TMI Blog2023 (8) TMI 1017X X X X Extracts X X X X X X X X Extracts X X X X ..... investor companies about the nature and source of such sum credited against their names in the books of account of the assessee company. In the present case before us, not only the assessee company had failed to substantiate to the hilt the nature and source of the amount credited in its books of account based on any clinching documentary evidence, but also, there is no whisper in the orders of the lower authorities about any explanation of the respective investor companies about the nature and source of such sum so credited against their names in the books of account of the assessee company. Because the assessee company had grossly failed to discharge the onus that was cast upon it as regards proving the authenticity of its claim of having raised genuine share application money of Rs. 121.88 crore (approx.) from the 40 investor companies, i.e., by satisfying the double facet conditions contemplated in the aforesaid statutory provision, i.e., Sec. 68 (post-amended), viz. (i) explanation about the nature and source of the credit in its books of account; and (ii) explanation by the investor companies as regards the nature and source of the sum so credited against their name in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income for A.Y. 2014-15 on 30.11.2014, declaring an income of Rs. Nil. The case of the assessee company was selected for scrutiny assessment u/s. 143(2) of the Act. 3. Survey u/s. 133A of the Act was conducted at the business premises of the assessee company on 22.01.2014 by the DDIT (Investigation)-II, Raipur. After that, the A.O., during the assessment proceedings, verified the documents impounded during the survey vis- -vis the books of accounts of the assessee company. The A.O observed that the assessee company, which was incorporated on 23.09.1997, had during the year received share application money of Rs. 121.88 crore (approx.), against which it had allotted 4,93,460 shares of a face value of Rs. 100/- per share at a premium of Rs. 2400/- per share. The A.O considering the fact that the assessee company during the year had carried out negligible business activities and reported a loss of Rs. (-) 1,01,80,468/-, thus carried serious doubts about the veracity of its claim of having raised share capital/premium by issuing shares of the face value of Rs. 100/- per share at a high premium of Rs. 2400/- per share. Observing that the amount of investment received by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es of the PAN, returns of income, audit reports, bank statements, etc. of the share applicant/subscriber companies. The A.O. observed that as in the majority of the cases of share applicant/subscriber companies, the summons, which were on an earlier occasion issued u/s. 131 of the Act by the DDIT (Inv), Unit- 4(1), Kolkata, were either returned unserved; or where they were served had remained uncomplied with, thus, was of the view that no useful purpose would be solved by heeding to the request of the assessee company and issuing summons to the aforementioned persons. Apart from that, the A.O. observed that Shri Sarad Kumar Darak (supra), despite specifically being directed to produce the directors/principal officers of the share applicant/subscriber companies, had not only failed to effect the necessary compliance but had also most whimsically adopted an evasive approach and submitted through post certain bundle of papers/documents which were never called for. 6. The A.O considering the facts as mentioned earlier, held a conviction that the assessee company, by failing to substantiate the identity and creditworthiness of the share applicant/subscriber companies, and genuinene ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... incorporation, had not done any actual business activities in spite of that, they had invested considerable amounts in securities premium account vis- -vis non-current investments in the shares of private limited companies. 7. The A.O further considering the facts mentioned above held a conviction that the share applicant/subscriber companies were shell/paper companies that had no creditworthiness to make investments in the assessee company. The A.O., after deliberating at length on the modus-operandi that was adopted by shell/paper companies for laundering unaccounted money in the form of share capital/premium, therein observed that a perusal of the documents placed on his record revealed that the investor companies in the case of the assessee company were briefcase companies which had facilitated parking of the funds of the assessee company in the guise of share application money at a premium after routing the same through various other briefcase/shell companies associated with them. Referring to the returned income of the share applicant/subscriber companies and their financial statements, it was observed by the A.O. that the amount of share application money/premium recei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wherein it was called upon to prove the identity and creditworthiness of the share applicant/subscriber companies, and also the genuineness of the transactions of receipt of the share application money from them. Also, the A.O. brought to the notice of the assessee company that the DDIT(Inv.), Kolkata, on a commission issued u/s. 131(1)(d) of the Act dated 21.11.2016 had based on his report dated 20.12.2016 stated that as per the database of the entry operators maintained by the directorate, the share applicant/subscriber companies from whom the assessee company had claimed to