BrijbhumiCommosale Pvt Ltd 84-87 of PB ₹ 10,20,58,974 (Page 78 of PB) ₹ 1,27,65,000 3 Jintan Mercantile Pvt Ltd 103-106 of PB ₹ 15,78,77,331 (Page 95 of PB) ₹ 1,29,99,600 4 LaxniipurtraTradecomm Pvt Ltd 123-126 of PB ₹ 13,30,11,167 (Page 115 of PB) ₹ 1,86,09,300 5 RichifleldVintrade Pvt Ltd 142-144 of PB ₹ 14,44,31,804 (Page 134 of PB) ₹ 1,80,78,000 6 Ne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is a Private Limited Company, and which has Permanent Account No. AAGCP0516K and CIN U74140WB2011PTC162259 and its Net-worth as on 31.03.2014 (in total)- share capital reserve is to the tune of ₹ 7,57,92,433/- (PB page 58) and the investment made in the assessee-company including the share premium comes to ₹ 1,45,65,900/-. There is Share Application Form, Bank statement, ITR acknowledgement and financial statement available in the PB-page 53-72. This share applicant regularly filed Income Tax Return (ITR) and it has filed its Bank statement. Thus we note that the assessee had duly discharged its onus to prove the identity of the share applicants by adducing PAN as well as income-tax returns. The financial statement shows that the share applicant had enough funds to invest in the assesseecompany and the transaction has happened through banking channel. Since the case pertains to AY 2014-15, the share subscribers has to show the source of its fund for subscribing to the share capital/premium of the assessee company. From the bank statement of M/s Pragati Complex Advisory Pvt Ltd enclosed as page no 66-70 of paper book it is clear that the share subscriber has invested R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany has furnished the details of source of Fluids and has duly filed its financial statements, so the requirement of source of source is satisfied and no adverse view against this share subscriber especially in respect of share premium is warranted. (iii) On perusal of the paper book, it reveals that the documents are placed at page 90 to 108 of share applicant M/s. Jintan Mercantile Pvt Ltd which is a Private Limited Company, and which has Permanent Account No. AACCJ6360P and CIN U51909WB2011PTC164209 and its Net-worth as on 31.03.2014 (in total)- share capital reserve is to the tune of ₹ 15,78,77,331/- (PB page 95) and the investment made in the assessee-company including the share premium comes to ₹ 1,29,99,600/-. There is Share Application Form, Bank statement, ITR acknowledgement and financial statement available in the PB-page 90-108. This share applicant regularly filed Income Tax Return (ITR) and it has filed its Bank statement. Thus we note that the assessee had duly discharged its onus to prove the identity of the share applicants by adducing PAN as well as income-tax returns. The financial statement shows that the share applicant had enough funds to i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he share subscriber has invested ₹ 1,86,09,300/-in the assessee company on various dates as follows : on 27.02.2014 ₹ 251akhs,on28.02.2014 ₹ 25 lakhs, on 03.03.2014₹ 65 lakhs, on 04.03.2014₹ 30 lakhs, on 05.03.2014 ₹ 15 lakhs, on 07.03.2014 ₹ 15 lakhs and on 11.03.2014 ₹ 11.093 lakhs through banking channel. From perusal of bank statement it is evident that there was no cash deposit. Thus the company has furnished the details of source of Funds and has duly filed its financial statements, so the requirement of source of source is satisfied and no adverse view against this share subscriber especially in respect of share premium is warranted. (v) On perusal of the paper book, it reveals that the documents are placed at page 129 to 146 of share applicant M/s. Richifield Vintrade Pvt Ltd which is a Private Limited Company, and which has Permanent Account No. AAFCR3199H and ON U51909WB2011PTC163139 and its Net-worth as on 31.03.2014 (in total)- share capital reserve is to the tune of ₹ 14,44,31,804/- (PB page 134) and the investment made in the assessee-company including the share premium comes to ₹ 1,80,78,000/-. There is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... invest in the assessee-company and the transaction has happened through banking channel. Since the case pertains to AY 2014-15, the share subscribers has to show the source of its fund for subscribing to the share capital/premium of the assesse company. From the bank statement of M/s. Newzone Vintrade Pvt Ltd enclosed as page no 159-162 of paper book it is clear that the share subscriber has invested ₹ 1,30,00,290/- in the assesse company on various dates as follows : on 03.01.2014 ₹ 25 lakhs, on 06.01.2014 ₹ 25 lakhs, on 07.01.2014 ₹ 20 lakhs, on 09.01.2014 ₹ 251akhs,onl0.01.2014 ₹ 20 lakhs and on 15.01.2014 ₹ 15 lakhs through banking channel. From perusal of bank statement it is evident that there was no cash deposit. Thus the company has furnished the details of source of Funds and has duly filed its financial statements, so the requirement of source of source is satisfied and no adverse view against this share subscriber especially in respect of share premium is warranted. 39. Thus from the aforesaid discussions and in the light of the facts and circumstances discussed and since there is no other material to negate or find any infirm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... will take up the Revenue s appeal. At the outset the Ld. D.R. submitted that though the Revenue has raisedeighteen (18) grounds of appeal in the Departmental appeal, however, it pertains to only four issues. 43. Ground No.1 and 2 of the Revenue is against the action of the Ld. CIT(A) in deleting the disallowance of ₹ 5,65,461/- u/s 56(2)(viib) of the Income Tax Act, 1961 (hereinafter the Act ). 44. In respect of this ground, the A.O held as under: Disallowance u/s. 56(2) (viib) 7.1. On perusal of the Audited Accounts for the year ended 31/03/2015 submitted by the Assessee Company, it is found that during the year under consideration, it has issued 4,95,800 Nos of Class A Equity Shares of ₹ 10- each and premium ₹ 62/- which translate to ₹ 72 per equity share. The assessee has also issued 6,65,566 Nos of Class B Equity shares of ₹ 100/- face value and premium ₹ 620/-. The assessee was requested to submit the FMV as per Rule 11UA w.r.t. regarding issues of shares during the year. 7.2 In response to the same, the assessee company filed copy of valuation of its Shares of A Class B. Ongoing through the same, it is noted tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Hyderabad bench and held that section 50C should not be invoked if difference between stamp duty value and declared consideration is nominal. Again, the Jaipur bench of ITAT in the case of Sita Bai Khetan vs. ITO (2016) 181 TTJ 549 (JP), dated 27.7.201 6 has held that since the difference was within tolerable limits, which is 15% of valuation, as recognized by the Hon ble Supreme Court in G. E. Gautam u. UOI (1993) 199 1TR 530, no addition should be made. The decision of Sita Bai Khetan has been followed by the Delhi bench of ITAT in the case of Manoj Singhal Us. DCIT, ITA NO.6023/De l/2015, dated 17.10.2016. Taking the same logic in this case where valuation price and transaction price difference is negligible, no addition can be made. In view of the above discussion the ground is Allowed. 46. Aggrieved the Revenue is before us. 47. We have heard both the parties and perused the records. We note that during the year, the assessee had issued Class-A equity shares of ₹ 10/- each face value with a premium of ₹ 62/- each amounting to ₹ 72/- per equity share. The assessee company had also issued 6,65,566 number of Class-B equity shares o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant Machinery which is engaged in manufacturing and production and not on electrical installation. Further, it is seen that, the rate of depreciation on electrical installation is 10% as per I.T. Rules, 1962. Hence, the assessee company had made excess claim of depreciation and additional depreciation of ₹ 68.87,393/- on electrical installation. The detail working of excess claim of depreciation on electrical installation is as under: SI. No. Details of assets Written down value on the first day of the previous year Additions 180 days or more (A) Additions less than 180 days (B) Total Depreciation 1 Electrical installation (10%) Depreciation at the prescribed rate as per Income Tax Act Electrical installation (10 %) 8,33,82,144/- - 10,87,31,419/ ₹ 1,37,74,785/- Assessee's claim Elec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Net Addition b) Electrical Installations - Eledrive Autoation (M/C)-K 15.12.2014 - 10,16,25,303 10,16,25,303 22,81,088 9,93,44,215 Power Supply System - K 15.12.2014 44,21,570 44,21,570 2,41,720 41,79, 850 Lighting Plant-K 15 25.03.2015 5,90,854 5,90,854 - 5,90,854 Electrical Install-G 21.10.2014 45,14,543 45,14,543 - 45,14,543 Transformer 21.10.2014 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to Provident Fund and ESIC to the tune of ₹ 8,99,406/- on the ground that the same was not remitted within the due date prescribed in the PF ESI Act. It is noted that the Ld. CIT(A) vacated the disallowance by following the decision of Hon'ble Calcutta High Court in the case of Commissioner of Income Tax, Circle - 1, Kolkata Vs Vijayashree Ltd. reported in (2014) (43 taxmann.com 396) (Cal) wherein it was held that no disallowance for employees contribution to PF ESI should be made under section 36(1)(va) read with section 2(24)(x) of the Act where the same is deposited within the time allowed for filing Income Tax return under section 139(1) of the Act. 54. We find that the assessee has deposited the PF ESIC amount within the time allowed for filing Income Tax return under section 139(1) of the Act,therefore theLd. CIT(A) has followed the order of the Hon ble jurisdictional High Court in the case of Vijayashree Ltd.