A.C.I.T.,CIRCLE-1(2), KOLKATA vs. M/S SARADA JUTE MILLS PVT. LTD., KOLKATA

order

: December 14th, 2023 ORDER

Per Manish Borad, Accountant Member:

1. That on the facts and circumstances of the case and in law Ld. CIT(A) has erred in deleting the addition of Rs. 6,24,97,500/- on account of unexplained cash credit as per provision of section 68 of the I.T. Act, without considering the facts that the identity, genuineness & creditworthiness of the share subscribing companies were not proved satisfactorily during the assessment proceeding and as well as remand proceeding.

2. That on the facts and circumstances of the case and in law Ld. CIT(A) has erred in granting relief to the assessee without discharging onus in his role “Co-terminus & Coextensive” with that of an AO while the AO did not record satisfaction about the identity, genuineness & creditworthiness of the share subscribing companies during the remand proceedings.

3. The appellant craves the leave to make any addition, alteration, modification etc. of grounds either before the appellate proceedings, or in the course of appellate proceedings.”

4. Brief facts of the case as culled out from the records are that the assessee is a private limited company engaged in the business of dealing in jute. Loss of Rs. 92,77,983/- declared in the return of I.T.A. No.: 1867/Kol/2019 Assessment Year: 2012-13 M/s. Sarada Jute Mills Pvt. Ltd. income for AY 2012-13 furnished on 28.09.2012. On account of the reason of receipt of large share premium case of the assessee selected for scrutiny through CASS followed by validly serving of notices u/s 143(2) & 142(1) of the Act. During the course of assessment proceedings, the Assessing Officer (in short ld. 'AO') noticed that the assessee has received share capital of Rs. 16,02,500/- along with share premium of Rs. 6,24,97,500/-. Though the details as called for by the AO were filed but directors and alleged shareholders did not appear even when called by issuing summons u/s 131 of the Act. Further, ld. AO noticed that the assessee company is incurring losses consistently and it is surprising that even after suffering losses and not having solid track record, a huge premium of Rs. 390/- has been charged on the equity share of face value of Rs. 10/-. Based on this observation, ld. AO came to a conclusion that the assessee failed to explain the identity, genuineness and the creditworthiness of the alleged share applicants and the transactions and thus, drawing reference from the decision of this Tribunal in the case of M/s. Bisakha Sales Pvt. Ltd. vs. CIT [2014] 52 taxmann.com 305 (Kolkata- Trib.), added the portion of share premium of Rs. 6,24,97,548/- to the income of the assessee. In other words, ld. AO was satisfied with the genuineness of the share capital and identity and creditworthiness of share applicants giving share capital but disputed the genuineness of the share premium charged thereon.

5. Aggrieved, the assessee preferred appeal before ld. CIT(A) and filed complete details which contained some details filed for the first time before ld. CIT(A) who called for a remand report. Ld. AO Page 3 of 22 I.T.A. No.: 1867/Kol/2019 Assessment Year: 2012-13 M/s. Sarada Jute Mills Pvt. Ltd. vide remand report dated 08.03.2019 stated that the assessee company has filed copies of photo identity card, books of accounts, ITR, share application/allotment form, bank statement of the directors. Even the directors of the assessee company as well as directors of share holding companies appeared on 19.03.2019 and produced the requisite documents. Considering these factual aspects and that the assessee having successfully discharged the initial burden casted upon it by furnishing all necessary material and also producing the directors of the assessee company as well as share applicant companies, ld. CIT(A) held that ld. AO has not found anything inimical as regard to the assessee and the identity of the share subscribers, genuineness of the transaction and creditworthiness of the share subscribers have been proved and thus, no addition is called for u/s 68 of the Act. Accordingly, ld. CIT(A) deleted the impugned addition.

