TMI Blog2023 (7) TMI 677X X X X Extracts X X X X X X X X Extracts X X X X ..... failed to discharge such mandatory onus. Thus we reach to a logical conclusion that the documents submitted to prove the genuineness of transaction are itself from to be malaises created with the intention to cover up the true nature of transaction and thus the CIT(A) rightly held that the amount received by the appellant company as share capital and premium are nothing but arranged transactions to introduce its unaccounted income/money as share capital through group concerns to give a clear color to the undisclosed income of assessee. Accordingly, grounds of assessee are dismissed. - ITA No. 7440/Del/2018 - - - Dated:- 14-7-2023 - Shri Chandra Mohan Garg, Judicial Member And Dr. B.R.R. Kumar, Accountant Member For the Assessee : Shri Rajeev Saxena, Adv., Shri Shyam Sunder, Adv. For the Revenue : Shri Anuj Garg, Sr. DR ORDER PER CHANDRA MOHAN GARG:- This appeal has been filed against the order of CIT(A)-22, New Delhi dated 21.09.2018 for AY 2013-14. 2. The grounds have been raised by the assessee are as follows:- 1. That the Ld. Commissioner of Income Tax (Appeals) has grossly erred both in law and on facts in confirming the order of Ld. AO f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rushing aside the submissions/evidence/material produced on record and hence such findings are vitiated and deserve to be deleted. Lastly, the ld. counsel drawing out attention towards orders of the authorities below submitted that the impugned order passed by the Ld. Commissioner of Income Tax (Appeals) is based upon assumption, presumptions, whims and fancies, conjectures, surmises, preconceived notions and incorrect application of law and therefore liable to be quashed. Therefore addition made by the Assessing Officer and uphold by the ld. CIT(A) may kindly be deleted. 4. The ld. Senior DR drew our attention towards written submissions on behalf of the revenue filed on 09.02.2023 and submitted that the Assessing Officer after relying upon various judgments noted in para 4 to 9 of assessment order also noted in para 7 that the assessee company has failed to discharge its onus to substantiate identity, creditworthiness of share capital investor and genuineness of transaction and thereafter rightly made addition in hands of assessee which is quite correct and sustainable. The learned Senior DR further drawing our attention towards relevant para 7.1 to 7.17 submitted that even be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee company has received share capital from Sabka Media Pvt. Ltd. at Rs. 4,2,81,440/- (premium). The AR is asked to prove the creditworthiness of Sabka Media Pvt. Ltd. as the return income is nil and why it should not be added u/s 68 of the Act. 4.1 In response to the above show cause, the assessee filed its reply vide its letter dated 14.03.2016, wherein, it was submitted as under:- 1. It is submitted that during the year under consideration M/s. Sabka Media Pvt. Ltd. has invested Rs. 4,3,49,200 as share application money in Hamara Samay TV News Network Pvt. Ltd. as against which the share have been allotted to the company. Copy of Form 2 and Balance sheet and statement of the company is already on record. 2. During the year under consideration the balance sheet of the Sabka Media Pvt. Ltd. shows net worth of Rs. 22,8,00,309/- including share application money pending for allotment. This net worth itself proves the creditworthiness of the company. 3. All the transactions into between the companies have been through proper bank channel, copy of ITR, Balance Sheet, PAN number etc have been already on record. Thus it is not the case where investing compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. It is also brought to the notice that mere filing of confirmation or income tax return does not prove identity of the subscriber company. Process to form a company is very simple as below:- i. A company can be formed by anybody whether he exists at that place or not ii. It is then registered with Registrar of Companies iii. On the basis of registration PAN is obtained. iv. After obtaining PAN, Return of income is filed without payment of any taxes. It is pertinent to point out here that no verification is done by any Govt. Authority at the stage of formation of a company or allotment of PAN. Any non genuine person may resort to formation of companies or obtaining PAN in bogus manner. For that purpose the IT. Authority has to satisfy itself about the identity of the person and genuineness of the transaction. For that purpose the department had given the assessee the opportunity to produce the persons. However the Assessee had failed to produce a single person. Hence mere receipt of confirmations or IT does not prove even the identity of the subscriber company not to talk of genuineness of transaction or its creditworthiness. The assessee's submis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctual evidence fails. In the instance case the assessee was required to produce the subscribers because it was must to verify whether the signatures in share application form or the confirmation are genuine. This can be verified only after production of the subscriber before the Assessing Officer. It is pertinent to mention that while coming to a particular conclusion, the Full Bench of Delhi High Court in the case of Sophia Finance Limited 205 IT 98 (Del) duly considered the case of Stellar Investment Limited. Even in the case of M/s Lovely Exports Private Limited the Hon'ble Delhi High Court in para 4 observed as under :- Reference to section 68 of the IT Act is conspicuous by its absence, the Stellar Investment Limited ratio cannot be stressed to the extent that it partakes as a reflection on section 68, when the inquiry pertained only to section 263. The Hon'ble Delhi High Court while deciding the case cited by the assessee i.e. Lovely Exports Limited Devine Leasing and Finance Limited (being combined order) it has been held as under:- In the case of public issue the company concerned cannot be expected to know every detail pertaining to identit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion and the veracity of the repudiation. Since the share applicants'/share subscribers identity is not proved, therefore, the assessee cannot be permitted to take shelter of technicalities. Even otherwise, website existence on the Company Law Board is not a sole proof that in fact the share applicants are in existence. Technicalities also help those who are with clean hands. It was fairly clear that in spite of many opportunity provided as categorically noted above in the order, the assessee merely filed certain documents which did not prove the identity but did not produce any of the share applicants/subscribers. It is to be pointed out again that the share applicants are the companies which are involved in providing accommodation entries. Even as per preponderance of probabilities, all facts pointed above go against the assessee as laid down by the Hon'ble Apex Court in the case of Sumati Dayal (214 ITR 801). 