(supra), therefore, no infirmity can be attributed to his impugned action and so we confirm the order and dismiss these grounds of appeal of the Revenue. 55. Ground Nos.10 to 12 of the appeal is directed against the order of the Ld. CIT(A) in dele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the addition by the AO are summarized as under: i) The nexus of three entry operators with three of such loan creditors,namely Mr. Manohar Lai Nangalia/ Mr. Arun Nangalia with BankaEnterrprises Pvt Ltd; Mr. Ashok Jha with Pitman Commodities Pvt Ltdand lastly Mr. Vijay Kumar Gupta with Sanwaria Marketing Pvt Ltd. ii) Reliance was placed on the statement(s) of entry operators obtained bythe income tax department. The statement of Mr. Ashok Jha taken underoath on 02.03.2015, Mr. Vijay Kumar Gupta on 03.08.2015 and Mr.Arun Nangalia on 17.09.2015. iii) Non- appearance of directors of 32 of such loan creditors inresponse to summons issued during the assessment proceedingsu/ s 131 of the Act. iv) Some of the sum monses sent by post were returned unserved. v) The loan creditors are having apparent signage of a JamaKharchi concerns that of no/negligible payment of taxes, no actualassets, having fake addresses and having dummy directors. 57. And the Ld CIT(A) deleted the addition of ₹ 12.95 crores ₹ 4.5 crores by holding as under: I have perused the Submissions of the AR, the Assessment Order and the case laws on this issue. An analysis o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as it's loan and advance to shree Guru Carbide Chemicals Pvt Ltd., Orissa Air Products Pvt Ltd. , Rishi Gases Pvt. Ltd. The company belongs ,to Asiatic Oxygen Group (Surajmull Nagarmull), The ICD for theassessee was arranged by renonwend corporate finance broker. Apparently this company can t be said to be a paper company during the assessment year. 4. R D Fans Ltd (4) - the Company is having investment in Quoted shares of ₹ 24 lakhs, interest in joint venture in real estate and immovable properties of ₹ 7.5 crore . During the year it gave loan, to Parekh. Aluminex Ltd another reputed Company. The company pays tax regularly in this year (FY 14-15) it paid tax of ₹ 21.29 Lac and in next year, it paid tax of ₹ 19.57 lac. The company belongs to Dhandania RD. Group. The ICD for the assessee was arranged by renowned corporate finance broker. In view of the above this company can t be said to be a paper company during the assessment year. 5. Park Complex Pvt Ltd (5) - The Company is having investment in Quoted shares and land. The company pays tax regularly in this year (FY 14-15) it paid tax of ₹ 3.65Lac and in next year, it paid tax of &# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. The Company is Trading in Jute having turn over of around 13 Cr. company keep balance of ₹ 107 lac in bank. The company belongs to Sarda Group having interest in jute trading and manufacturing.. The ICD for the assessee was arranged by renowned corporate finance broker. In view of the above this company can t be said to be a paper company during the assessment year. 10. Cresenthemum Vypaar Pvt.Ltd (10) - The Company is having Tangible Fixed Assets (₹ 10.40 lakhs) and fixed deposits with bank.. The company pays tax regularly in this year (FY 14-15) it paid tax of ₹ 11,23 Lac and in next year, it paid tax of Rs, 10.191ac. The company is regularly lending monies to large and established corporate house. The company belongs to Bohra Group Mumbai 85 Gujarat (Textile). Bohra group is a renowned group of Kolkata which run a charitable institution which runs a girls hostel in Kolkata. The ICD for the assessee was arranged by renowned corporate finance broker. In view of the above this company pant be said to be a paper company during the assessment year. 11. Disha Paints Pvt ltd (11) - The Company is having Fixed Deposits with bank(18.52 lakhs) and given su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elopment of properties of ₹ 6 Crore. The company also has fixed deposits with bank of ₹ 43.2 lakhs . The company pays tax regularly. The.company belongs to JAYA Biscuits Group. The ICD for the assessee was arranged by renowned corporate finance broker. 17. Monet Securities Pvt Ltd (17) - The Company is having investment in Quoted shares of 49.30 crores . During the year FY 14-15, it gave ICD to Kashipur Holding Ltd, Williamson Magor Co Ltd, SKP Steel Industries Pvt Ltd, Bihanji Construction Ltd, Elder Healthcare Ltd and so on.The company belongs to Bubna Group. It is a share broking company. The ICD for the assessee was arranged by renowned corporate finance broker. 18. Narmada Trexim Pvt Ltd (18) - The company has merged with PingleCommotrade Pvt ltd. It has lent money to many business groups of Kolkata like Ajmer Mineral Grinding corporation, Vikram India Ltd,, Suiyaprabha Tea services pvt ltd. etc. The ICD for, the assessee-Was arranged by renowned corporate finance broker. 19. Navin;Constriiction . credit Pvt Ltd 1,(19} - The .Company is having investment in Quoted shares(₹ 67.19 lakhs) and Mutual funds (₹ 6 crores in next year); The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year (FY 14-15) it paid tax of ₹ 5.64 Lac and in next year, it paid tax of ₹ 6.01 lac. The Company is having Interest in Fixed Assets of Over ₹ 88 lac. The company belongs to Sarda Jute Group. The ICD for the assessee was arranged by renonwend corporate finance broker. 26. Richimen Barter Pvt Ltd (26) - The Company is having investment in Quoted shares of 59 lakhs. The company is regularly lendering monies to large and established corporate house. The company belongs to Beekay Group. The ICD for the assessee was arranged by renowned corporate finance broker. 27. Ritesh Roadlinks Pvt. Ltd (27) - The Company is having fixed deposit with bank of ₹ 42 lakhs. Fixed asset is of 23.75 lakhs. The company is engaged in Transport and logistic service industry. The ICD for the assessee was arranged by renowned corporate finance broker. 28. S K Dudhoria Holding Pvt. Ltd (28) - The Company is having investment in Mutual funds (₹ 30 lakhs) and FD of ₹ 20 lakhs. The company pays tax regularly in this year (FY 14-15) it paid tax of ₹ 1.5 Lac and in next year, it paid tax of ₹ 67.051ac. During the year FY 14-15, it gave ICD to Video ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hed corporate house. During the year FY 14-15, it gave ICD to B P Poddar Hospital Medical research Ltd, BKP Investments, Bengal Infra Builder Ltd, Bigjos Estate Ltd, Jayshree Chemical.Ltd, Kedia Castle Dellon industries Ltd, M.adura Wood Craft Engineering Industries Ltd-,Saifco India Co., Williamson Magor Co Ltd, Willowood Chemicals Pvt Ltd, VOC International, Trade India Corporation and so on.The company belongs to industrial Group engaged in Civil Engineering and Construction . The ICD for the assesses was arranged by renowned corporate finance broker 15.5. Following salient features emerge on this issue of unsecured loan- i) It can be seen that most of the lender companies have substantial assets lying with them. ii) These companies are controlled by reputed business houses of Kolkata, therefore, it is difficult to level them as shell companies. iii) Further, most of the lender companies have filed details before the AO in response to summons u/s. 131. Only the Directors did not appear before the AO but the AO should have issued personal summons to the Directors and could have enforced their attendance which he did not do. Therefore, the assessee c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nity to assessee, whereas according to Ld. CIT-DR despite giving adequate opportunity to assessee, they failed to produce cogent evidence to substantiate the identity, creditworthiness and genuineness of the twenty two (22) loan creditors, so the A.O had no option but to make the addition and the Ld. CIT(A) erred in deleting the same. According to Ld. CIT-DR, the statement of entry operators obtained by the department and who controlled these lender companies are part and parcel of the assessment order and since these companies (lender) are controlled by entry operators and have failed to bring cogent evidence to establish identity, creditworthiness genuineness of the lender companies before A.O, the A.O has rightly drawn adverse inference against the assessee. The Ld. CIT-DR in this context pointed out the nexus of three (3) entry operators with three (3) such loan creditors viz.