6. Now, the Revenue is in appeal before this Tribunal. Ld. D/R vehemently argued supporting the order of ld. AO and stated that when the assessee company is incurring huge losses consistently how can it command such a huge premium of Rs. 390/- on the face value of equity share of Rs. 10/- each which thus, indicates that the alleged sum has been received through accommodation entry provider companies and it is the assessee company’s own unaccounted income which has been routed in the form of share premium. Reliance heavily placed on the decision of this Tribunal in the case of Tribhuvan Dealtrade Pvt. Ltd. vs. ITO in order dated 16.02.2023 wherein also against the face value of Rs. 10/- share premium of Rs. 9,990/- was charged and the addition u/s 68 of the Act was confirmed. Page 4 of 22 I.T.A. No.: 1867/Kol/2019 Assessment Year: 2012-13 M/s. Sarada Jute Mills Pvt. Ltd.

7. On the other hand, ld. Counsel for the assessee apart from placing heavy reliance on the detailed finding of fact of ld. CIT(A), remand report furnished by the AO, also submitted that the alleged share subscriber companies are owned and controlled by common directors and shareholders. It is submitted that out of the total directors of the assessee company namely 1) Madan Lal Agarwal, 2) Sarada Devi Agarwal, 3) Binod Kumar Agarwal, 4) Ratan Lal Agarwala, 5) Mahabir Prasad Agarwala, 6) Pradip Agarwala, any one or more are the directors of the alleged share subscriber companies and therefore, the alleged sum is not a part of any accommodation entry but it is the fund of assessee’s own group of companies which have been received during the year for the purpose of expansion of the business of the company. Ld. Counsel for the assessee also submitted that the assessee company deals in the business of jute and the gross sales during the year are Rs. 7.22 Crore and the expenses incurred towards purchase of goods, manufacturing expenses etc. are Rs. 8.20 Crore approx. and such activity is being carried out regularly and charging share premium of Rs. 390/- is justified. It is submitted that the assessee company owns fixed assets, tangible assets worth Rs. 8.34 Crore (WDV) and therefore, the assessee company is carrying out the business regularly. He further, submitted that all necessary details required to explain the identity and the creditworthiness of the share applicants and genuineness of the transaction have been supplied to the Revenue authorities. Notices u/s 133(6) of the Act as well as u/s 131 of the Act have duly been responded by the recipients and replies have been filed directly to the AO along with the documentary evidences. He further, submitted that in the remand I.T.A. No.: 1867/Kol/2019 Assessment Year: 2012-13 M/s. Sarada Jute Mills Pvt. Ltd. report ld. AO has accepted that the assessee has filed all the details and even the directors of the assessee company as well as directors of the share subscriber companies appeared on 19.03.2019 and produced the documents as requisitioned. Reliance placed on the decision of Hon'ble Jurisdictional High Court PCIT vs. Sreeleathers reported in [2022] 448 ITR 332 (Calcutta) as well as in the decision of this Tribunal in the case of ITO vs. Inset commercial & Trading Co. (P) Ltd. in order dated 06.02.2023, ITO vs. M/s. Tara Re-Rolling Pvt. Ltd. in ITA No. 49/KOL/2021 order dated 01.05.2023 and on the judgment of Hon'ble Jurisdictional High Court in the case of CIT vs. Dataware Private Ltd. reported in ITAT No. 263 of 2011 dated 21.09.2011.