have received share application money appeared to be paper/shell companies. Apart from that, it was brought to the notice of the assessee company that, as reported by the DDIT(Inv.), Kolkata, in his report dated 20.12.2016, the share applicant companies were managed by infamous entry operators who had already acknowledged in their statements recorded on oath before the Department that they were only providing accommodation entries through the said paper/shell companies. Also, the assessee was made aware that the directors of many of the share applicant/subscriber companies were found to be dummy directors of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s based on presumptions only .However report of the Hon'ble DDIT(inv.), unit 4(1), Kolkata itself prove the followings -the Hon'ble DDIT(inv.), unit 4(1), Kolkata has not enquire the matter specifically related to our transactions with the all such alleged companies. - All the alleged companies are existed at their address and traceable. - All the alleged companies are assessed regularly u/s 143(1) and W' 143(3) at their respective jurisdictional income Tax Ward. -All such alleged companies have been duly assessed with their sufficiency of funds for their investments in the A/Y 2012-13, 2013-14 2014-15. Kindly refer to the same. -Directors of all such alleged companies are identifiable and well-traceable to the Department. -Report of the Hon'ble DDIT(Inv), unit 4(1), Kolkata also stated that out of the alleged companies, summons u/s 131 has been served, and as informed to us by those companies, they have submitted requisite documents before the Hon'ble DDIT(Inv). unit 4(1), Kolkata through the speed post dated 16/12/2016 and the same facts also mentioned by them in the submissions letters before you. Kindly refer to the same. - On critic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... companies at their registered head office address on 15/12/2016 to 17/12/2016. Copy of all such receipt has already been furnished at your office on 20/12/2016 In compliance to the said compelling letters issued from our office to the all alleged 48 share holders companies, Following documents are given by the Investors companies to confirm the transactions between us and its genuineness and the source of their investments( Details of letter issued date letter received date, speed post date and speed post received by the department are enclose here with for your reference) :- Copy of share application on which face value and the premium value of our equity share, name and address of applicant company are clearly mentioned and in support of these applications money source of the investment are also attached. Genuineness of transaction- Copy of related bank accounts. Copy of share certificates. To prove identity- PAN card of their companies, A copy of the IT returns for the assessment year 20I4-15, Copy of memorandum of association. To prove credit worthiness- Copy of profit and loss accounts, balance sheet; audit report for F/Y 2013-14. in lig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /Directors of the 48 (sic) investor companies who were called upon to put up an appearance a/w supporting documents to substantiate the authenticity of their investments made with the assessee company, had filed before the A.O. requisite documents to confirm the transactions entered into between them and the assessee company a/w respective source of the same. Also, the assessee company refuted the report of the DDIT (Inv.), Unit-4(1), Kolkata, on the ground that the same was neither specific nor corroborative. Based on its aforesaid contentions, and by drawing support from certain judicial pronouncements, the assessee company tried to impress upon the A.O. that now when the nature and source of the cash credit of Rs. 121.88 crore (approx.) received from the share applicant/subscriber companies were proved based on supporting documentary evidence, the same could not be held as unexplained cash credits u/s. 68 of the Act. However, the A.O. was not persuaded to subscribe to the aforesaid claim of the assessee company. The A.O. was of the view that now when the DDIT (Inv.), Unit-4(1), Kolkata, based on deep inquiry and detailed analysis of the facts, had reported that the share applica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pprox.) u/s. 68 of the Act, brought the same to tax u/s 115BBE of the Act and determined the income of the assessee company at Rs. 120.86 crore (approx.). 12. Aggrieved, the assessee assailed the order passed by the A.O. u/s. 143(3) dated 28.12.2016 before the CIT(Appeals). The CIT(Appeals), after deliberating at length on the contentions advanced by the assessee, did not find any infirmity in the view taken by the A.O. It was observed by the CIT(Appeals) that as per the post-amended section 68 of the Act that was applicable from A.Y.2013-14, the assessee company was not only required to explain the source of the share application money but was also statutorily obligated to explain the source of the money out of which the investor companies had made the respective investments. The CIT(Appeals) was of the view that as in the case before him, neither of the share applicant/subscriber companies had appeared and put forth any explanation as regards the respective source of their finance out of which investments towards share application money were made with the assessee company; therefore, the assessee company had failed to discharge the onus that was cast upon it u/s. 68 of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were accepted in earlier years also. To mitigate the doubt