(i) Mr. Arun Nangalia s statement which was recorded on oath on 17.09.2015 with M/s Banka Enterprises Pvt. Ltd; (ii) Mr. Ashok Jha s statement which was recorded on oath on 02.03.2015in respect of M/s Ritman Commodities Pvt Ltd and (iii) Mr. Vijay Kumar Gupta s statement was recorded on oath on 03.08.201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... produced before the A.O/CIT(A). And according to Ld. A.R, the statements of three entry operators which the AO relied upon has nothing incriminating against the assessee/lenders; and wondered as to how the AO connected their statement with three (3) lender companies (1)M/s Banka Enterprises Pvt. Ltd; (2) M/s Ritman Commodities Pvt Ltd and (3) M/s Sanwaria Marketing Pvt Ltd. The Ld. A.R. took pains by drawing our attention to pages 3 to 18 of assessment order [ where the AO has reproduced statements of three (3) entry operators with three (3) such loan creditors viz. (i) Mr. Arun Nangalia s statement recorded on 17.09.2015 with M/s Banka Enterprises Pvt. Ltd; (ii) Mr. Ashok Jha s statement recorded on 02.03.2015 in respect of M/s Ritman Commodities Pvt Ltd and (iii) Mr. Vijay Kumar Gupta s statement recorded on 03.08.2015 in respect of M/s Sanwaria Marketing Pvt Ltd. ] to bring out this fact of non-connection/nexus of these three (3) entry operators with the afore-said lender companies, which we find to be correct and will discuss in detail (infra). Andaccording to Ld AR, the Ld.CIT(A) being satisfied with these facts has recorded finding of fact by dwelling upon each lender compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icer) has given sufficient time of 21 days to the assessee to produce the loan creditors before him and they failed to appear, he treated the entire unsecured loan of ₹ 12.95 crores as undisclosed cash credit under section 68 of the Act and added the same to the total income of the assessee. On appeal, the Ld. CIT(Appeals) while giving relief to the assessee, noted that the assessee in order to prove the genuineness of the loan transaction from these 22 Companies had filed bank statement which reflected that assessee received loan/advance through proper banking channel and these lenders had earned substantial interest income not only from assessee, but from other borrowers too and the interest on the loans were credited in the lenders account after deduction of TDS and all these lender companies have filed their respective Income TaxReturns and that they were duly assessed by the department. And the Ld CIT(A) noted that the lender companies had substantial assets to grant loans. And the Loans have been eventually repaid also through banking channel, so he deleted the addition. Against this impugned action of the Ld. CIT(Appeals), the Revenue has preferred this appeal before t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ck securities Pvt. Ltd 20,00,0000 TOTAL 12,95,00,000 65. Further it was brought to our notice that in the subsequent assessment year i.e, AY 2016-17 the AO has accepted the loan taken by the assessee from the following thirteen (13) parties to be genuine out of total twenty two (22) parties not accepted by him in this AY 2015-16. Sl No Name of Company Amount (Rs) Accepted by AO in AY 2016-17 1 RITMAN COMMODITIES PVT LTD 1,00,00,000 Accepted by AO in AY 2016-17 2 PARK COMPLEX PVT.LTD 30,00,000 Accepted by AO in AY 2016-17 3 PAWAN PUTRA SECURITIES PVT.LTD 25,00,000 Accepted by AO in AY 2016-17 4 GULMOHAR MERCANTILE PVT. LTD. 1,00,00,000 Accepted by AO in AY 2016-17 5 CRESCENTHEMUM VYAPAARPVT.LTD. 30,00,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... U70109WB1994PTC065616 AABCK1563C Yes 4 PAWAN PUTRA SECURITIES PVT LTD U51109WB1993PTC060129 AABCK1563C Yes 5 MOHIT BAKERS PVT.LTD. U15410WB2009PTC134482 AAFCM9864J Yes 6. KUKU MERCANTILE PVT LTD. U70109WB1995PTC071706 AABCK3311L Yes 7 JAGADHATRI FOOD LTD U51909WB1981PLC033866 AAACJ6899F Yes 8 GULMOHAR MERCANTILE PVT. LTD U51909WB2006PTC108134 AACCG5361R Yes 9 CRESCENTHEMUM VYAPAAR PVT LTD U51109WB2007PTC114264 AADCC0224E Yes 10 BANKA ENTERPRISES PVT.LTD. U70200WB1995PTC069399 AABCB2996A Yes 11 RITESH ROAD LINKS PVT.LTD. U63090W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2,83,068 28,307 4 PAWAN PUTRA SECURITIES PVT LTD 29,18,29,000 25,00,000 14,384 1,438 5 MOHIT BAKERS PVT.LTD. 25,40,62,000 25,00,000 1,19,178 11,918 6. KUKU MERCANTILE PVT LTD. 3,77,13,000 30,00,000 1,66,028 16,602 7 JAGADHATRI FOOD LTD 4,09,90,000 50,00,000 4,20,549 42,056 8 GULMOHAR MERCANTILE PVT. LTD 20,99,56,000 1,00,00,000 3,86,302 38,630 9 CRESCENTHEMUM VYAPAAR PVT LTD 6,43,78,000 30,00,000 18,904 1,890 10 BANKA ENTERPRISES PVT.LTD. 35,04,79,000 50,00,000 1,02,329 10,233 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s visible from the facts noted in the form of chart given above under the heading creditworthiness . Moreover, it has also been brought to our notice that the Assessing Officer in the next assessment year i.e. A.Y. 2016-17 has accepted thirteen (13) parties out of this twenty-two (22) parties as genuine lender companies (supra) and thereafter it was brought to our notice that the Ld. CIT(Appeals) has accepted the loan obtained from one party, i.e. M/s. Sanwaria Marketing Pvt. Limited for A.Y. 2016-17 (which we will examine separately). We note that while adjudicating this issue, the Ld. CIT(Appeals) has gone through the Master Data relating to the lender companies, which were available in the ROC Websites and the Ld. CIT(Appeals) has acknowledged the fact that he has crosschecked the facts regarding the identity, creditworthiness and genuineness of the loan transaction, which fact is evident from his finding at para 15.3 (Page 18) of his impugned order; and it is noted that the Ld. CIT(Appeals) has not only discussed about the identity, creditworthiness and genuineness of the twenty-two (22) lender companies from whom the assessee had taken loans in this relevant assessment year o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r for AY 2015-16 is concerned, the AO aftertaking note that the assessee has taken unsecured loan from so many lender companies, called for the details from the assessee; and from the list of the creditors/lender companies, he found that three (3) parties were controlled by entry operators. According to the AO, (1) M/s. Banka Enterprises Pvt. Ltd. was the concern of entry operator Shri Monoharlal Nangalia/Arun Nangalia. (2) M/s. Ritman Commodities Pvt. Ltd. was the concern of the entry operator Shri Ashok Kumar Jha and (3) M/s. Sanwaria Marketing Pvt. Ltd. was the concern of entry operator Shri Vijay Kumar Gupta and thereafter he reproduced their respective statements which were recorded on oath u/s. 131 of the Act by Investigation Wing [Refer pages 3 to 18 of the assessment order]. According to AO, since these three (3) lender companies are the concerns of the entry operators, he issued summons and insisted on the personal appearance of the Directors of the lender companies and failure of which prompted him to make the additions as bogus loan credits in the assessee s books which the Ld. CIT(A) has deleted. In this context the Ld. AR took pains and took us through the statements r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gation Wing Unit. In the assessment order the AO has alleged that the entry operator Mr. Vijay Kumar Gupta s concern is M/s. Sanwaria Marketing Pvt. Ltd. It is noted from the statement of Mr. Gupta that nowhere in the statement he has named M/s. Sanwaria Marketing Pvt. Ltd. as his company for providing accommodation entries. In answer to question no. 5, Mr. Gupta has enlisted the names of various persons who were his relatives and in answer to question no. 7 he had given the names of two (2) persons who were his employees. On perusal of the information pertaining to M/s. Sanwaria Marketing Pvt. Ltd. extracted from the master data it is noted that the registered office of the creditor company was situated at 176, Jamuna Lal Bajaj Street, Kolkata-700 007 and the said company also declared that the company s books of account and other papers were maintained at 10/3, Acropolis, 1858/1, Rajdanga Main Road, Kolkata700107 and as per the company master data Shri Siddharth Kumar Podder, Shri Sanjib Kumar Podder and Shri Supradip Kumar Sharma are the directors of the creditor company since 26.07.2012. In contra-distinction to this information it is noted that Mr. Gupta had no where admitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... questioning him in respect of the survey conducted on M/s. Happy Bengal Promoters Ltd. and M/s. Mangalthan Properties Pvt. Ltd. It is also noted that this was in continuation to the statement recorded during the survey of Shri Sushil Kumar Podder who has stated about fifteen (15) companies created by Mr. Pramod Agarwal which has been transferred to Mr. Arun Nangalia. However, Shri Arun Nangalia has stated that Mr. Promod Agarwal has transferred only twelve (12) companies not fifteen (15) companies to him, details are given at page nos. 15 and 16 of the assessment order. From the statements of Shri Arun Nangalia, we note that nowhere the name of M/s. Banka Enterprises Pvt. Ltd. or its director s name or their relatives are found. Therefore, we wonder as to how the AO has connected Shri Nangalia with M/s. Banka Enterprises Pvt. Ltd., Therefore, the finding of the AO that M/s. Banka Enterprises Pvt. ltd. was the concern of the entry operator Shri Monoharlal Nangalia/Shri Arun Nangalia are perverse and the Ld. CIT(A) has rightly deleted the addition. And since the assessee was able to show that the assessee received ₹ 50 lacs in this assessment year and the assessee had paid inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore us, the details of the unsecured loans taken by the assessee; and the interest given to them by the assessee can be seen as well as the fact that assessee company has squared up/ repaid the loan which facts are discernable from the chart below. 