6. In view of the discussion made above the assessee's submissions are not acceptable. However reliance is also placed on the orders as discussed below:- In the case of Commissioner of Income-Tax.v/s Nova Promoters And Finlease (P) Limi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Investigation Wing that their operations were routed through 22 companies whose names were also given. Fifteen out of those 22 companies have subscribed to the shares of the assessee. Therefore, even if they were not directors of 12 companies, the fact remains, as admitted by them, that their entry providing operations were carried out through 22 companies, 15 of which have subscribed to the shares of the assessee-company. The Tribunal has ignored this vital aspect and has examined the issue rather superficially. Compliance with the statutory norms and requirements is only one aspect, but in the present case a deeper scrutiny was required and the camouflage adopted was the primary aspect that required adjudication. This aspect has been ignored. Bona fide and genuineness of the transactions was the issue. The Hon'ble Delhi High court gave the finding on the question referred as below:- In the light of the above discussion, we are unable to uphold the order of the Tribunal confirming the deletion of the addition of Rs. 1, 18,50,000 made under section 68 of the Act as well as the consequential addition of Rs. 2,96,250. We accordingly answer the substantial questions o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s authorities, does not establish the identity of the share applicants as the certificates were issued without physically verifying the existence of applicants, such as income tax department receives returns of income or documents without verification of existence of the persons filing the returns/documents. PA is also allotted to the applicants on the basis of applications without verifying the existence of applicants at the address given in the application. Likewise, Registrar of companies also register a company without physical verification of the existence of the applicant company. Therefore, the assessee cannot claim to have established the identity of both these companies on the basis of some documents. The Hon'ble ITAT Delhi in recent decision on dated 07.12.2012 in the case of Sekhawati Capital Finlease Pvt. Ltd V/s. Income-tax Officer, in ITA No. 2099/Del/2011 has confirmed the addition made u/s 68 of the IT. Act where subscribers were not produced before the assessing officer on the ground that the assessee has failed to establish identity and creditworthiness of the subscriber. In the said order the ITAT has given finding that The action of the Ld AO co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e conclusive by law. In view of the facts of the case special reference has also to be made to the very recent decision of Hon'ble Delhi High in the case of The commissioner of income tax vs Empire Builtech Pt Ltd in ITA No. 493/2013 vide order dated 27.01.2014, findings are given as under:- It is not sufficient for the assessee to merely disclose the addresses or identities of the individuals concerned. The other way of looking at the matter is that having given the address, the inability of the notices who are approached by the AO to afford any reasonable explanation as to how they got the amounts given the nature of their income which was disproportionally less than what they subscribed as share capital would also amount to the Revenue having discharged the onus if at all which fell upon it. This court also notices that the assessee in this case was incorporated barely few months before the commencement of the assessment year, and there is no further information, or anything to indicate why its markup of the share premium thousand folds in respect of the shares which were of the face value of Rs. 10 lakhs was justified. Further reliance is placed on the fol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6.1 In appeal Ld. AR submitted that Hamara Samay News Network Pvt Ltd and Sabka Media Pvt Ltd are group concern and during the assessment proceeding the appellant company has furnished all the relevant details pertaining to the share capital and share premium that were called for by the AO. It is submitted the evidence furnished by the appellant during the course of the assessment proceedings are Copy of Ledger Account, Copy of Bank Account, Copy of audited profit and loss account and balance sheet, Copy of the IT and Copy of Form 2 of ROC. The crux of the arguments of Ld. AR in appeal: a) All the transactions are among sister concerns. b) It is not the case where cash has been deposited and entries are taken. c) All the sister concerns are assessed to tax and scrutinized u/s 143 (3) of the Act. d) Additions has been made on the basis conjectures and surmises. e) The appellant has also explained source of the source of the transactions. 