and establish genuineness, the appellant must furnish further evidence. The A.O. has provided the opportunity to the appellant to produce directors of purported share application companies who could have given statements and added further to what was said before the DDIT and establish the genuineness of share application mono and creditworthiness of their respective companies. But the assessee refused to avail the opportunity and instead tried to shift the onus on the A.O., which is not permissible prior to the assessee discharging his onus. The Director Shri Darak has not produced the directors of companies advancing share application money and has, in turn, requested the A.O. to summon these persons. When a person claims certain facts as true, the onus is on him to produce necessary witnesses to support his claim. He cannot shift the onus on the A.O. Only after Shri Darak produces his witnesses; the onus will shift on the A.O. It is on record that these directors were already summoned by the Deputy Director of Income-tax (DDIT) (Inv) at Kolkata. In several cases, the summons could not be served at the addresses, and i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s that were enclosed in the case of its sister concern viz, M/s. Trimurti Finvest Limited, ITA No.19/RPR/2018 for A.Y.2014-15. As the present appeal had earlier been adjourned on twelve occasions, out of which, on two occasions, it was adjourned on the request of the assessee, while on three occasions, the matter had to be adjourned as the assessee appellant had failed to put up an appearance, therefore, finding no justification in the reason based on which the hearing of the appeal was requested to be adjourned, i.e. request for adjourning the hearing of the appeal till the disposal of the appeal of the sister concern, the same was in all fairness posted for final hearing on 08.06.2023. On 08.06.2023, the Ld. AR sought liberty for placing on record Paper Book Volume-2 ( sic ) (comprising of Page 1-45 ), which subject to no objection of the Ld. DR was admitted, and the appeal of the assessee appellant was heard at length and the order was reserved. 15. Before proceeding any further, it would be pertinent to point out that though the hearing of the captioned appeal was concluded on 08.06.2023, but thereafter, the registry of the Tribunal on 26.06.2023, through speed post rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t as the case may be, proposes to refer or rely upon any document or statements or other papers on the file of or referred to in the assessment or appellate orders, he may submit a paper book in duplicate containing such papers duly indexed and paged at least a day before the date of hearing of the appeal along with proof of service of a copy of the same on the other side at least a week before: Provided , however, the Bench may in an appropriate case condone the delay and admit the paper book. (2) The Tribunal may suo motu direct the preparation of a paper book in triplicate by and at the cost of the appellant or the respondent containing copies of such statements, papers and documents as it may consider necessary for the proper disposal of the appeal. (3) The papers referred to in sub-rule (1) above must always be legibly written or type-written in double space or printed. If xerox copy of a document is filed, then the same should be legible. Each paper should be certified as true copy by the party filing the same, or his authorised representative and indexed in such a manner as to give the brief description of the relevance of the document, with page numbers and the Au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were already receiving the price compensation in terms of inputs at reduced landed cost, and thereby were aiding each other for mutual business interest so that the production cost by both of them be kept at a minimum, and the central excise duty is discharged at a lower value. Before the Hon ble Apex Court, it was claimed by the appellant company that both the adjudicating commissioner and the Tribunal had non-suited it because the details of the final product and the landed cost of the material supplied were not provided. Also, it was observed that the appellant company had not furnished any material/data as regards the actual expenses incurred on account of freight, loading, unloading charges, profit margin, etc. The appellant company produced before the Hon ble Apex Court a Certificate issued by a Chartered Accountant (CA) in respect of the valuation of the normal price of Magneto assemblies, which were manufactured and sold by it to M/s Bajaj Auto Ltd. in wholesale, which was in support of costing. Also, the said Certificate pointed out freight charges incurred by the appellant company for getting material from M/s Bajaj Auto Ltd. a/w loading and unloading charges, consumab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... permission for admission of the same (received through post), however, it would be relevant to point out that though the same states that an Annexure-A is being enclosed but no such annexure is found enclosed with the said application/written submission/synopsis. 