D.C.I.T.,CC-2(3), KOLKATA vs. RABINDRA ENTERPRISES PVT. LTD., KOLKATA

O R D E R

PER DR. MANISH BORAD, ACCOUNTANT MEMBER :

s in the course of appellate proceedings.”

3. Facts in brief are that the assessee is a private limited company and is engaged in the business of manufacturing of sponge iron. Assessee filed return of income for Assessment Year 2013-13 on 25/09/2012, declaring ‘Nil’ income. Case Selected for scrutiny followed by issuance and service of notices u/s 143(2) and 142(1) of the Act. During the course of assessment proceedings, the directors of the assessee company appeared from time to time and made due compliances by submitting various details as sought for by the Assessing Officer. The Assessing Officer observed that the assessee company had received share application money of Rs.27,22,00,000/- during the year under consideration and allotted the shares to one company, namely, Bhillai Holdings Pvt. Ltd. However, the Assessing Officer was of the opinion that the assessee company had entered into a sham transaction with the investor i.e., Bhillai Holdings Pvt. Ltd., to introduce its own unaccounted income in the form of share application and added entire amount of Rs.27,22,00,000/- as undisclosed cash credit u/s 68 of the Act. 4.1. Aggrieved the assessee preferred appeal before the ld. CIT(A) challenging the addition made u/s 68 of the Act by the Assessing Officer on account of unexplained cash credit amounting to Rs. 27,22,00,000/- and filed complete details of the investor company, Bhillai Holdings Pvt. Ltd, its net worth as on the date of applying for the shares, complete details to prove the identity, creditworthiness of the share applicants and 3 Assessment Year: 2012-13 Rabindra Enterprises Pvt. Ltd. genuineness of the transactions, replies filed by the investor company to the summons issued u/s 131 of the Act and also contended that all the documents filed before the Assessing Officer are sufficient enough to explain the nature and source of the alleged sum and even the source of source has been proved by giving the necessary details and the ld. Assessing Officer has not indicated any discrepancies in these details. Various judgments were relied on by the assessee including the judgment of the Hon’ble Supreme Court in the case of CIT vs. Lovely Exports P. Ltd. [2008] 216 CTR 195 (SC), and other case-laws. 4.2. The ld. CIT(A) observed that the assessee has filed documentary evidence in support of the claim of the nature and source being explained for the alleged transactions and also referred to various judicial decisions The ld. CIT(A) observe that the ld. Assessing Officer obtained all these details from the investment companies when summons issued u/s 131 of the Act and again failed to find any discrepancy in the documents filed with regard to the share subscriber companies. The ld. CIT(A) considering these details and also the fact that the assessee is carrying out regular business activity of manufacturing sponge iron and that the share subscriber had sufficient net worth to cover up the investments made in the equity capital of the assessee company, decided in favour of the assessee by deleting the impugned addition u/s 68 of the Act.

5. Aggrieved, the revenue is now in appeal before this Tribunal.

6. The ld. CIT D/R submitted that the ld. Assessing Officer has examined the facts of the case extensively and also scrutinised the 4 I.T.A. No. 1508/Kol/2019 Assessment Year: 2012-13 Rabindra Enterprises Pvt. Ltd. financial statements of the share applicant and came to a plausible conclusion. He vehemently argued supporting the order of the ld. Assessing Officer and stated that merely filing paper documents cannot be treated as a compliance to explain the nature and source of the alleged sum. Surrounding circumstances which includes the meagre income offered by the share subscribers, no regular business activity carried out by the share subscriber and the typical nature of flow of funds in the bank statement indicates that share subscribing companies are engaged in rotation of funds for providing accommodation entries and they are jamakharchi or shell/paper companies and, therefore, the ld. Assessing Officer has rightly added the sum in the hands of the assessee. The Ld. D/R has further relied upon the decision of the Hon’ble Supreme Court in the case of PCIT vs. NRA Iron & Steel (P) Ltd. reported in [2019] 103 taxmann.com 48(SC).