8. We have heard rival contentions, perused the records placed before us and carefully gone through the judgments and decisions referred relied by both the sides. Addition u/s 68 of the Act for unexplained cash credit in the form of share premium of Rs. 6,24,97,500/- received by the assessee company is in challenge before us at the instance of the Revenue. The assessee company which is in the regular business of manufacturing jute has issued 1,60,250 equity shares during the year having face value of Rs. 10/- and charged share premium of Rs. 390/- thereon. The AO has accepted the genuineness of the share capital of Rs. 16,02,500/- and identity and creditworthiness of the share applicants giving the share capital but disputed the genuineness of the share premium at Rs. 6,24,97,500/-. The assessee received the total sum of Rs. 6.41 Crore which included share capital of Rs. 16,02,500/- and share premium of Rs. 6,24,97,500/- from following companies: Page 6 of 22 I.T.A. No.: 1867/Kol/2019 Assessment Year: 2012-13 M/s. Sarada Jute Mills Pvt. Ltd. Sl. Name of Allottee No. of Equity Total Amount No. Shares of Rs. Paid (including 10/- each premium) F.V. in Rs. 1 Attabira Rice Mill Pvt. Ltd. 13750 55,00,000.00 2 Dabri Food Products Pvt Ltd. 17750 71,00,000.00 3 Hare Krishna Entertainment & 8750 35,00,000.00 Media 4 Pratik Realcon Pvt. Ltd. 16250 65,00,000.00 5 Rangpur Tea Association Ltd. 48500 194,00,000.00 6 Sarada Impex Pvt. Ltd. 14500 58,00,000.00 7 Sarada Overseas Pvt. Ltd. 23750 95,00,000.00 8 Shivshakti Ispat Pvt. Ltd. 17000 68,00,000.00 160250 6,41,00,000.00 9. During the course of assessment proceedings ld. AO has not doubted the identity, creditworthiness and genuineness of the share applicants investing the share capital of Rs. 16,02,500/- but has only doubted the genuineness of the share premium of Rs. 6,24,97,500/-. Ld. AO has alleged that the assessee company is incurring losses and then how can it fetch such huge premium of Rs. 400/-. We however, after going through the details filed by the assessee notice that there are six directors of the assessee company of which key persons are Madan Lal Agarwal and Binod Kumar Agarwal, and the alleged share applicant companies are part of the same group and in some companies Madan Lal Agarwal is the director or his relatives and in some cases Binod Kumar Agarwal or his relatives are directors. Therefore, undisputedly the alleges sum has been received from assessee group/sister concerns. When these facts were brought up before ld. CIT(A) he called for a remand report for the fresh documents filed by the assessee and after mentioning the facts of the remand report was convinced with the identity, creditworthiness and genuineness of the share applicants. The finding of ld. CIT(A) reads as follows:

I.T.A. No.: 1867/Kol/2019 Assessment Year: 2012-13 M/s. Sarada Jute Mills Pvt. Ltd. “5. The assessee has filed an appeal and has opted for six Grounds of Appeal

. Grounds of Appeal No. 2, 3, 4, 5 and 6 are general / consequential in nature and, therefore, arc not being adjudicated. I am adjudicating Ground of Appeal No. 1 at the very outset where an addition of Rs.6,41,00,000/- has been made by the Id. A.O u/s. 68 of the Income-tax Act, 1961.

6. In a recent decision in the case of NRA Iron & Steel Pvt. Ltd. in SLP (Civil) No. 29855 of 2018, the three ingredients as given above have been reinforced. In Para No. 3.5 of the decision of the Apex Court, it has been stated as under:- “3.5 The Respondent Company - Assessee was called upon to furnish details of the amounts received, and provide evidence to establish the identity of the investor companies, credit-worthiness of the creditors, and genuineness of the transaction. The AO issued a detailed questionnaire to the Assessee to provide information with respect to the amount of Rs. 17,60,00,000 shown to have been received as Share Capital/Premium from various legal entities. The AO gave various opportunities to the A.R. of the Assessee to attend the proceedings, and file necessary clarification on the queries raised.’’

7. In the decision of the Delhi High Court in C.I.T. vs. N.R. Portfolio (P) Ltd. 264 CTR 0258 which has relied on its own decision in C.I.T. vs. Nova Promoters Ltd. reported in 342 ITR 169, it has been adverted on the creditworthiness of the creditors and genuineness of the transactions. In the case of Hindusthan Tea Trading Co. Ltd. vs. C.I.T. reported in 263 ITR 0289 (Cal), the three principles have been articulated, even though the last mentioned was not a closely held company.

