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Income Tax Appellate Tribunal, RANCHI BENCH, RANCHI
Before: Shri S.S.Godara & Dr. A.L. Saini
आदेश /O R D E R SA No.01/R/2020, ITA 203 & 225/R/19 A.Y. 2015-16 M/s Maa Chinnamastika Cement & Ispat P.Ltd. Vs. ACIT/DCIT-Cir-2, Ranchi Page 2 PER BENCH:- These assessee’s and Revenue’s cross-appeal(s) for assessment year 2015-16 arise against the Commissioner of Income Tax (Appeals)-Ranchi’s common order dated 01.03.2019 passed in case No.CIT(A), Ranchi/10182/2017-18 involving proceedings u/s 143(3) of the Income Tax Act, 1961; in short ‘the Act’. Heard both the parties. Case files perused
Both parties submit at the outset that the sole inter connected issue in these cross-appeal(s) is that of sec. 68 unexplained cash credits addition of ₹23,33,31,180/- (share capital / premium) and unsecured loans amount of ₹436,85,914/-; respectively. Corresponding entity-wise details read as follows:- Name Nature Amount in dispute M/s Raunak Ispat Enterprises Share capital 13,31,99,600/- Pvt. Ltd. M/s Exclusive Infra Project Pvt. Share capital & unsecured loan + 17,11,820/- Ltd. interest 15,0,370 M/s Tolsariya Viniyog Pvt. Ltd. Share capital & unsecured loan + 17,11,820/- interest 15,00,000/- M/s Mohenka Exports Pvt. Ltd. Share capital 1,20,720/- M/s Nagina Export and Finvest Unsecured loan + interest 18,00,000/- Pvt. Ltd. M/s Lupin Commodeal Pvt. Ltd. Unsecured loan + interest 5,43,706/- M/s Bhutoria Electricals Pvt. Unsecured loan + interest 19,23,728/- Ltd. M/s Escort Tradelink Pvt Ltd. Unsecured loan + interest 10,68,227/-
2. We find during the course of hearing that these entities are part of “Rungta” group only and this clinching fact has gone unrebetted from the Revenue side. Couple with this, there is further no quarrel that all the relevant notice(s) issued u/s 133(6) of the Act stood duly received / replied from these group entities’ side in assessee’s favour. We therefore make it clear that it is not an instance of involvement of accommodation entry provider(s) per se SA No.01/R/2020, ITA 203 & 225/R/19 A.Y. 2015-16 M/s Maa Chinnamastika Cement & Ispat P.Ltd. Vs. ACIT/DCIT-Cir-2, Ranchi Page 3 since all these investors as well as the assessee form part of the same group only. This tribunal’s co-ordinate bench decision in assessee’s case itself for assessment year 2013-14 involving decided on 30.11.2018 has declined Revenue’s identical stand as follows:- “3. In Ground No.2 of the appeal, the grievance of the assessee is that the CIT(A) erred in treating the loan money received as unexplained credit u/s.68 of the Act. 154.
The brief facts of the case are that the Assessing Officer observed that the following companies have invested the following amounts in the assessee company: 1. Nagina Exports & Finvest Pvt Ltd,. : Rs. 4,83,00,000 2. Tolasariya Viniyog Pvt Ltd. : Rs. 4,36,00,000 3. Lupin Commodeal Pvt Ltd. : Rs. 4,14,00,000 4. Jit Finance Ltd., : Rs. 1,00,00,000 5. Mohanka Exports Pvt Ltd. : Rs. 12,00,000 6. Ambika Commerce Pvt Ltd. : Rs. 10,00,000 7. M.R.Infradev Pvtd. : Rs. 3,50,000 8. M.R.International Pvt Ltd. : Rs. 3,00,000 Total: Rs.14,61,50,000 5. The Assessing Officer required the assessee to furnish the copy of bank account of companies making investment in assessee’s company, copy of share certificate issued, minutes of meeting & company of Form No.2 for relevant period, copy of AGM, copy of electricity bills, quantitative details of consumption of raw materials. The assessee produced details before the Assessing Officer. In the meantime, information under section 133(6) of the Act was called for from the parties, who invested in the assessee’s company. The Assessing Officer observed from the information called from the investment companies was not furnished by them and, therefore, he show caused the assessee why transactions made with these companies should not be disbelieved and disallowed. The Assessing Officer required the assessee to produce Alok Rungta and Shri Shri Ashish Rungta in January, 2016. In compliance to the same, Shri Alok Rungta appeared on 7.1.2016, whose statement was recorded partially. Thereafter, a summon was issued to Shri Alok Rungta on 1.2.2016 