73. From a perusal of the chart (infra)we can see the list of lenders( total 33), their respective PAN, , loan amount, interest per annum, TDS deducted while interest is paid to lenders, loan repaid/closed F.Y, supporting documents filed etc: 74. From a perusal of the chart (supra) we note that out of the total thirty-three (33) lender companies, which had given loans to the assessee, other than the loan taken from M/s. Richmen Barter Limited shown at item number 29, all other loan amounts have been repaid which is evident from the chart. Thus we note that all the lender companies from which all the assessee has taken loan this year and also carry forwarded loan except ₹ 20,00,000/- of M/s. Richmen Barter Pvt. Limited [which does not pertain to this year and it is noted that it is the carry forwarded loan/opening loan of this year], the assessee had repaid / squared up the entire loan taken through banking channel a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar, so the AO added back the closing balance of these loan parties to the tune of ₹ 4.5 crores. Further details of these lender companies can be seen from the chart below; 78. According to Ld AR, the opening balance of loan as on 01.04.2014 except for ₹ 1 crore repaid in this AY 2015-16 was through banking channel on 03.04.2014 (Refer Page 93 of Paperbook 2) , has been added back by AO. According to Ld AR, since the loan was accepted in previous year, no addition was made in this regard in previous AY 2014-15, so such addition of ₹ 4.5 crores is legally un-tenable and is bad in law. Further according to Ld AR, it is evident from Paperbook 2, that said Companies have reflected the interest income from loan and the TDS in respect thereof was duly accounted for and deposited and the parties have filed Income Tax Returns and have been duly assessed, so no addition was warranted. 79. We have heard both the parties and we note that AO made an addition of ₹ 4.5 crores andwe note that the addition of ₹ 4.5 crores was made for the loan taken by assessee from eight (8) parties (supra), which was admittedly the carry forwarded loans/opening loans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. PNR COMPLEX PVT LTD 9,36,24,266 50,00,000 50,00,000 - 3. MONET SECURITIES PVT LTD 55,24,81,000 1,00,00,000 1,00,00,000 - 81. According to Ld AR, it is evident from perusal of paper book 2 pages 178 to 188 that in this assessment year, no fresh loan was taken from these three (3) parties and opening loan along with interest was repaid in this assessment year through banking channel after deducting TDS on interest. It was brought to our notice that AO had added back interest of ₹ 1,10,22,742/- paid to following parties: Sl. No. Name of company Interest (Rs.) TDS (Rs.) 1 RITMAN COMMODITIES PVT LTD 83,288 8,329 2. R.D.FANLTD 3,96,712 39,671 3. PARK COMPLEX PVT.LTD. 2,83,068 28,307 4. PAW ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TROPEX SUPPLIERS PVT.LTD, 1,20,000 12,000 26. RICHMEN BARTER PVT.LTD. 1,80,000 18,000 27. NARMADA TREXIM PVT.LTD. 1,20,000 12,000 28. PADWAVATI VINIMAY PVT. LTD. 7,123 712 29. PNR COMPLEXPVT. LTD. 4,70,137 47,014 30. MONETSECURITIES PVT. LTD 10,12,602 1,01,261 31. BEST LUCK SECURITIES PVT.LTD. 1,88,712 18,871 1,10,22,742 82. The Ld. A.R. further submitted that the loans taken from all the parties have been squared up/repaid. According to Ld. A.R, some loans have been paid during this year and others in subsequent assessment years and all the lenders are income-tax assessee s and the payments have been made through banking channel. And the interest for the lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s also cannot be accepted and we are of the opinion that the Ld. CIT(Appeals) rightly deleted the same. 84. Therefore, in the facts and circumstances discussed (supra) the Ld. CIT(Appeals) has rightly deleted the addition of interest expenditure of ₹ 1,10,22,742/- which does not require any interference. Therefore, we confirm the action of the Ld. CIT(Appeals) and dismiss the appeal of the Revenue. 85. In the light of the aforesaid discussion, we dismiss the Revenue s appeal for AY 2015-16. ITA 2191/Kol/2018(AY 2015-16) [Assessee s Appeal] 86. This is an appeal preferred by the assessee against the order of the Commissioner of Income Tax (Appeals)-4, Kolkata dated 16.08.2018 for AY 2015-16. The sole issue raised by the assessee is against the action of the Ld. CIT(A) in confirming an addition of ₹ 8,94,96,000/- u/s 68 of the Act. 87. The A.O noted on perusal of the balance sheet of the assessee company that the assessee had shown receipt of share capital with premium of ₹ 51,49,05,120/- during F.Y 2014-15. Therefore, the A.O asked the assessee to furnish the details of the share allottes. The A.O acknowledged that pursuant to the same,the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to confirm the same. The Ld. CIT(A) while confirming the order of the A.O observed as under: 17.1 Following facts emerges from the Order of the AO- (a)The AO has made addition in respect of share capital raised from 14 entities. (b) Most of these entities were appearing in the share subscriber list for A.Y. 2014-15 where the summons sent to these parties Return unserved, c) None of these parties were found to be existing at the addresses given in the field enquiry made by the Department. d) Even in A.Y. 2015-16 the AO had issued summons to these 14 allottees. However, these 14 allottees did not comply with the summons u/s. 131. e) The AO also asked the assessee to produce these Directors before the AO, but the Assessee did not produce them before the A.O. f) The AO has also noted that many of the summons u/s. 131 were returned back to office and this fact was also communicated to the AR of the Assessee, but till the date of passing of the order the assessee did not furnish explanation regarding the same. Even new addresses of these concerns were not provided. 17.2 The Ld. AR in his reply before the undersigned has emphasized that all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the true nature and source thereof even if the same is credited as receipt of share application money. Mere fact that the payment was received by cheque or that the applicants were companies, borne on the file of Registrar of companies were held to be neutral facts and did not prove that the transaction was genuine. 3. Hon'ble Apex Court in the case of Navodaya Castle (P) Ltd vs CIT reported in (2015) 56 taxmann.com 18 (SC) has held that mere filing of certificate of incorporation, PAN were not sufficient for the purpose of identification of subscriber company especially when there was material to show that subscriber was a paper company and not a genuine investor. 4. Hon. Delhi High Court in the case of CIT V Empire Builtech P Ltd 361 ITR 258 (Del), has held that when Asst. Year 2009-10 assessee does not produce evidence or tries to avoid the appearance before the Assessing authority it necessarily creates difficulties and prevents ascertainment of the truth and correct facts as the Assessing Officer is denied the advantage of the attendance or factual assertion by the assessee before him. If an assessee deliberately and intentionally fails to produce evidence befo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ticulars, or relying on entries in a Registrar of Companies website. One must remember that in all such cases, more often than not, the company is a private one, and share applicants are known to it, since they are issued on private placement, or even request basis. If the assessee has access to the share applicant's PAN particulars, or bank account statement, surely its relationship is closer than arm's length. Its request to such concerns to participate in income tax proceedings, would, viewed from a pragmatic perspective, be quite strong, because the next possible step for the tax administrators could well be re-opening or such investor's proceedings. That apart, the concept of shifting onus does not mean that once certain facts are provided, the assessee's duties are over. If on verification, or during proceedings, the AO cannot contact the share applicants, or that the information becomes unverifiable, or there are further doubts in the pursuit of such details, the onus shifts back to the assessee. At that stage, if it falters, the consequence may well be an addition under Section 68. 17.4 In the instant case the assessee has failed to prove the identit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... form and (vi) copy of Board Resolution of subscriber companies. However, according to the Ld. A.R, during the assessment proceeding for AY 2015-16, the AO could not find any fault or infirmity whatsoever in respect of the documents filed before him to establish the identity, creditworthiness and genuineness of the share capital and premium received from these concerns by the assessee company. However, the AO has simply toed the line of the predecessor AO for AY 2014-15 and has reproduced the order of his predecessor AO for AY 2014-15 in respect of share capital and premium collected from six (6) shareholders for AY 2014-15 and thereafter, AO issued summons u/s. 131 of the Act to all nineteen (19) companies to produce their directors and since only five (5) companies directors responded to it, he drew adverse inference against the fourteen (14) companies. Before the Ld. CIT(A), the following facts were also brought to his notice that during the year (i.e. AY 2015-16), the addition made on account of share application and share premium received from fourteen(14) companies, six(6) companies were those from whom the assessee company received share application and share premium in the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ky Sales Pvt Ltd 5,35,700/- 33,21,340/- 38,57,040/- Total 10,00,3000 62,01,860/- 72,02,160/- 93. According to Ld. AR, in respect of the above three (3) subscriber companies' addition was made by the assessing Officer solely on the ground that similar addition were made in respect of share capital receipt from these companies in the assessment Year 2014-15. And in the Assessment year 2014-15 since no addition was made in the assessment order in respect of the aforesaid three Companies, according to Ld AR, the addition was made merely on erroneous assumption of fact and therefore, such arbitrary addition cannot be sustained since assessee has discharged the burden of proof to prima facie prove the identity, creditworthiness and genuineness of the share transaction. 