8. It is observed during the time of hearing before me that the Id. A.O. had not asked the vital details during the course of hearing which would substantiate the case of the Revenue or the appellant. It is evident from the impugned order that there was a degree of non- cooperation by the assessee. As such, the matter was remanded to the A.O. vide letter No. CIT(A)-1 /Kol./RR-Sarada Jute Mills/2018- 19/1056-1057 dated 08.03.2019, which is reproduced as under:- OFFICE OF THE COMMISSIONER OF INCOME TAX(APPEALS)-1, P-7, CHOWRINGHEE SQUARE, 7th FLOOR, KQLKATA-700069 No. CIT(A)-1/Kol./RR-Sarada Jute Mills/2018-19/Dated: 08.03.2019 To Page 8 of 22 I.T.A. No.: 1867/Kol/2019 Assessment Year: 2012-13 M/s. Sarada Jute Mills Pvt. Ltd. The Income Tax Officer, Ward-1(2), Kolkata. Sir, Sub : Remand proceedings in the case of M/s. Sarada Jute Mills Put. Ltd [PAN: AANCS4459PI for the Assessment Year 2012-13 for the purpose of appellate proceedings - matter regarding - Please refer to the above subject.

2. Mr. B K. Sahoo, PC A., appeared on behalf of the assessee on 06.03 201 9 He has given a detailed written submission, a photocopy of which is being enclosed herewith.

9. The report of the Id. A.O. was to reach the undersigned on 20.03.2019, but has eventually reached on 1 1.04.2019.

10. Report of Id. A.O., through his Addl. C.I.T., Range-1, Kolkata, was received on 11.04.2019. In the Remand Report, the Id. A.O. (endorsed by the Addl. C.I.T.) has recorded as following after conducting investigations at his end:- "As per the direction of the Ld. CIT(A)-1, Kolkata vide his letter No CIT(A)/Koi./Remand Report-Sarada Jute Mills/ 2018-19/ 1056 dtd. 08.03.2019 summons u/s 131 of the Income Tax Act 1961 was issued to the Director of the assessee company and also the Directors of the 8(eight) shareholding companies on 15.03.2019 fixing the date of hearing on 19.03.2019 which were duly served by the Income Tax Inspector attached to this office. The report submitted by the Inspector is kept on record The following documents/information were requisitioned from the director of the assessee company - (i) Copy of photo identity card and proof of address. (ii) Books of account for the relevant A Y. 2012-13. Furthermore the shareholders were requested to produce the under mentioned documents- (i) Copy of photo identity card and proof of address. (ii) Copy of acknowledgement of Return of income for AY. 2012-13. (iii) Copy of ITR for the A. Y. 2015-16 in full set. (iv) Copy of share application given to the assessee M/s. Sarada Jute Mills Pvt. Ltd. (v) Copy of share allotment from assessee company M/ s. Sarada Jute Mills Pvt. Ltd (vi) Copy of share certificate issued by M/s. Sarada Jute Mills Pvt. Ltd. (vii) Copy of Bank statement for A.Y. 2012-13. (viii) Copy of Balance sheet for AY. 2012-13 till date. The director of assessee Company as well as the directors of shareholding companies appeared on 19.03.2019 and produced the Page 10 of 22 I.T.A. No.: 1867/Kol/2019 Assessment Year: 2012-13 M/s. Sarada Jute Mills Pvt. Ltd. documents as requisitioned above. It is seen that 3 (three) directors appeared who are common directors in shareholding companies. The statement on oath of one of the Directors was recorded on 19.03.2019 and the proceeding of recording deposition u/s. 131 on the basis of documents producer including affidavit for other directors was completed on 08.04.2019. The same is placed on record. In this regard the photocopies of statement recorded u/s. 131 of the Income Tax on 1 9 03.2019 and 08.04.201 9 are enclosed herewith for your kind perusal and necessary action.”

13. There is no doubt that the Id. A.O. has not found anything inimical as regard to the assessee is concerned The same also stands endorsed by his senior Once, the Id A.O. is convinced about the identity, genuineness and creditworthiness, the same have to be accepted.”