for appearing on 11.2.2016 but the same was not complied with. Similarly, the Assessing Officer issued summons to Shri Sudip Kumar Shaw and Mohamad Pyare on 12.1.2016 for compliance on 19.1.2016 but they also did not appear before the Assessing Officer. Subsequently, a commission was issued to the Director of Income Tax (INV) Unit2(4), Kolkata, asking to verify the genuineness of transaction made with various parties by the assessee. The Director of Income Tax (Inv) Kolkata submitted that a summon was issued to Jeet Finance Ltd., and Inspector of this charge was deputed to serve the same. However, the Inspector has reported that in the said address, no company was found in the name of Jeet Finance Ltd. The Inspector informed that in respect of Adi Ispat Pvt. Ltd., Giridih, the DIT(INV) Unit-2(24), Kolkata, informed that this Company is registered at Giridih, Jharkhand. Therefore, enquiry of this company could not be done. With regard to rest of the cases, it was informed that the summons were issued & served to the assessee. The assessee submitted a written explanation alongwith copy of IT acknowledgement, balance sheet, profit and loss account and ledger copy of the transaction made with M/s. Maa Chinna Mastika Cement & Ispat Pvt. Ltd.. Ranchi and same were forwarded to the Assessing Officer for perusal & necessary action. The Assessing Officer observed that personal appearance of Director was sought for SA No.01/R/2020, ITA 203 & 225/R/19 A.Y. 2015-16 M/s Maa Chinnamastika Cement & Ispat P.Ltd. Vs. ACIT/DCIT-Cir-2, Ranchi Page 4 recording the statement but no one appeared before the undersigned. He also observed that when Inspector of this charge was sent to the address to see whether the office of the said Company is functional at the given address or not, it was found that the said address was just for receiving the letter & a person who might be a peon was present to receive the letter, and no substantial activity was found there. Therefore, the Assessing Officer opined that said company is a shell Company & is only providing accommodation entry for enrooting assessee's own income through different channels. In support of the same, he observed that income and turnover declared by all these shell companies, namely, Nagina Exports and Finest Pvt Ltd., in assessment year 2013-14 was only Rs.26,177/-, Ambika Commerce Pvt ltd Rs.13,060/-, Escorts Tradlink Pvt Itd Rs 97 950/- , Lupin Commodeal Pvt Ltd Rs.43,439, MR International Pvt Ltd Rs.230/-, MR Infradev Pvt Ltd Rs.1290, and Tolasariya Viniyog Pvt Ltd., 44,230/-. He also observed that on perusal of balance sheet shows that these investing companies do not have any substantial business to invest substantially in any company. Further, the directors who were summoned by DIT(INV) Unit-2(4), Kolkata as well as by him did not appear before the respective authority to evade Cross-examination & to bring the truth on surface. Once the notice U/s. 131 is issued to the assessee/witness and he did not appear, the assessee is required to proof their identity and capacity to advance money & genuineness of transaction. In the case of the assessee, the onus on assessee was not discharged as he failed to produce the directors to whom summons were issued. Mere filing of Income return by the creditors is not enough to prove the genuineness of cash credit appearing in assessee's book. For this, he relied on the decision in the case of CIT vs Corlay Trading Company Ltd., (1999) 7 DTC 442 (Cal). Similarly, he relied on the decision of Hyderabad Bench of the Tribunal in the case of V Venkat Reddy & Company vs DCIT (2002) 26 DCT 458 (Hyd), wherein, it was held that mere filing of confirmatory letter to establish the identity of the creditors is not enough & it cannot be said the onus was discharged by the assessee. Therefore, he held that investments made by these companies are not considered genuine as the assessee’s explanation is not satisfactory in this regard. Hence, he presumed that assessee’s own money was routed through circuitous route by these companies and hence, added Rs.14,61,50,000/- to the income of the assessee as inform from undisclosed sources under section 68 of the Act.