94. From the following chart it can be discerned that out of the fourteen (14) share subscribing entities, from which the assessee received share subscription the AO/CIT(A) has not accepted their identity, creditworthiness and genuineness of share transaction, whereas for AY 2014-15 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... premium have been subscribed by them through banking channel (NEFT or cheque) which goes on to show that the assessee has discharged the onus in respect of genuineness of the transaction since no cash deposits can be seen from the bank statements. In such a scenario, the view of the lower authorities based on the documents referred to supra is not tenable and is not in consonance with judicial precedents (supra). However we would like to discuss/ examine about each share subscribers totalling Fourteen (14) as follows especially the source of source: (i) On perusal of the paper book, it reveals that the documents are placed at page 170 to 190 of share applicant M/s. BrijbhumiCommosale Pvt Ltd which is a Private Limited Company, and which has Permanent Account No. AAECB5701C and CIN U51909WB2011PTC163205 and its Net-worth as on 31.03.2015 (in total)- share capital reserve is to the tune of ₹ 10,21,11,470/- and the investment made in the assessee-company including the share premium comes to ₹ 66,60,000/-. There is Bank statement, ITR acknowledgement and financial statement available. This share applicant regularly filed Income Tax Return (ITR) and it has filed its Ban ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r subscribing to the share capital/premium of the assessee company. From the bank statement of Pragati Complex Advisory Pvt Ltd enclosed at page no 280-281 of paper book it is clear that the share subscriber has invested ₹ 75,99,600/- in the assessee company as follows : on 16.08.2014 ₹ 37.998 lakhs and on 03.02.2015₹ 37.998 lakhs through banking channel. From perusal of bank statement it is evident that there was no cash deposit. Confirmation of its source is provided in Page 282 of Paper book. (iii) On perusal of the paper book, it reveals that the documents are placed at page 312 to 332 of share applicant M/s. RichifiieldVintrade Pvt Ltd which is a Private Limited Company, and which has Permanent Account No. AAFCR3199H and CIN U51909WB2011PTC163139 and its Net-worth as on 31.03.2015 (in total)- share capital reserve is to the tune of ₹ 14,44,43,237/- and the investment made in the assessee-company including the share premium comes to ₹ 94,32,000/-. There is Bank statement, ITR acknowledgement and financial statement available. This share applicant regularly filed Income Tax Return (ITR) and it has filed its Bank statement. Financial statement a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee company on various dates as follows : on 21.08.2014 ₹ 33.9156 lakhs and on 11.03.2015 ₹ 33.9156 lakhsthrough banking channel. From perusal of bank statement it is evident that there was no cash deposit. Confirmation of its source is provided in Page 373 of Paper book. (v) On perusal of the paper book, it reveals that the documents are placed at page 405 to 428 of share applicant M/s. LaxmipurtraTradecomm Pvt Ltd which is a Private Limited Company, and which has Permanent Account No. AACCL0187C and CIN U51909WB2011PTC158663 and its Net-worth as on 31.03.2015 (in total)- share capital reserve is to the tune of ₹ 13,31,01,760/-and the investment made in the assessee-company including the share premium comes to ₹ 97,09,200/-. There is Bank statement; ITR acknowledgement and financial statement available. This share applicant regularly filed Income Tax Return (ITR) and it has filed its Bank statement. Financial statement and source of fund of share subscriber has been duly filed. Thus we note that the assessee had duly discharged its onus to prove the identity of the share applicants by adducing PAN as well as income-tax returns. The financial st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erusal of bank statement it is evident that there was no cash deposit. Confirmation of its source is provided in Page 448 of Paper book. (vii) On perusal of the paper book, it reveals that the documents are placed at page 191-224 of share applicant M/s. Waltaz Commodities Pvt Ltd which is a Private Limited Company, and which has Permanent Account No. AABCW2145G and CIN U74999WB2012PTC174119 and its Net-worth as on 31.03.2015 (in total)- share capital reserve is to the tune of ₹ 39,78,13,925/- and the investment made in the assessee-company including the share premium comes to ₹ 48,96,000/-. There is Bank statement, ITR acknowledgementand financial statement available. This share applicant regularly filed Income Tax Return (ITR) and it has filed its Bank statement. Financial statement and source of fund of share subscriber has been duly filed. Thus we note that the assessee had duly discharged its onus to prove the identity of the share applicants by adducing PAN as well as income-tax returns. The financial statement shows that the share applicant had enough funds to invest in the assessee-company and the transaction has happened through banking channel. Since the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per book. (ix) On perusal of the paper book, it reveals that the documents are placed at page 375 to 404 of share applicant M/s. Martgalkarnna Merchants Pvt Ltd which is a Private Limited Company, and which has Permanent Account No. AAHCM2337E and CIN U51909WB2011PTC163124 and its Net-worth as on 31.03.2015 (in total)- share capital reserve is to the tune of ₹ 14,84,65,406/-and the investment made in the assessee-company including the share premium comes to ₹ 81,61,200/-. There is Bank statement, ITR acknowledgement and financial statement available. This share applicant regularly filed Income Tax Return (ITR) and it has filed its Bank statement. Financial statement and source of fund of share subscriber has been duly filed. Thus we note that the assessee had duly discharged its onus to prove the identity of the share applicants by adducing PAN as well as income-tax returns. The financial statement shows that the share applicant had enough funds to invest in the assessee company and the transaction has happened through banking channel. Since the case pertains to AY 2015-16, the share subscribers has to show the source of its fund for subscribing to the share capita ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Limited Company, and which has Permanent Account No. AAFCR1735B and CIN U51909WB2010PTC154877 and its Net-worth as on 31.03.2015 (in total)- share capital reserve is to the tune of ₹ 13,29,43,509/- and the investment made in the assessee-company including the share premium comes to ₹ 80,71,920/-. There is Bank statement, ITR acknowledgement and financial statement available. This share applicant regularly filed Income Tax Return (ITR) and it has filed its Bank statement. Financial statement and source of fund of share subscriber has been duly filed Thus we note that the assessee had duly discharged its onus to prove the identity of the share applicants by adducing PAN as well as income-tax returns. The financial statement shows that the share applicant had enough funds to invest in the assessee-company and the transaction has happened through banking channel. Since the case pertains to AY 2015-16, the share subscribers has to show the source of its fund for subscribing to the share capital/premium of the assessee company. From the bank statement of M/s. Ramdot Suppliers Pvt Ltd enclosed as page no 502 of paper book it is clear that the share subscriber has invested ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncluding the share premium comes to ₹ 7,71,120/-. There is Bank statement, ITR acknowledgement and financial statement available. This share applicant regularly filed Income Tax Return (ITR) and it has filed its Bank statement. Financial statement and source of fund of share subscriber has been duly filed. Thus we note that the assessee had duly discharged its onus to prove the identity of the share applicants by adducing PAN as well as income-tax returns. The financial statement shows that the share applicant had enough funds to invest in the assessee-company and the transaction has happened through banking channel. Since the case pertains to AY 2015-16, the share subscribers has to show the source of its fund for subscribing to the share capital/premium of the assessee company. From the bank statement of M/s. Ontime Securities Pvt Ltd enclosed as page no 335-336 of paper book it is clear that the share subscriber has invested ₹ 7,71,120/- in the assessee company on various dates as follows : on 18.08.2014 ₹ 3.856 lakhs and on 10.03.2015 ₹ 3.856 lakhs through banking channel. From perusal of bank statement it is evident that there was no cash deposit. Confi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITA 115/Kol/2020for(AY 2016-17) (Revenue s Appeal) 100. This is an appeal preferred by the Revenue against the order of the Commissioner of Income Tax (Appeals)-4, Kolkata dated 18.11.2019 for A.Y 2016-17. Though the Revenue has raised 29 grounds of appeal, according to the Ld. CITDR, the main grievance of the Revenue is against the action of the Ld. CIT(A) in deleting the addition of ₹ 11,40,00,000/- and disallowance of interest claimed to be paid by assessee to the lenders to the tune of ₹ 31,99,351/-. 