10. Now, from the perusal of the finding of ld. CIT(A) we notice that there is complete cooperation on the part of the assessee by way of filing all the relevant details and documents necessary to prove the nature and source of the alleged sum and even the directors of the share applicant companies as well as the assessee company have appeared in person before ld. AO and furnished the details. Before us also ld. Counsel for the assessee has filed the complete set of details including the replies filed by the share applicants to the notices issued u/s 131 & 133(6) of the Act. The I.T.A. No.: 1867/Kol/2019 Assessment Year: 2012-13 M/s. Sarada Jute Mills Pvt. Ltd. details so filed are available in the paper book running into 1195 pages containing the following details:

Sl.No. Particulars 01 Copy of Order Sheet 02 Notice U/s 143(2) dated 08/08/2013 03 Copy of IT acknowledgement, Audited financial statement, Hard copy of Income Tax return filed In response to notice u/s 143(2) dated 08.08 2013 04 Copy of Notice U/s 142(1) dated 11/11/2013 05 Copy of Reply Filed in response to notice U/s 142(1) 06 Copy of Notice U/s 133(6) issued by AO 07 Copy of Reply filed in response to notice U/s 133(6) on 156 various dates Attabira Rice Mills Pvt Ltd Dabri Food Products Pvt Ltd Pratik Realcon Pvt Ltd Rangpur Tea Association Ltd Sarada Overseas Pvt Ltd 08 Copy of Summon notice U/s 131 Issued to director of the company and director of the shareholders company. 09 Reply Filed in response to notice u/s 131 issued by AO and place on records Attabira Rice Mills Pvt Ltd Binod Kumar Agarwal Dabri Food Products Pvt Ltd Hare Krishna Entertainment & Media Pvt Ltd Madan Lal Agarwal Pratik Realcon Pvt Ltd Rangpur Tea Association Ltd Sarada Devi Agarwal Serada Impex Pvt Ltd Sarada Overseas Pvt Ltd Shivshakti Ispat Pvt Ltd 10 Copy of Order u/s 143(3) of the LT. Act 1961 passed by AO 11 Copy of Form 35 along with Ground of appeal against order passed u/s 143(3). 12 Copy of Appeal Hearing Notices issued by CIT(A), Kolkata 13 Copy of Remand Report forwarded to CIT(A)-1, Kolkata by ACIT, Range- 1, Kolkata 14 Copy of notice of date fixed for hearing of the appeal u/s 250 of IT Act, 1961 15 Copy of Written submission before the Hon'ble CIT(A)-1, Kolkata dated 06-03-2019 16 Copy of Written submission before the Hon'ble CIT(A)-1, Kolkata dated 06-05-2019 17 Copy of Appellate Order and Grounds of Decision issued by the CIT(A)-1, Kolkata 18 Copy of Rectification Order u/s 154 of the IT Act, 1961 issued by the CIT(A)-1, Kolkata Page 12 of 22 I.T.A. No.: 1867/Kol/2019 Assessment Year: 2012-13 M/s. Sarada Jute Mills Pvt. Ltd.

11. From perusal of the details filed by the assessee we find merit in the contention of ld. Counsel for the assessee because firstly, the assessee company is carrying out regular business of manufacturing jute and turnover during the year is around Rs. 7.22 Crore, WDV of the fixed assets as on 31.03.2012 is around Rs. 8.34 Crore, accumulated reserves and surpluses including share capital are approx. Rs. 83 Crore. Secondly, ld. Counsel for the assessee has successfully proved that the share applicant companies are part of the same group and owned by the common directors or their relatives. Thirdly, a chart has also been placed before us depicting the networth of the of the share applicant companies and as on 31.03.2012 the networth of the share applicant companies are as follows:

Name of the Investor Networth of the Investor % of Networth invested Company Company in Assessee Company Attabira Rice Mill Pvt Ltd 5,06,23,137 10.86% Dabri Food Products Pvt 12,99,02,942.00 5.47% Ltd Hare Krishna 5,61,61,278.10 6.23% Entertainment & Media Pvt Ltd Pratik Realcon Pvt Ltd 9,17,41,519.59 7.09% Rangpur Tea 9,23,43,398.87 21. 01% Association Ltd Sarada Impex Pvt Ltd 14,94,58,360.74 3.88% Sarada Overseas Pvt 9,77,79,129.59 9.72% Ltd Shivshakti Ispat Pvt Ltd 18,88,75,260.00 3.60% 12. The above details of networth proves that the share applicant companies have sufficient creditworthiness to make investment in the assessee company.