7. I have considered the facts of the case, the basis of addition made by the AO and the arguments of the Ld. AR during the assessment, the submissions and the paper placed on record before me. 7.1 I have car ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... So far as revenue from operation in the said company is Rs. 8.27 crores and profit before tax is Rs. 15,54,395/- and Rs. 5.46 crores and profit before tax of Rs. 22,10,060/- for A.Y. 2013-14 and 2012-13 respectively. These facts does not get along with the argument of Ld. AR that the money rotating in the group concerns are from PAL News Media Pvt. Ltd. Further the balance-sheet of Pal New Media Pvt. Ltd. is examined and it is found that this company has increase in the capital reserve of Rs. 12,76,78,532/- in the year under consideration. When asked details of the same under rule 46A (4) of the Rules, the Ld. AR submitted that M/s PACL Ltd. has applied for investment in shares of M/s PAL News Media Pvt. Ltd. Initially M/s PACL Limited has given Rs. 12,90,00,000/- as share application money and rest of the amount was to be given on the later dat. Due to some reasons M/s PACL Limited could not give the rest of the amount due to which M/s PAL News Media Pvt Ltd was left with no other option but to forfeit the entire share application money and shown the same as capital reserve in its books of account. The above facts clearly establishes the chain of money going to appellant company. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ances under which money is rotated among the group concerns. 7.6 Since the appellant claimed that the share capital was genuine, the onus was on the appellant under section 101 of the Evidence Act, 1972 to produce the directors/ principal officers of share applicant companies as its own witness for cross examination by the Revenue. The appellant should have discharged its duty as a taxpayer by producing the directors of these companies particularly in a scenario in which then companies have made substantial investment in the appellant company. 8. Thereafter the ld. CIT(A) considered various judgments in subsequent paras 7.7 to 7.13 rendered by Hon ble jurisdictional High Court of Delhi and order of ITAT Ahmadabad bench dated 18.08.2016 in the case of Nakoda Fashion Pvt. Ltd. in ITA 1716/AHD/2012. In the subsequent paras 7.14 to 7.19 the ld. CIT(A) noted final conclusion and findings against the assessee upholding the addition made by the assessee which are as follows:- 7.14 Section 102 of Indian Evidence Act makes it clear that initial onus is on person who substantially asserts a claim. If the onus is discharged by him and a case is made out, the onus shifts on to dep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o establish the transfer of those recitals, the taxing authorities were entitled to look into the surrounding circumstances to find out the reality of such recitals. Science has not yet invented any instrument to test the reliability of the evidence placed before a Court or Tribunal. Therefore, the Courts and the Tribunals have to judge the evidence before them by applying the test of human probability. Human minds may differ as to the reliability of piece of evidence, but, in the sphere, the decision of the final fact finding authority is made conclusive by law. 7.17 The above ratio laid down by the Hon ble Supreme Court has been reiterated and applied by the Hon ble Apex Court in the case of Sumati Dayal V CIT 214 ITR 801 (S.C). It is essential on the part of the AO to look into the real nature of transaction and what happens in the real word and contextualize the same to such transactions in the real market situation. 7.18 All these above mentioned cases are also applicable to the facts and circumstances of the present case in which the various judicial authorities have decided the cases in favour of revenue after going through the entirety of the facts and circumstan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... share application money of Rs. 4,70,26,300/-. Regarding source of funds to M/s. Pal News Media P. Ltd., it was submitted that PACL Ltd. has applied for investments in the shares of M/s. Pal News Media and given an amount of Rs. 12,90,000/- as share application money and rest of amount was to be given on later date which was not given due to some reason. Therefore Pal News Media P. Ltd., forfeited the entire share application money and shown the same as capital reserve in the books of accounts. 11. While evaluating the creditworthiness of said investor M/s. Pal New Media P. Ltd., the ld. CIT(A) noted that M/s. PACL Ltd. was incorporated in 1996 and was having registered office in Jaipur and corporate office at 7th floor, Gopal Das Bhavan, 28th Barakhamba Road New Delhi and is also known as pearls and said company was black listed in 2015 by SEBI on the allegation of indulging in dubious transactions and the Chairman and Managing Director of said company were arrested by CBI. Thus the creditworthiness of source of source company could not be established beyond doubt as unblemished. The ld. CIT(A) rightly dismissed contention of the assessee regarding transaction through banking ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nserved and uncomplied. This approach would be unreasonable as a general proposition as the assessee cannot plead that they had received money, but could do nothing more and it was for the Assessing Officer to enforce shareholders attendance. Some cases might require or justify visit by the Inspector to ascertain whether the shareholders/ subscribers were functioning or available at the addresses, but it would be incorrect to state that the Assessing Officer should get the addresses from the Registrar of Companies' website or search for the addresses of shareholders and communicate with them. Similarly, creditworthiness was not proved by mere issue of a cheque or by furnishing a copy of statement of bank account. Circumstances might require that there should be some evidence of positive nature to show that the said subscribers had made a genuine investment, acted as angel investors, after due diligence or for personal reasons. Thus, finding or a conclusion must be practicable, pragmatic and might in a given case take into account that the assessee might find it difficult to unimpeachable establish the creditworthiness of the shareholders. 14. The identical issue was placed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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