TMI Blog2023 (7) TMI 329X X X X Extracts X X X X X X X X Extracts X X X X ..... , genuineness and creditworthiness of the parties against whom the amount in question has been credited. On going through the issues, since the assessee failed to rebut the findings of the revenue, the order of the ld CIT(A) is hereby affirmed. Appeal of the assessee is dismissed. - ITA No. 538/Del/2019 - - - Dated:- 28-4-2023 - SH. SAKTIIT DEY, JUDICIAL MEMBER AND DR. B. R. R. KUMAR, ACCOUNTANT MEMBER For the Assessee by : None For the Revenue by : Sh. P. Praveen Sidharth, CIT DR ORDER PER DR. B. R. R. KUMAR, ACCOUNTANT MEMBER: The present appeal has been filed by the assessee against the order of ld. CIT(A)-4, New Delhi dated 12.11.2018 for AY 2014-15. 2. The assessee has raised the following grounds of appeal:- 1. Under the facts and circumstances of the case, the assessment order passed by the Id. Assessing Authority u/s 143(3) of the Act and upheld by Id. First Appellate Authority is arbitrary, injudicious, invalid bad at law. 2. Under the facts and circumstances of the case, Id. Assessing Authority and Id. First Appellate Authority has grossly erred in making addition of 20,19,23,500/-u/s 68 of the Act when no cash credit has b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -which is highly arbitrary, injudicious, unwarranted, based on surmise and conjectures, and bad at law. Tax Effect relating to above mentioned ground of appeal is 13,72,676/- 9. The appellant prays for leave to add, amend, alter or withdraw any grounds of appeal. Total Tax Effect relating to all the above mentioned grounds of appeal is 7,00,06,474/-. 3. In this case, the AO made addition of Rs. 20,19,23,500/- on account of unexplained cash credits u/s 68 of the Act and Rs. 40,38,470/- on account of commission paid u/s 69C of the Act. 4. Inspite of the issue of valid notice, the assessee failed to bring on record any evidence contrary to the ruling of the ld. CIT(A) after filing of appeal before the Tribunal on 24.01.2019. The notices of the Tribunal have been validly served on the assessee, however neither the assessee nor the Authorized Representative attended the hearings before the Tribunal. Hence, the appeal is being decided based on the evidences available on record and on merits of the issue. 5. We find from the record that before the ld. CIT(A), the ld. AR of the appellant has submitted its submission on 16/10/2017, which is as under:- 1. Brief facts of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 deemed to be not satisfactory, unless- (a) the person, being a resident in whose name such credit is recorded in the books of such company also offers an explanation about the nature and source of such sum so credited; and (b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory: 7. From the reading of the aforesaid provisions of sec. 68 of the Act, it becomes clearly evident that the said section applies only in case there is credit in the books of the assessee and such credit is of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iz., 'escaped assessment.... 9. Further, it is hereby submitted that the provisions of sec. 68 of the Act are deeming provisions and it is a settled low that deeming provisions are to be construed strictly. Therefore, the provisions of sec. 68 of the Act can only be applied in case of receipt of credits in the money from either in cash or in bank. The said sec. 68 cannot be extended to include credits arising on account of issue of shares for consideration other than cash/bank. 10. Further, to substantiate the argument that in case there is no receipt of money, the provisions of sec. 68 of the Act cannot be applied, reliance is placed on the following judicial precedents: Ruling of Hon. Supreme Court in the case of CIT vs. P. Mohankala, [2007] 161 TAXMAN 169 (SC). The relevant findings of the Hon. Court are being reproduced hereunder for the sake of ready reference: 14. The question is what is the true nature and scope of section 68 of the Act? When and in what circumstances section 68 of the Act would come into play? That a bare reading of section 68 suggests that there has to be credit of amounts in the books maintained by an assessees; such credit has to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ailed to prove that it had filed return in earlier years as evidences shows, as discussed above, that the current year's return is the 1 return of the assessee, therefore credited shown in this return is the credit for the year under consideration, i.e., AY 2014-15 only. Therefore, it is clear that the amount of Rs. 20,19,23,500/- recorded by the assessee company in its balance sheet has failed to pass the test of identity, creditworthiness and genuineness of transactions within the meaning of section 68 of Income Tax Act 1961 as no documents filed in support of receipt of share capital/share premium in the financial year 2008-09 relevant to assessment year 2009-10. 25. In this regards, it is hereby submitted that the aforesaid findings of the Id. A.O. are grossly baseless and based on surmise conjectures. The assessee company in order to substantiate the issue of shares in F.Y. 2008-09, duly submitted the following evidences:- i. Audited Financial Statements of the assessee company for the year ended 31.03.2009 reflecting the transaction of issue of shares. Copy of the said Financial Statements of the assessee company from F.Y. 2008-09 to F.Y. 2013-14 ore being en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts first return of income for A.Y. 2014-15 and no return of income for earlier years have been filed and as the current year's return is the first return filed by the assessee, credits shown in this return is the credit for the year under consideration. In this regards, it is hereby submitted that the said findings of the Id. A.O. is grossly frivolous, against the basic principles of accounting, based on surmise conjectures and bad at low. It cannot be disputed that the credits belongs to that year in which it is introduced in the books of accounts irrespective of the fact whether return of income for that year is filed or not. The filing of return of income can by no stretch of imagination determine the year of a credit. 