“7. We have heard the rival contentions and perused the material available on record and have given our thoughtful consideration to the elaborate observations and findings given by the Ld. CIT(A) while giving relief to the assessee. At the outset, we note that notices u/s. 133(6) of the Act were issued by the Ld. AO to all the nine subscribers, who had replied giving all the details and documents required by the Ld. AO along with confirming the transaction of they making investment in the share capital of the assessee. We also take note of the undisputed fact of assessments/intimations issued by the department for all the share subscribers, which testifies the identity of these nine share subscribers. 7.1. From the perusal of the paper book and the documents placed therein, it is seen that all the share applicants are (i) income tax assessees, (ii) they are filing their income tax returns, (iii) share application form and allotment letter is available on record, (iv) share application money was made by account payee cheques, (v) details of the bank accounts belonging to share applicants and their bank statements, (vi) in none of the transactions there are any deposit of cash before issuing cheques to the assessee, (vii) all the share applicants are having substantial creditworthiness represented by their capital and reserves. 7.2. We also take note of the elaborate and well reasoned findings and decisions arrived at by the Ld. CIT(A) by taking into consideration all the details and documents placed on record. The relevant findings and decisions from para 5.8 are extracted as under: “5.8. Basically the law requires documentary evidences on record in dealing with the issue of authenticity. It is not the case of the AO that necessary documentary evidences are not on record but the only major reliance placed on his action is based on non attendance of the directors of the subscriber companies before him u/s 131 of the Act. It is no longer res Integra that such non attendance should be considered as a factor which should be used by the AO in coming to an adverse conclusion against the appellant. On an overall analysis of the issue, I find that the AO has not made out his case with cogent material on record that the appellant could come under the purview of section 68 of the Act with regard to share capital as rejected in the balance sheet when there is no finding with any cogent material evidence that the same was actually bogus in nature. It is accordingly observed that creditworthiness of the share subscribers to make investment in the share capital of the appellant company cannot be a disputed matter as per material facts on record. The aforesaid facts underlined by evidences clearly prove the identity of the share Page 15 of 22 I.T.A. No.: 1867/Kol/2019 Assessment Year: 2012-13 M/s. Sarada Jute Mills Pvt. Ltd. applicants, their creditworthiness and source of funds, as well as the genuineness of the transactions being investments in the share capital issued by the appellant, which was subscribed to by each of them. Thus, it is proved beyond any doubt or dispute that the share applicants are actually found to have subscribed to the share capital issued by the appellant during the year under consideration as clearly evident not only from their respective books of accounts but also from their audited accounts filed with the income tax authorities in relation to their own income tax assessments and the sources of such funds are also explained by each of the share applicants in their replies addressed to the AO. However, the AO had not brought these indisputable facts on record but acted on his whims and fancies. It is observed that the burden which lay on the appellant, in relation to section 68 of the Act, has been duly discharged by it and nothing further remains to be proved by it on the issue. Since the conditions precedent for discharging of burden of proof under the provisions of section 68 of the Act is met with adequate evidence, the addition made under such pretext deserves to be deleted. In this respect it is imperative to refer to the decision of the jurisdictional High Court in the case of CIT vs. Sagun Commercial (P) Lid. [ITA No. 54 of 2001 dated 17.02.2011) wherein it was held as follows: “After hearing the learned advocate for the appellant and after going through the materials on record, we are at one with the Tribunal below as well as the Commissioner of Income-tax (Appeals) that the approach of the Assessing Officer cannot be supported. Merely because those applicants were not placed before the Assessing Officer, such fact could not justify disbelief of the explanation offered by the assessee when details of Permanent Account Nos. payment details of shareholding and other bank transactions relating to those payments were placed before the Assessing Officer. It appears that the Tribunal below has recorded specifically that the Assessing Officer totally failed to consider those documentary evidence produced by the assessee in arriving at such conclusion. We, therefore, find no reason to interfere with the decision passed by the Commissioner of Income-tax (Appeals) and the Tribunal below and answer the questions formulated by the Division Bench in the affirmative and against the Revenue. The appeal is, thus, dismissed.” 