7. On the other hand, the ld. Counsel for the assessee apart from referring to the detailed written submissions and paper book containing 181 pages again asserted the fact that the assessee company which is engaged in the business of manufacturing of sponge iron, issued equity shares of face value of Rs.10/- and not charged any share premium to the investor company, namely, Bhillai Holding Pvt. Ltd.. The alleged investor company is a group concern having common directors, regularly assessed to tax, transactions being carried out through banking channels and has passed through scrutiny proceedings and replied to summons issued u/s 131 of the Act providing details to the Assessing Officer and due compliance was done to the notices issued u/s 133(6) of the Act. He thus claimed that assessee has explained the nature and source of the share Assessment Year: 2012-13 Rabindra Enterprises Pvt. Ltd. application money received during the year and has discharged the primary onus casted upon it u/s 68 of the Act and even the source of source has also been explained. Therefore, the ld. CIT(A) has rightly deleted the addition u/s 68 of the Act. Reference was also made to the written note placed before this Tribunal, which is extracted for ready reference:- “(1) Name of Appellant – Rabindra Enterprises Pvt. Ltd. (2) Name of share Applicant – Bhillai Holding Pvt. Ltd. (One applicant only group company) (3) Details of Directors in appellant & Investor Company. S. No. Name of Director Rabindra Bhillai Holding Enterprises Pvt. Pvt. Ltd. (Investor Ltd. (Appellant Company) Company) 1 UPENDRA RAI DIRECTOR DIRECTOR (00558583) 2 HARENDRA ROY DIRECTOR DIRECTOR (00558688) 3 PARMESHWAR DIRECTOR DIRECTOR NATH RAI (00869571) (4) Details Shareholders S. No. Name of Rabindra Bhillai Holdings Shareholder Enterprises Pvt. Pvt. Ltd. (Investor Ltd. (Appellant Company) Company) 1 PARMESHWAR SHAREHOLDER SHAREHOLDER NATH RAI 2 HARENDRA RAI SHAREHOLDER SHAREHOLDER 3 MAHADEV COKE SHAREHOLDER SHAREHOLDER LTD. 4 MAYA FUELS SHAREHOLDER SHAREHOLDER PVT. LTD. 5 NEW MGM SHAREHOLDER SHAREHOLDER MINERALS PVT. LTD. 6 MGM SHAREHOLDER SHAREHOLDER REFRACTORIES Assessment Year: 2012-13 Rabindra Enterprises Pvt. Ltd. PVT. LTD. (5) Details of Registered Office S. No. Name of Company Address 1 RABINDRA Anamika Apartment, 12, ENTERPRISES PVT. LTD. Lee Road, 2nd Floor, Room (Appellant Compant) No- 202, Kolkata-20 2 BHILLAI HOLDINGS Anamika Apartment, 12 Lee PVT. LTD. (Investor Road, 2nd Floor, Room No- Company) 202, Kolkata-20 Reconciliation of Rs. 27.22 cr. (a) Addition made by AO Rs. 27,22,00,000 (b) Loan as on 31.03.2011 Rs. 6,73,66,237 Interest paid 19-04-2011 Rs. 19,66,237 Amount transfer to share Rs. 6,54,00,000 Rs. 6,54,00,000 application a/c (c) Fresh share application taken during F.Y. 2011-12 Rs. 20,68,00,000 (d) Share Application Return Rs. 4,22,00,000 (e) Share allotted out of fresh share application amount Rs. 16,46,00,000 (7) The appellant company received share application money of Rs. 20,68,00,000/- through banking channel from its sister concern M/s. Bhillai holdings Pvt. Ltd. (investor company) as below:- Source of share Application Date Mode of Receipt Amount Source (Received) 25-04-2011 RTGS 15,000,000.00 Premature withdrawal of F.D 28-04-2011 RTGS 96,00,000.00 Premature withdrawal of F.D 02-05-2011 RTGS 15,000,000.00 Premature withdrawal of F.D Rs. 1,00,09,873 & 50,00,000 from sale of investment 04-05-2011 RTGS 25,00,000.00 Premature withdrawal of F.D 09-05-2011 RTGS 15,000,000.00 Premature withdrawal of F.D 20-05-2011 RTGS 17,000,000.00 Premature withdrawal of F.D Rs. 1,24,69,832 & 40,00,000 from Assessment Year: 2012-13 Rabindra Enterprises Pvt. Ltd. sale of Investment 27-05-2011 RTGS 35,00,000.00 Premature withdrawal of F.D 02-06-2011 RTGS 25,00,000.00 Bank Balance 03-06-2011 RTGS 25,00,000.00 Premature withdrawal of F.D Rs. 9,70,000 & 10,00,000 from sale of Investment 28-06-2011 RTGS 19,000,000.00 From Sister concern Maithan Resort & Carrier Pvt. Ltd. 14-07-2011 RTGS 10,000,000.00 Premature withdrawal of F.D 16-07-2011 RTGS 30,00,000.00 Premature withdrawal of F.D 19-07-2011 RTGS 35,00,000.00 Premature 19-07-2011 RTGS 15,00,000.00 withdrawal of F.D 22-07-2011 RTGS 30,00,000.00 Premature withdrawal of F.D 22-07-2011 RTGS 20,00,000.00 Bank Balance 28-07-2011 RTGS 60,00,000.00 Premature withdrawal of F.D 06-08-2011 RTGS 80,00,000.00 Premature withdrawal of F.D 10-08-2011 RTGS 28,00,000.00 Premature withdrawal of F.D 11-08-2011 RTGS 20,00,000.00 Bank Balance 12-08-2011 RTGS 20,00,000.00 Bank Balance 23-09-2011 RTGS 15,000,000.00 Premature withdrawal of F.D 26-09-2011 RTGS 25,00,000.00 Bank Balance 12-10-2011 RTGS 50,00,000.00 Sale of Investment 13-10-2011 RTGS 30,00,000.00 Premature withdrawal of F.D 17-10-2011 RTGS 5,00,000.00 Bank Balance 21-10-2011 RTGS 10,000,000.00 Premature withdrawal of F.D 03-11-2011 RTGS 50,00,000.00 Premature withdrawal of F.D 30-11-2011 RTGS 25,00,000.00 Premature withdrawal of F.D 03-12-2011 RTGS 22,00,000.00 Premature withdrawal of F.D Assessment Year: 2012-13 Rabindra Enterprises Pvt. Ltd. 05-12-2011 RTGS 32,00,000.00 Premature withdrawal of F.D 30-12-2011 RTGS 75,00,000.00 Premature withdrawal of F.D 13-01-2012 RTGS 50,00,000.00 Premature withdrawal of F.D Rs. 24,50,000 & 20,00,000 from sale of Investment Total amount received 20,68,00,000.00 Refund of share application money by appellant company 22-11-2011 RTGS (40,00,000.00) Refund of Share application money 17-02-2012 RTGS (3,82,00,000.00) Refund of Share application money 16,46,00,000.00 Balance of Share application money against which 1,64,60,000 shares issued @ Rs. 10.