22. Adverting to the facts involved in the present appeal before us, we find that the controversy therein involved lies in a narrow compass, i.e., as to whether or not the lower authorities are correct in law and facts of the case in concluding that the amount of share application money of Rs. 121.88 crore (approx.) claimed by the assessee company to have been received from 40 share applicant/subscriber companies was to be treated as unexplained cash credit u/s. 68 of the Act? 23. On a perusal of the assessment order, it transpires that the A.O., in the course of assessment proceedings, observed that the assessee company had claimed to have received share application money to the tune of Rs. 121.88 crore (approx.) from 40 Kolkata-based share applicant/subscriber companies, as under: 24. The A.O. further noticed that the assessee company had, during the year, allotted 4,93,460 shares of a face value of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he said exercise of summoning the persons above on his part would be nothing but futile and of no use, refrained from doing so. 25. Apart from that, as noticed by us hereinabove, the assessee company had throughout adopted an evasive approach, wherein instead of complying with the directions of the A.O. and producing the directors/principal officers of the share applicant/ subscriber companies for necessary examination before him, it had instead chosen to file through speed post bundles of papers with the office of the A.O. The A.O. considering the fact that the assessee company was not forthcoming with the requisite details in discharge of the primary onus that was cast upon it as regards proving the authenticity of its claim of having received genuine share application money from the share applicant/subscriber companies, thus, for verifying the factual position referred to the financial statements of the share applicant/subscriber companies, which revealed that they had virtually no worth and no fixed assets, as under: Based on the facts above, the A.O. held a firm conviction that the share applicant/subscriber companies lacked creditworthiness to make investments ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment company had filed before his predecessor. However, on a specific query by the Bench, whether the documents mentioned above, stated to have not been considered by the A.O., were produced before the CIT(Appeals), the Ld. A.R. failed to come forth with any reply. Also, no such material/documents were placed before us, which would evidence that the assessee company had duly discharged the onus that was cast upon it as regarding proving the authenticity of its claim of having received genuine share application money from the 41 share applicant/subscribers companies. Further, a chart filed by the assessee appellant company demonstrating that out of 41 companies therein stated, some of those were active, along with details of company master data from ROC website of 41 share subscriber companies, in our considered view on such standalone basis would not suffice to discharge the onus cast upon it as regards proving the authenticity of the transactions under consideration. 27. Be that as it may, we shall look into the aspect as to whether the assessee company had duly discharged the primary onus that was cast upon it as regards proving the identity and creditworthiness of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... where the assessee had adopted an evasive approach and had deliberately and intentionally failed to produce evidence before the A.O. with the desire to prevent inquiry or investigation, then adverse view should be taken. At this stage, we may herein observe that Shri Sarad Kumar Darak (supra), in his statement recorded on oath by the A.O. on 13.12.2016 on being directed to produce the principal officers/directors of the share subscriber/applicant companies, had expressed his inability to do so and had requested that the Department may summon the said persons. In our considered view, now when neither of the aforementioned persons had complied with the summons issued to them u/s. 131 of the Act by the DDIT (Inv.), Unit-4(1), Kolkata; therefore, the A.O. being well aware of the fact that the summoning of the said persons on his part would be a futile exercise, had thus rightly refrained from acceding to the said request of the assessee. Considering the totality of the facts involved in the present case, wherein the principal officers/directors of the share applicant/subscriber companies were evading their participation and compliance to the summons that were issued by the DDIT(Inv.)-4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubscriber companies. However, we find that the assessee company had failed to discharge the primary onus that was cast upon it for proving the authenticity of the transactions of receipt of the share application money from the share applicant/subscriber companies based on any irrefutable documentary evidence. As observed by us hereinabove, it is though the claim of the Ld. AR that the assessee company on the basis of supporting documents/material had duly discharged the onus that was cast upon it as regards proving the authenticity of its claim of having received genuine share application money from the 40 investors companies, which, as claimed by him had not been considered by the A.O, but we find that neither any such documents/ material so heavily relied upon by the Ld. AR were produced before the CIT(Appeals) or before us. 29. Also, the fact that notices issued by the DDIT (Inv.) Unit-4(1), Kolkata, to the 40 shares applicant/subscriber companies mentioned above were either returned unserved; or were not complied with by them, further fortifies the view taken by the A.O. that the assessee company had laundered its ill- gotten money in the garb of the share application money ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the transaction, the identity of the creditors, and the creditworthiness of the investors who should have the financial capacity to invest in