7.4. Before arriving at our finding, we refer to the following judicial precedents to buttress our observations and conclusions: i) The decision of Hon’ble Jurisdictional High Court of Calcutta in the case of CIT v. Dataware Pvt. Ltd. in ITAT No. 263 of 2011 dated 21.09.2011 wherein Hon’ble jurisdictional High Court held that “After getting the PAN number and getting the information that the creditor is assessed under the Act, the Assessing officer should enquire from the Assessing Officer of the creditor as to the genuineness" of the transaction and whether such transaction has Page 16 of 22 I.T.A. No.: 1867/Kol/2019 Assessment Year: 2012-13 M/s. Sarada Jute Mills Pvt. Ltd. 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.” ii) Decision of Hon’ble Madras High Court in the case of CIT v. Creative World Telefilms P. Ltd. (2011) 333 ITR 100 (Mad) wherein it was held as under: “In the case in hand, it was not disputed that the assessee had given the details of name and address of the shareholder, their PAN/GIR number and had also given the cheque number, name of the bank. It was expected on the part of the Assessing Officer to make proper investigation and reach the shareholders. The Assessing Officer did nothing except issuing summons which were ultimately returned back with an endorsement "not traceable”. The Assessing Officer ought to have found out their details through PAN cards, bank account details or from their bankers so as to reach the shareholders since all the relevant material details and particulars were given by the assessee to the Assessing Officer. In the above circumstances, the view taken by the Tribunal could not be faulted. No substantial question of law was involved in the appeal." iii) Judgment of Hon’ble Jurisdictional High Court in the case of Exoimp Resources (India) Ltd. vs. CIT (supra), wherein it was held as follows: “It is incumbent upon the Assessing Authority to examine the explanation of the creditor and arrive at a conclusion as to whether the explanation was satisfactory. The conclusion arrived by the Assessing Authority is to be communicated to the assessee if such explanation is not considered satisfactory. If thereupon the assessee submits any comments or furnishes further information, in that event, the Assessing Authority has to examine the same and arrive at his own conclusion. The inbuilt safeguard provided in section 68 cannot be ignored by the Assessing Authority at his sweet will. The Assessing Authority can add the share capital as undisclosed income if no explanation is offered by the assessee. But since the details/explanations were offered, it was incumbent on the Assessing Authority to examine the same and arrive at a cogent conclusion. Assessing Officer having failed to discharge such obligation the addition is not sustainable in law.., case of CIT vs. Lovely Exports Ltd. (2008) 216 CTR 195 (SC) that where share application money.” 7.5. In the course of assessment proceeding, Ld. AO directed the assessee to produce the director of the assessee and also the directors of the subscriber companies along with relevant documentary evidence and details which was not complied with in Page 17 of 22 I.T.A. No.: 1867/Kol/2019 Assessment Year: 2012-13 M/s. Sarada Jute Mills Pvt. Ltd. full. Ld. Counsel submitted that mere non-appearance of directors of subscriber companies is no basis for invoking provisions of section 68 of the act for which he placed reliance on the decision of Hon’ble Supreme Court in the case of CIT v. Orissa Corporation (P) Ltd. (1986) 159 ITR 78 (SC) wherein it was held as under: “In this case the assessee had given the names and addresses of the alleged creditors. It was in the knowledge of the revenue that the said creditors were the income-tax assessees. Their index number was in the file of the revenue. The revenue, apart from issuing notices under section 131 at the instance of the assessee, did not pursue the matter further. The revenue did not examine the source of income of the said alleged creditors to find out whether they were credit-worthy or were such who could advance the alleged loans. There was no effort made to pursue the so-called alleged creditors. In those circumstances, the assessee could not do any further. In the premises, if the Tribunal came to the conclusion that the assessee had discharged the burden that lay on him, then it could not be said that such a conclusion was unreasonable or perverse or based on no evidence. If the conclusion was based on some evidence on which a conclusion could be arrived at, no question of law as such could arise. The High Court was, therefore, right in refusing to refer the questions sought for. Decision of the High Court affirmed.”