101. Brief facts as noted by the A.O on this issue are that the A.O on perusal of the balance sheet of the assessee noted that the assessee has taken short-term borrowings/unsecured loan of ₹ 37,51,30,470/- as on 31.03.2016. Therefore, the A.O asked the assessee to give details. According to the A.O, the assessee company furnished details. However, on going through the details of loan creditors as submitted by the assessee, it was noted by him that some of the loan creditors concerns were paper concerns/jamakharchi concerns managed and controlled by entry operators. The details of eight (8) paper concerns and the respective entry operators according to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessable as income u/s 68 of the Act.The alleged transactions of unsecured loan and interest expenses of the aforesaid parties on which the AO made the addition are as under: Sl. No. Name of the party Amount of received during year Loan the Interest paid during F.Y.2015-16 1. M/s. Ujjwal Cloth Marketing Pvt. Ltd. ₹ 50 lacs ₹ 60,109/- 2 M/s. Trimurti Vincom Pvt. Ltd. ₹ 15 lacs ₹ 38,852/- 3 M/s. Top Class Logistic Pvt. Ltd., ₹ 25 lacs ₹ 68,306/- 4 M/s. Sanwaria Marketing Pvt. Ltd. ₹ 4.5Crore ₹ 5,02,740/- 5 M/s.Gonedawala Developers Pvt. Ltd. ₹ 50 lacs ₹ 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C. Top Class Logistics Pvt. Ltd. i) Copy of I.T. Acknowledgement For AY 2016-17 ii) Copy of the Audited Accounts for AY 2016-17 iii) Copy of the Bank Statement Depicting ICD Transactions iv) Account confirmation for FY 2015-16, 2016-17 2017-18 v) Company Master Data D. Sanwaria Marketing Pvt. Ltd. i) Copy of letter dated 13.12.2018 submitted to IT Department Directly ii) Copy of the Audited Accounts for AY 2016-17 iii) Account confirmation for FY 2015-16, 2016-17 2017-18 iv) Company Master Data E. Gonedawala Developers Pvt. Ltd. i) Copy of the Audited Accounts for AY 2016-17 ii) Company Master Data F. Dhanvirdhi Suppliers Pvt. Ltd. i) Copy of letter dated 27.12.2018 submitted to I T Department Directly ii) Copy of I.T. Acknowledgement For AY 2016-17 iii) Copy of the Audited Accounts for AY 2016-17 iv) Copy of the Bank Statement Depicting ICD Transactions v) Account confirmation for FY 2015-16, 2016-17 2017-18 vi) Company Master Data vii) Copy of Form 26AS G. Brijwasi Vinimay Pvt. Ltd. i) Copy of letter dated 27.12.2018 submitted t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /s. Dhanvridhi Suppliers Pvt. Ltd., vii) M/s. Brijwasi Vinimay Pvt. Ltd., viii) M/s. Anjani Tradelinks Pvt. Ltd. The parties were selected alleging that the entities belong to a known entry operators of Kolkata and along with the name of the company, name of the entry operator was also given. The AO has also copied statement given by these entry operators to Investigation Wing, Kolkata. On verification, it is noted that: i) The AO simply reproduced the contents of some statements recorded before the Investigation Wing Kolkata without disclosing the context and relevance. The AO has not reproduced any part of the statement in which these eight companies have been named by any of these entry operators before the Investigation Wing. - ii) The Statement copied by the AO in the Assessment Order are all pre dated to the loan transaction. iii) The AO has not recorded statement of any single operator allegedly controlling the above mentioned eight entities during the Course of assessment or used any material whereby it can be inferred that during the relevant period these entities were controlled by the alleged entry operators. iv) In case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riteria adopted by the AO seems to be the physical presence of the Directors of these donor companies rather than the strength of their Financial Statements. It is to be mentioned that the section 68 requires assessee to furnish the explanation. As per various judicial pronouncements, this explanation must satisfy the three basic criteria of identity, genuineness and creditworthiness. Once assessee explains these three ingredients before the AO, it is for AO to specify as what is lacking in the explanation given by the assessee arid make further enquiries and bring cogent material to brush aside the explanation given by the assessee and make an addition u/s. 68 of the I. T. Act, 1961. It is the prime duty of the AO to do so. In this case, verification of loan was not one of the criteria for selection of case by CASS. However, AO chose to verify the same. Even during verification, loans received from 117 parties were accepted without verifying whether these companies were having any creditworthiness or whether they are shell companies or whether transactions are genuine or not. Even the AO has not adhered to the principal of physical presence of the director in compliance to summons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tworthiness and the genuineness of the transactions. The enquiry of the ITO revealed that either the assessee was not traceable or there was no such file...creditworthiness . In this case however the facts are totally different. The assessee has submitted relevant documents however no field enquiry was conducted by the AO and therefore the AO could not have concluded that the companies was not traceable. Therefore, the ratio of above-mentioned case cannot be applied to the present appeal. 106. Thereafter the Ld. CIT(A) while giving relief to the assessee has made the following findings of fact in respect of each lender companies: An analysis of Balance sheet and profit and loss account of all these companies does show that these companies are not shell companies and have substantial assets in their balance sheets and most of these companies are now controlled by one or the other reputed group of Kolkata. The assessee was asked to give evidence in support of the fact that the lender companies have substantial genuine asset and other evidence of genuineness. In reply the AR downloaded the data relating to lender companies from ROC website. The submissions given by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The assessee had obtained loan of ₹ 15,00,000/- on 13.01.2016. This loan was repaid in October 2016. Copies of the loan confirmations are enclosed. The said Company s Regd. Office is situated at 318, Hossainpur, Tiljala, IKolkata700 107. As per the Company Master Data Company s current status is active. The said Company is assesseed to tax under PAN: AADCT6881G. For the A.Y. 2016-17 it filed Return of income on 08.10.2016 and copy of the I.T Acknowledge is enclosed. The loan of ₹ 15,00,000/- was paid by the said Company from its Bank A/c No. 0262102000011972 by way of RTGS. Copy of the Bank Statement is enclosed. From the Balance Sheet of the said Company it will be noted that during the relevant year there was no increase in the paid up capital and the net owned funds as at 31.03.2016 were ₹ 15,39,44,741/-. The Company held bank balance of ₹ 13.11 Lacs and Loans Advances granted were ₹ 11,04,75,563/. Besides it was also having investments in shares at cost of ₹ 4,16,77,250/-. During the F.Y. 2015-16 the said Company earned interest income of ₹ 75,44,100/- which inter-alia included interest of only ₹ 38,852/- paid by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Ltd is having its Regd. Office at 176, Jamuna Lai Bajaj Street, Kolkata -700007. Besides it is having Administrative Office at 10/3, Acropolis, 1858/1, Rajdanga Main Road, Kolkata. Your goodself will note that the opening balance due to M/s. Sanwaria Marketing Pvt. Ltd was ₹ 1 Crore which was fully repaid on 02.04.2015. Thereafter the said Company granted following ICDs during F.Y. 2015-16: Date Amount 24.08.2015 ₹ 1,50,00,000/- 21.12.2015 ₹ 1,00,00,000/- 22.12.2015 ₹ 1,00,00,000/- 16.02.2016 ₹ 1,00,00,000/- The loan of ₹ 150 Lacs accepted on 24.08.2015 was fully repaid along with interest on 18.09.2015. The loan taken on 21.12.2015 was refunded on the same date and another Cheque for ₹ 1 Crore was paid by the Party on 22.12.2015. As such the entries of ₹ 1 Crore appearing in the books on 21.12.2015 are in fact contra-entries and the loan of Rs.l Crore was actually taken on 22.12.2015. Loan of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -18. Copy of the said appellate order is enclosed. You will thus note that the identity and creditworthiness of M/s. Sanwaria Marketing Pvt. Ltd was accepted by the Ld. CIT(A) in the appellant s own case in the immediately preceding year. In the circumstances, there was no reason for the AO to doubt the Company s transaction with the same party in A.Y. 2016-17. 5. Gonedawala Developers Pvt. Ltd: The appellant had taken loan of ₹ 50,00,000/- from this creditor. Although the AO has alleged that the creditor was managed by an entry operator by the name Prawesh Beria, his statement was not quoted by the AO. The appellant submits that the AO s allegation that the creditor was controlled by entry operator is factually incorrect in as much as the said Company belongs to Diwansons Group which is one of the reputed Jewellers of Kolkata. For your kind perusal and record, we enclose herewith the information extracted from Ministry of Corporate Affairs Website from which it will be noted that the Regd. Office of the Company is at 101, Park Street, Kolkata - 700016 where jewellery showroom of Diwansons is located. It will also be noted from the said information that Sri Ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... total income of ₹ 20,61,396/-. Although in the impugned order the AO claimed that the creditor was controlled by one Mr. Shankar Khaitan; no tangible material including statement of Mr. Khaitan was brought on record by the AO to prove his allegation that creditor Company was managed by the said Entry Operator. Be the same as it may, for your kind perusal and record, we enclose herewith copy of the information extracted from Ministry of Corporate Affairs Website from which it will be evident that the creditor company is managed by its Directors, Mr. Sourabh Mukherjee Mr. Debashis Roy. For your kind perusal and record, we enclose herewith copy of the audited Balance Sheet of M/s. Dhanvridhi Suppliers Pvt. Ltd from which it will be noted that the capital of the creditor company remained same at ₹ 2,15,65,750/-. Company s net owned funds in the form of Capital Reserves as on 31.03.2016 were ₹ 31,58,92,818/-. During the relevant year the said Company had granted loans advances to the tune of ₹ 13,17,73,025/- and this did not include loan to the appellant since it was fully refunded prior to 31.03.2016. Your goodself will also note that in respect of loans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t a case that the creditor had granted loan only to the appellant. 