question to the satisfaction of the A.O., to discharge the primary onus. ii. The Assessing Officer is duty bound to investigate the creditworthiness of the creditor/ subscriber, verify the identity of the subscribers, and ascertain whether the transaction is genuine or these are bogus name-lender entries. iii. If the inquiries and investigations reveal that the identity of the creditors is dubious or doubtful, or lacks creditworthiness, then the genuineness of the transaction would not be established. In such a case, the assessee would not have discharged the primary onus contemplated by Section 68 of the Act. (emphasis supplied by us) 30. Considering the facts as were involved in the case before the Hon'ble Apex Court it was observed, viz. (i). that the investor companies had filed returns for a negligible taxable income which would show that the investors did not have the financial capacity to invest the substantial amount with the assessee company; (ii) there was no explanation whatsoever offered by the investor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee. The assessee is under a legal obligation to prove the receipt of share capital/premium to the satisfaction of the A.O., failure of which would justify addition of the said amount to the income of the assessee. Also, the Hon'ble Apex Court had not found favour with the view taken by the lower appellate authorities, wherein they had observed that as the assessee company had filed all the documentary evidence in the course of assessment proceedings, therefore, the onus that was cast upon it to establish the creditworthiness of the investor companies stood discharged. Rebutting the aforesaid view taken by the lower authorities, the Hon'ble Apex Court had observed that the lower appellate authorities, while so concluding, had not even adverted to the field inquiry conducted by the A.O., which revealed that in several cases, the investor companies were found to be non-existent, and thus the onus to establish the identity of the investor companies was not discharged by the assessee. 32. Considering the principles which the Hon'ble Supreme Court had laid down in the case of Pr. CIT, Circle-1 Vs. NRA Iron Steel Pvt. Ltd. (supra), we find that the facts invo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upra), if the assessee is not able to provide a satisfactory explanation of the nature and source of the investments made, then it is open to the revenue to hold that it is the income of the assessee, and there would be no further burden on the revenue to show that the income is from any particulars source. 33. Be that as it may, as observed by the lower authorities and rightly so, the case of the assessee company falls within the realm of post- amended Section 68 of the Act, i.e., as had been made available on the statute vide the Finance Act, 2012 w.e.f. 01.04.2013 . For the sake of clarity, Sec. 68 (post-amended as applies to the case of the assessee company) is culled out as under : 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 interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nus cast upon the assessee company to prove the authenticity of the transactions of receipt of the share application money from the 41 share applicant/subscriber companies was duly discharged, therefore, on a similar footing, no adverse inferences were liable to be drawn in its case. We are unable to persuade ourselves to subscribe to the aforesaid claim of the assessee. We, say so, for the reason that a perusal of the facts involved in the aforementioned case of Chhattisgarh Metaliks and Alloys (P) Ltd. Vs. ITO (supra) reveals that the same is distinguishable on facts. In the aforesaid case, the assessee company that had received share application money from the concerned share applicant/subscriber company had filed requisite documents to prove the transaction's authenticity. On a perusal of the capital account of the investor company, viz. M/s. Aayush Steelco (P) Ltd., it was therein observed by the Tribunal that the investment in question was made by the investor company out of its opening balance of Rs. 89.18 lac on 01.04.2014 as a partner with M/s. Sri Balaji Iron Steel Traders, Visakhapatnam, and not out of any fresh amount parked in its capital account during the yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... premium. 38. Once again, unlike the facts involved in the present case of the assessee before us, as the identity, creditworthiness, and genuineness of the investor companies in the aforesaid case were proved to the hilt based on irrefutable documentary evidence, therefore, the facts therein involved leading to the view taken by the Hon ble High Court would by no means assist the case of the assessee before us. (C) ACIT Vs. Shri Pramod Kumar Sethi, ITA No.382 383/Ind/2014 dated 06.11.2018 39. As is discernible from the aforesaid order, it transpires that the same had been pressed into service by the Ld. AR to impress upon us that the assessee company a/w. its two other sister concerns were held by the Tribunal to be genuine, and it was held that the unsecured loans raised by the assessee before them, viz. Shri Pramod Kumar Sethi (supra) from the present assessee before us and its sister concerns was not to be treated as unexplained cash credit u/s. 68 of the Act. 40. We are unable to comprehend that as to how the aforesaid order of the ITAT, Indore would assist the case of the assessee company before us. It is not the existence of the assessee company before us ..... X X X X Extracts X X X X X X X X Extracts X X X X
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