11. Further, in respect of ground nos. 3, 4 and 5, reference to the judgment of Hon’ble Supreme Court in the case of NRA Iron & Steel Pvt. Ltd. (412 ITR 161) is found to be distinguishable on facts in as much as in the said decision, Ld. AO has made extensive enquiries and some of investors were found to be non-existent. Upon going through the facts involved in that judgment, it is noted that, in the decided case the AO had made extensive enquiries and from that he had found that some of the investor companies were non-existent, which is certainly not the case before the undersigned. In the decided case, certain investor companies also failed to produce their bank statements proving the source for making investments in assessee company. In the facts of the present case however not only have the shareholders furnished their bank statements and investment schedules to establish the source of funds but they have also furnished their respective sources of funds in response to notices issued by the AO u/s. 133(6) of the Act.

12. We, therefore, respectfully following the judgment referred hereinabove by the Hon’ble Courts and also considering the facts and circumstances of the case, are of considered view that since the assessee has sufficiently explained the identity and creditworthiness of the share subscriber companies and the genuineness of the transaction of applying for the equity shares of the assessee company and since nothing contrary to the evidence filed by the assessee has been placed on record by the Revenue, except the reason that the directors of the share subscribing companies failed to appear to the I.T.A. No.: 1867/Kol/2019 Assessment Year: 2012-13 M/s. Sarada Jute Mills Pvt. Ltd. notices issued u/s 133(6) of the Act, we find no reason to interfere with the meritorious finding of the CIT(A). We accordingly, dismiss the grounds raised

by the revenue in this respect.”

15. Further, Hon'ble Jurisdictional Calcutta High Court in the case of Principal CIT vs. Sreeleathers reported in [2022] 448 ITR 332 (Cal) held as follows: “Section 68 of the Income-tax Act, of 1961, deals with cash credits. It states that 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. The crucial words in the provision are “the assessee offers no explanation". This would mean that the assessee offers no proper, reasonable and acceptable explanation as regards the amount credited in the books maintained by the assessee. No doubt the Act places the burden of proof on the taxpayer. However, this is only the initial burden. In cases where the assessee offers an explanation to the credit by placing evidence regarding the identity of the investor or lender along with their confirmations, the assessee has discharged the initial burden and, therefore, the burden shifts on the Assessing Officer to examine the source of the credit to be justified in referring to section 68 of the Act. After the Assessing Officer puts the assessee on notice and the assessee submits the explanation concerning the cash credit, the Assessing Officer should consider it objectively before he decides to accept or reject it. Where the assessee furnishes full details regarding the creditors, it is up to the Department to pursue the matter further to locate those creditors and examine their creditworthiness. While drawing the inference, it cannot be assumed in the absence of any material that there have been some illegalities in the assessee’s transaction. Held, dismissing the appeal, that the allegations against the assessee were in respect of thirteen transactions. The Assessing Officer issued a show-cause notice only in respect of one of the lenders. The assessee responded to the show-cause notice and submitted the reply. The documents annexed to the reply were classified under three categories namely: to establish the identity of the lender, to prove the genuineness of the transactions and to establish the Page 20 of 22 I.T.A. No.: 1867/Kol/2019 Assessment Year: 2012-13 M/s. Sarada Jute Mills Pvt. Ltd. creditworthiness of the lender. The Assessing Officer had brushed aside these documents and in a very casual manner had stated that merely filing the permanent account number details, and balance sheet did not absolve the assessee from his responsibility of proving the nature of the transaction. There was no discussion by the Assessing Officer on the correctness of the stand taken by the assessee. Thus, going by the records placed by the assessee, it could be safely held that the assessee had discharged his initial burden and the burden shifted onto the Assessing Officer to enquire further into the matter which he failed to do. In more than one place the Assessing Officer used the expression "money laundering". Such usage was uncalled for as the allegation of money laundering is a very serious allegation and the effect of a case of money laundering under the relevant Act is markedly different. The order passed by the Assessing Officer was utterly perverse and had been rightly set aside by the Commissioner (Appeals). The Tribunal had rightly deleted the additions under section 68.”