8. Anjani Tradelinks Pvt. Ltd : In this case loan of ₹ 25,00,000/- was obtained by the appellant on 17.02.2016 and interest paid for the F.Y.2015-16 was ₹ 30,137/-. This loan together with accrued interest was fully paid by the assessee in F.Y. 2017-18. Copies of the Account Confirmations for the F.Ys 2015-16 to 2017-18 are enclosed. The said loan was paid from the A/c No. 0060102000103848 and the relevant Bank Statement of the creditor is enclosed for ready reference and record. The creditor company is regularly assesseed to tax under PAN: AAJCA0590K. For the A.Y. 2016-17 it had filed its return of income on 08.10.2016. Although the Regd. Office of the assessee is presently located at 318, Hossainpur, Tiljala, Kolkata and Company s Office was earlier located at 52, Weston Street, Bow Bazar, Kolkata. For your kind perusal and record, we enclose herewith Audited Balance Sheet of the creditor company from which it will be observed that the paid up capital of the assessee during the relevant year continued to remain at ₹ 21,22,000/-. The Reserves Surplus of the creditor was ₹ 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... zes the audited accounts of each of the loan creditor then it would be evident that each creditor possessed substantial resources of their own. Compared with the total investible funds available with each loan creditor, the loans advanced by them to the appellant during the year was not significant. For your perusal we are enumerating the fund position of each loan creditor and the loans advanced by them. The comparative data set out above will clearly establish that each of the bodies corporate had their own resources which were several times more than the loan advanced to the appellant company. It is also material to point out that each of the Company who had granted 1CD to the appellant; reported in the respective P/L A/c substantial interest income from the business of granting loans. Interest income as accounted by the creditors clearly showed that their interest earnings from Loans granted to parties other than assessee were substantially more. These facts therefore showed that these Companies were actively engaged in business of granting loans earned substantial interest income. In the circumstances none of the company could be said to be shell Company. Following ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nue is before us. 108. We have heard both the parties and perused the records. We note that the ground no. (i), (ii), (iv) to (xiii) and (xv) to (xviii) of the appeal are directed against the Ld. CIT(A) deleting the addition made u/s 68 of the Act of ₹ 11.40 crores and disallowance of interest paid on these loans totaling to ₹ 31.99 Lakhs. We also note that during the year under consideration the assessee has taken loan from one hundred and twenty seven (127) parties and paid interest on the said loan. In the course of assessment proceedings the assessee was called upon to furnish details of unsecured inter-corporate deposits (ICD) accepted by it during the year. In compliance, the assessee furnished the details in the format prescribed by the AO. However, the AO relied on the statements of alleged five (5) entry operators which were recorded by the Investigating Wing, Kolkata namely Mr. Jivendra Mishra, Mr. Pranav Kumar Modi, Mr. Ankit Bagreee, Mr. Vijay Kumar Gupta and Mr. Akash Agarwal and opined that some of the creditor companies were paper companies allegedly managed and controlled by these entry operators. The AO observed that in view of the statements of entr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by certain entry operators and in Para 4.2 of the assessment order, the AO has set out the names of these purported Companies and corresponding names of the alleged entry operators and the said Chart is given below for ready reference : 110. Thereafter on Pages 4 to 16 of the assessment order, the AO extracted statements of alleged (5) entry operators, namely Mr. Jivendra Mishra, Mr. Pranaw Kumar Modi, Mr. Ankit Bagri, Mr. Vijay Kumar Gupta Mr. Akash Agarwal and thereafter having selectively extracted part of the statements of those five (5) persons, the AO proceeded to make additions of ₹ 11.40 crores being the Loans/ICDs received by the assessee from eight(8) Bodies Corporate named (supra) in the chart. According to Ld. A.R no person properly instructed in law would have drawn inferences against the assessee on the basis of the statements as appearing in the assessment order. According to Ld. A.R the material on record would go on to show that before the statements of these entry operators were used in as evidence against the assessee, the AO himself never examined any of these persons personally so as to verify the assessee s transactions with the loan credito ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i Punit Madhogaria. On the other hand Mr. Mishra had admitted that the Companies controlled by him were managed from Offices located at Room No. 311, 85, N. S. Road, Kolkata - 700001, 18A Rama Kanta Bose Street, Kolkata - 700003 and Room No. 757, 25, Strand Road, Kolkata. Thus according to Ld. A.R it can be noted that the Regd. Office of Brijwasi Vinimay Pvt. Ltd had no connection whatsoever with any of the places from where Companies controlled and managed by Mr. Mishra were having Offices. At page-6 of the assessment order Mr. Mishrahas admitted that Mr. Murli Kumar Mishra, Mr. Gopal Maity, Mr. Mithilesh Kumar Mishra, Mr. Tara Kant Chowdhury, Mr. Rajesh Kumar Jha, Mr. Biswanath Jha, Mr. Bishwanath Maity were either related to him or his employees and acted as dummy Directors of various paper companies controlled by him. The MCA Master Data of M/s Brijwasi Vinimay Pvt. Ltd however demonstrates that with effect from 16.04.2010 Mr. Pawan Kumar Agarwal Mr. Punit Madhogaria were Directors of Brijwasi Vinimay Pvt. Ltd, and none of the persons enumerated in the Answer to Question No. 11 find mention as Directors of M/s Brijwasi Vinimay Pvt. Ltd. So in this back ground when one analyse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... statement Mr. Modi had claimed that Mr. Govind Haidar Mr. Tanmoy Haidar were working under his control and were engaged in providing accommodation entries. Thus we find having regard to the information as is available from the extracted statement of Mr Modi vis-a-vis the information available in the Company Master Data,the AO could have alleged that the assessee had availed accommodation entry in the form of ICD from M/s Trimurti Vincom Pvt. Ltd.Therefore we note that apparently there was no material/oral evidence available in the statement of Mr. Modi, on the basis of which any adverse inference could have been drawn against M/s Trimurti Vincom Pvt. Ltd. or the assessee,so the AO erred in relying on the statement of Mr. Modi to draw adverse inference against M/sTrimurti Vincom Pvt. Ltd. 113. Coming next to the statement of Mr. Ankit Bagri whose statement has been extracted by the AO at Pages 9 10 it is noted that AO has alleged that he was controlling managing the affairs of M/s. Ujjwal Cloth Marketing Pvt. Ltd from whom the assessee had received loan of ₹ 50,00,000/- in the month of February 2016. From a perusal of the Page-9 of the assessment order, it will be note ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions with M/s Sawaria Marketing Pvt. Ltd in the F.Y. 2015-16 as well as in the F.Y. 2014-15 which was the preceding year. It is noted that the Statement of Mr. Gupta was recorded in August 2015 i.e. the same year in which the loans were availed by the assessee from M/s Sawaria Marketting Pvt. Ltd. On careful perusal of the statement of Mr. Gupta, it is evident that nowhere in the statement recorded before the DDIT (Inv) he had named M/ s. Sawaria Marketing Pvt. Ltd to be a Company controlled managed by him for providing accommodation entries. In Answer to Question No. 5, Mr. Gupta had enlisted names of various persons who were his relatives and in Answer to Question No. 7, he had given names of 2 persons, who were his employees. On perusal of information pertaining to M/s Sawaria Marketing Pvt. Ltd extracted from Master Company Data, it is noted that the Registered Office of the creditor company was situated at 176, Jamuna Lai Bajaj Street, Kolkata-700007. The said company also declared that the Company's books of account and other papers were maintained at 10/3, Acropolis, 1858/1, Rajdanga Main Road, Kolkata - 700107. As per Company Master Data, Sri Siddharth Kumar Poddar, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Logistics Pvt. Ltd. From a perusal of the statement it is discernible that Mr. Akash Agarwal was resident of 4D/4E of ST Towers Kestopur, Kolkata and his office premises were at Room No. Ill, 1st Floor, 