28. Moreover, under the Income Tax Act, 1961, each year is a separate year and the action for any default in a particular year has to be taken for that year and not in any other year. Therefore, if the Id. A.O. wanted to take action for the defaults committed in A.Y. 2009-10, he should have taken action in A.Y. 2009-10 and not in A.Y. 2014-15. The Income Tax Act, 1961, empowers the Id. A.O. to make the assessment u/s 144 even if the assessee had not fil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able to tender any evidence against above issues, hence apart from accommodation entries of Rs. 20,19,23,500/-, it is reasonable to estimate the assessee company has also paid commission @ 2% on the amount of accommodation entries which comes to Rs. 40,38,470/-. The same is added to the income of assessee u/s 69C of the income Tax Act, 1961. 33. In order to have better understanding of the issue involved, reference of your goodself is drawn to the provisions of sec. 69C of the Act which provides as under:- 66 [Unexplained expenditure, etc. 69C. Where in any financial year an assessee has incurred any expenditure and he offers no explanation about the source of such expenditure or part thereof, or the explanation, if any, offered by him is not, in the opinion of the [Assessing] Officer, satisfactory, the amount covered by such expenditure or part thereof, as the case may be, may be deemed to be the income of the assessee for such financial year:] [Provided that, notwithstanding anything contained in any other provision of this Act, such unexplained expenditure which is deemed to be the income of the assessee shall not be allowed as a deduction under any head ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee made purchases from some unknown parties other than the two parties mentioned above. Undisputedly, no addition can be made merely on the basis of strong opinion ii. Ruling of Hon. ITAT Lucknow in the case of Rajendra Kumar Somani vs. DCIT, ITA No. 35,36 37/Lkw/2016 wherein it was held as under:- 4 We have heard the rival submissions, carefully considered the same along with the orders of the tax authorities below. We noted that so far the addition of Rs. 3,00,000/- towards the low house hold withdrawals, the Assessing Officer just estimated the monthly expenditure of the assessee @Rs.25,000/-. The assessee made the drawings at Rs. 85,000/-. No detail whatsoever was brought on record that the assessee has incurred the expenditure more than Rs. 85,000/-. The addition has been made by the Assessing Officer u/s 69C of the Act. The provisions of section 69 lays down a rule of law. The section mandates that where in any financial year the assessee has incurred any expenditure and offers no explanation about the source of such expenditure or part thereof or the explanation, if any, offered by him is not in the opinion of the Assessing Officer, satisfactory, the am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AR of the appellant vide its letter dated 04/09/2018 has submitted as under: ... As regards to the aforesaid matter, it is hereby submitted that in the recent ruling of Hon. High court of Madras in the case of M/s V.R. Global Energy Pvt. Limited [Tax case (Appeal) No 246 of 2017], it has been held that where allotment of shares is done through book adjustments, there is no scope for additions under section 68 of the Act. Copy of the said case low is enclosed for your ready reference. The assessee relies on the abovesaid case low and hereby prays that the addition made by the Ld. A.O. are grossly injudicious, unwarranted and bad at low and deserves to be deleted by this Hon. Court in the interest of justice... 6. The ld. CIT(A) held that the AO has made the addition under Section 68 of the Act amounting to Rs. 20,19,23,500/- as the appellant company has failed to prove the identity, genuineness and creditworthiness of the parties to whom the share capital including premium was issued. Further, an amount of Rs. 40,38,470/- was added under Section 69C of the Act. 7. The ld. CIT(A) held that the first important point to take note of is that the company does not ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tic Treatment Pvt. Ltd. 8223 Relax Direct Selling Pvt. Ltd. 26000 Shree Sobhagya Lakshmi Marketing Pvt. Ltd. 7500 Tenstar Animal Farming Pvt. Ltd. 7333 Thapar Infrastructures Pvt. Ltd. 14500 AV Webtech Pvt. Ltd. 18811 Total 99500 and as on 31/03/2014 M/s Lichchavi Construction Engineers Pvt. Ltd. is having 99.80% share holding. The assessee has furnished documents relating to M/s Lichchavi Construction Engineers Pvt. Ltd. The ld. CIT(A) held that on going through the B/sheet it is noticed that M/s Lichchavi Construction Engineers Pvt. Ltd. has shown the investment of Rs. 9,97,000/- whereas the assessee company i.e. M/s Alanice Computer Pvt. Ltd. has shown share capital with premium at Rs. 20,19,23,500/. It is also seen that the director of the assessee company and M/s Lichchavi Construction Engineers Pvt. Ltd. are common i.e. Shri Ajay. This show that assessee has introduced its unaccounted m ..... X X X X Extracts X X X X X X X X Extracts X X X X
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