by the revenue is against the finding of ld. CIT(A) deleting the addition u/s 68 of the Act made for alleged unexplained share application money in the form of share capital amounting to Rs. 27,22,00,000/-. During the year, the assessee company received share application money of Rs.27,22,00,000/- from one investor company, namely, Bhillai Holdings Pvt. Ltd.. No share premium has been charged on the issue of equity shares of face value of Rs.10/- each.

10. We further observe that during the course of assessment as well as appellate proceedings before the ld. CIT(A), the assessee has complied and has filed all the details, evidences and relevant documents which are 9 Assessment Year: 2012-13 Rabindra Enterprises Pvt. Ltd. necessary to prove the identity and creditworthiness of the share applicant and genuineness of the transactions. Though these details have been filed in the paper book but the same can be summarized as filing of the copy of PAN card, share application form, allotment advices, relevant bank statements, ITRs for Assessment Year 2012-13, audited financial statement, source of funds i.e., the immediate source of fund which has been utilised by alleged share applicant to apply for the equity shares of the company. Assessee has also filed copy of the summons issued u/s 131 of the Act along with the certified copy of reply submitted in compliance to notices u/s 133(6) of the Act by the investor company. During the course of assessment proceedings, reply of investor company was sent directly to the Assessing Officer and again providing necessary details before the ld. CIT(A). Perusal of these details which have been filed in the paper book containing 181 pages indicates that whatever documents which the assessee needs to file in order to explain the identity and creditworthiness of the share applicant and genuineness of the transactions have been filed and thereby the primary onus casted upon the assessee by virtue of Section 68 of the Act has been discharged and consequently the burden shifted over to the Assessing Officer to prove the contrary which the ld. Assessing Officer failed to do.

11. We further observe that the ld. CIT(A) has made a thorough examination of all these facts and also referred to various judicial pronouncements adjudicating similar type of issues and we find it necessary to go through the relevant finding of the ld. CIT(A):- “4. I have carefully considered the facts narrated by the Assessing Officer in the assessment order as well as the submissions and documents submitted by the 10 I.T.A. No. 1508/Kol/2019 Assessment Year: 2012-13 Rabindra Enterprises Pvt. Ltd. appellant company and Investor Company during the course of assessment proceedings. On examination of the above documents, the following facts have emerged: a.During the assessment year 2012-13, the appellant company had allotted 2,30,00,000 shares @ Rs. 10/- each to Bhillai Holdings Private Limited(Investor Company) amounting Rs. 23,00,00,000. Investor Company and Appellant company are sister concern having common Directors, commonShare Holders, and common address which is evident from record of