23B, Netaji Subhas Road, Kolkata. It is noted from a perusal of the assessment order that the AO has selectively extracted some of the Questions Answers from Mr. Agarwal s statement at Pages 15 16 and in his answers to DDIT s question he had admitted of earning commission from accommodation entries provided by him. However from a perusal of the statement it is relevant to note that nowhere in the selective extracted statement he had neither admitted of providing accommodation entries to the assessee nor he had admitted AO s claim that M/s Top Class Logistics Pvt. Ltd was a Company controlled managed by him. From the Company Master Data, it is noted that the Registered Office of the creditor Company is situated at Narayani Building, 27, Braboume Road, Kolkata-700001 and Directors of the Company are Mr. Suman Barasia Mr. Sushil Kumar Agarwal with whom no relation of Mr. Akash Agarwal was brought out by the AO.So we note that the AO erred in relying on the statement of Mr. Akas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ause the notices u/s 131 remained un-complied with. According to AO, the failure of the loan creditors to appear before him and their failure to confirm the transactions were sufficient reason to hold that the amounts of ICDs received were not genuine assessable as income u/s 68 of the Act. According to AO the assessee was given more than twenty three (23) days this was sufficient opportunity for producing the relevant evidence. Since the assessee failed to produce the Parties for AO s verification, drew adverse inference against the assessee company.In this regard, Ld. A.R drew our attention to the assessment order from which it is noted that the assessment proceedings were initiated by issue of notice u/s 143(2) in the month of July 2017. Thereafter notices u/s 142(1) were issued in May 2018, October 2018 November 2018 respectively. And from the assessment order, it is noted that assessee complied with the notices the hearing of the assessment was conducted by the AO on 04.08.2017, 10.08.2017, 12.06.2018, 12.10.2018, 20.11.2018 and lastly on 26.12.2018. It is noted that even though the assessment proceedings commenced in August 2017, the notices to unsecured loan creditor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by M/s Sanwaria Marketing Pvt. Ltd through Registered Speed Post and therefore, it was unreasonable for the AO to claim that the assessee had failed to establish the genuineness of the transaction. Similarly, it is noted in respect of loan from M/s Dhanvridhi Suppliers Pvt. Ltd the entire loan of₹ 5 Crores was fully repaid along with interest during F.Y. 2015-16 itself. Similarly, the loan of ₹ 50 Lacs was fully repaid to M/s. Gonedawala Developers Pvt. Ltd along with interest. It was therefore according to Ld. A.R, the AO was un-justified to make the addition simply based on suspicion and conjecture. The Ld. A.R submits that if one scrutinizes the audited accounts of each of the loan creditor then it would be evident that each creditor possessed substantial resources of their own when compared with the total investible funds available with each loan creditor, and the loans advanced by them to the assessee company during the year was not significant. For our perusal the Ld. A.R enumerated the fund position of each loan creditor and the loans advanced by them which is reproduced as under: Name of Company Investible own funds avail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cumstances the Ld. CIT(A) opines that none of the lender companies(supra) could be said to be shell Company. 122. We note that out of the loans of ₹ 11,40,00,000/- assessed u/s 68 of the Act, the loan of ₹ 4,50 Crores was obtained from pre-existing loan creditor viz. M/s Sanwaria Marketing Pvt. Ltd. We note that the outstanding balance brought forward was of ₹ 1 Crores. And it is noted that in the assessment order for the immediate preceding year i.e. AY 2015-16, the AO had assessed the loan received from the said party u/s 68 of the Act and on appeal, the Ld. CIT (A)-4 by his order dated 16.08.2018 had deleted the AO s additions on being satisfied that the assessee had established identity and creditworthiness of the said loan creditor, which action of Ld CIT(A) has received our imprimatur (supra). 123. However, it is noted that in the proceedings u/s 143(3) of the Act the assessee had placed before the AO documents to prima-facie discharge the onus of the nature source of the loan it took from the lender companies [i.e. fresh loans received during the year]. It is noted that all the loan creditors were regularly assessed to tax. The net owned funds of ea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ransaction was proved since evidences furnished prove that the loans were transacted through bank accounts of the creditors. All the loan creditors are regularly assessed to tax and for AY 2016-17 each of the loan creditor had filed their tax returns. Each loan creditor had furnished their financial statements for the financial year 2015-16 in which transaction with the assessee was properly reflected. The assessee had paid interest to each loan creditor and taxes were deducted u/s 194A in respect of such interest. The assessee had also complied with provisions concerning filing of TDS returns. Loan creditors had disclosed interest income in their respective tax returns. The AO was neither able to controvert the documentary evidences filed by the assessee nor prove that the loan monies received were not genuine and that the loan creditors were non-creditworthy by carrying out the exercise as directed by the Hon ble High Court in the case of M/s Data Ware (supra). Therefore in the facts and circumstances the Ld CIT(A) rightly deleted the addition of ₹ 11,40,00,000/- and further, the disallowance of interest of ₹ 31,99,351/- was also unjustified, since the assessee had pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as to why disallowance was factually and legally called for. Had such opportunity being given the appellant would have demonstrated before the AO that it had no liability to deduct tax u/s 195 because the commission paid to the foreign agents for procuring orders from outside India was not chargeable to tax in India as income and therefore Sec. 195 did not have any application. For your kind perusal and record we enclose herewith details of foreign sales commission paid to 22 Parties who were all residing outside India. The names and addresses of the Parties and commission paid to each of them are stated in the statement. For your kind perusal, we also enclose sample copies of the letters of appointment in terms of which the foreign agents had rendered services to the assessee for procuring export orders. We also enclose herewith sample copies of the Tax Residency Certificates issued in favour of these Agents which prove that the Payees were foreign tax residents and not tax residents of India. It is material to submit that the AO has not brought on record any material whatsoever to prove that any part of the services were rendered by the Agents in India so as to attract tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding in this regard gets support from the decision of the Hon ble Delhi High Court in the case of CIT Vs Eon Technology Pvt. Ltd 15taxman.com 391 and of the Hon ble Madras High Court in the case of CIT Vs Faiezan Shoes Pvt. Ltd 48 taxman.com 48. We, therefore, hold that the fees of ₹ 2,96,05,045/-paid by the assessee to US entities for rendering marketing and sale support services was not chargeable to tax in terms of Sec. 9(1)(i) of the Act. Thereafter in Para-21 the ITAT held as follows:- 21. For the reasons discussed in the foregoing, we are in agreement with the assessee that the payment of ₹ 2,96,05,045/- made by the assessee to foreign entities towards marketing and sale support services were not chargeable to tax in India and in that view of the matter the assessee was right in, law in not deducting any tax thereon under sec. 195 of the Act. Accordingly, we hold that the impugned disallowance of ₹ 2,96,05,045/ - made by the AO as well as confirmed by the Ld. CIT (A) u/s 40(a)(i) of the Act is unsustainable. Accordingly, it is directed to be deleted. This ground of appeal of assessee is allowed. Similar issue was considered by the ITAT Kolk ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deduct TDS from payments made u/s 195 of the Act or not. The Ld. CIT(A) noted that in support of the payments made assessee has provided letters of appoint, tax residency certificate of the agents and services were rendered overseas. The assessing Officer has brought no material on record to show that the services were rendered by these agencies in India and hence where chargeable to tax in India. The case law relied upon by the assessee in the case of JCIT Vs Omprocess Technology India Pvt Ltd ITA No. 1047/Kol/2016 Order dated 25.04.2018 wherein the Hon'ble ITAT Kolkata has held that if the income is not chargeable in India the assessee was right in law in not deducting any tax thereon u/s 195 of the I T Act 1951. The AO has failed to controvert this basic and was deleted. 22. It is submitted to your honours that the order of the Ld. CIT (A) was in conformity with the order of the Hon ble Kolkata Bench of the ITAT and therefore there is no mistake in the order of the Ld. CIT (A). The same should be confirmed. It is prayed that the ground no. (iii) (xiv) of the appeal of revenue be dismissed. 23. In view of the foregoing submissions it is prayed that the order of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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