6. On appeal, the CIT(A) confirmed the order of the Assessing Officer by observing as under: ‘5.10 I have considered the submissions of the appellant and have perused the assessment order. One thing that came out clearly from the statement of Shri Alok Rungta was that he was unaware of the activities of the companies which had extended loans to the appellant company even though he was a director in several of these companies as well. It is also a fact that the AO was considerate enough to suspend the statement to allow Shri Rungta to attend to some urgent business requirement. Shri Rungta stated that he would present himself for the completion of the statement in the second week of February but he did not abide by the statement made on oath. The AO issued another summon dated 1.2.2016 requiring the appellant to present himself on 11.2.2016 but this summon has not complied with. 5.11 The appellant has tried to make out a case that till 15.2.2016 he was busy with other court matters and thus was not able to comply with the summons. The claim of the appellant is that this detail was available with the AO, however, no further communication was issued by the AO before passing of the assessment order. The argument of the appellant is specious. The appellant is shunning all responsibilities from his side and shifting all the burden on to the AO. It was the appellant who got his statement temporarily SA No.01/R/2020, ITA 203 & 225/R/19 A.Y. 2015-16 M/s Maa Chinnamastika Cement & Ispat P.Ltd. Vs. ACIT/DCIT-Cir-2, Ranchi Page 5 suspended stating some urgent court matter in Delhi. He stated that he would present himself in the second week of February. This statement was made on oath before the AO u/s.131 of the Act. The appellant did not respond to the second summon. The assessment order was passed on 30.3.2016. There is no evidence on record to show that the appellant made any effort to present himself before the AO for the completion of his incomplete statement after 15.2.2016 and before the completion of the assessment proceedings which happened after a gap of one and a half months. Appellant’s contention is that all responsibility lay on the AO and that he was absolved of all legal responsibilities. Under the circumstances, I agree with the contention of the AO that the appellant deliberately shied away from making a statement before the AO and that the AO was justified in drawing adverse conclusions. 5.12 Similarly, both Sudip K Shaw and Sri Md Pyare did not attend in response to the summon. While recording his statement Shri Alok Rungta had stated that both were employees of the group companies belonging to the Rungta Group. However, both were shown as Directors. 5.13 It is also a fact that the companies extending loans to the appellant companies had very meagre income. The appellant has challenged this assertion of the AO stating that meagre income could be no proof of a company being shell company. This argument of the appellant is well founded as a stand alone argument. In circumstances such as that in the present case there could be no clinching evidence. The case has to be viewed by putting all the evidence together to see the Gestalt effect where the whole is more than the sum of its parts. 5.14 The Hon’ble Delhi High Court in a recent judgment in the case of Pr CIT vs Bikram singh ITS 55/2017 dated 25.8.2017 has held: ‘The transaction in the present appeal are yet another example of the constant use of the deception of loan entries to bring unaccounted money into banking channels. This device of loan entries continues to plague the legitimate economy of our country. As seen from the facts narrated above, the transactions herein clearly do not inspire confidence as being genuine and are shrouded in mystery, as to why the so called creditors would lend such huge unsecured, interest free loans-that too without any agreement. ‘ 5.15 It is also a fact that all the said companies were located at a single address where there was only one person to receive letters. None of the Directors of the companies which had extended loans to the appellant company appear before the DDIT (Inv), Kolkata. From the information available on the net (extracted below) all these companies in which Shri Alok Rungta is a Director function from single room ‘ DIAMOND PRESTIGE, ROOM No.310 41a, AJC Bose Road, Kolkata, WB-700017 IN’ Lupin Commodeal Pvt Ltd., is a private incorporated on 12 th July, 1994. It is classified as Non-govt. company and is registered at Registrar of Companies, Kolkata. Directors of Lupin Commodeal Pvt Ltd., are Alok Rungta, Ashish Rungta. Lupin Commodeal P. Ltd. Lupin Commodeal Pvt Ltd., Corporate identification number SA No.01/R/2020, ITA 203 & 225/R/19 A.Y. 2015-16 M/s Maa Chinnamastika Cement & Ispat P.Ltd. Vs. ACIT/DCIT-Cir-2, Ranchi Page 6 is (CIn) U51109 WB 1994 PTC 063901 and its registration number is 63901. Its email address is rungtaramgarh @gmail.com and its registered address is Diamond Prestige, Room No.310 41 AJC Bose Road, Kolkata-700017 IN Palak Projects Pvt Ltd., is a private incorporated on 5 th Sept 2008. It is classified as Non-govt. company and is registered at Registrar of Companies, Kolkata Director of Palak Projects Private Limited are Alok Rungta, Palak Project P Ltd Ashish Rungta Palak Projects Private Limited's Corporate Identification Number is (CIN) U45400WB2008PTC129137 and its registration number is 129137. Its Email address is rungtaramgarh@gmail.com and its registered address is DIAMOND PRESTIGE, ROOM NO.310, 41A, A.J.C., BOSE ROAD, KOLKATA, WB-700017 IN Nagina Exports & Finvest Pvt. Ltd. is a Private incorporated on 10 May 1991. It is classified as Non-govt company and is registered at Registrar of Companies, Kolkata. Directors of Nagina Exports & Finvest Pvt. Ltd. are Alok Nagina Exports Finvest Rungta, Ashish Rungta,. P. Ltd Nagina Exports & Finvest Pvt. Ltd.'s Corporate Identification Number is (CIN) U51909WB1991PTC051710 and its registration number is 51710. Its Email address isjiplramgarh@gmail.com and its registered address is DIAMOND PRESTIGE, ROOM NO.310, 41 A, A.J.C., BOSE ROAD, KOLKATA WB 700017 IN Escorts Tradelink Pvt. Ltd. is a Private incorporated on 28 March, 1996. It is classified as Non-govt company and is registered at Registrar of Companies, Kolkata. Escorts Tradelink P. Ltd. Directors of Escorts Tradelink Pvt. Ltd. are Alok Rungta, Ashish Rungta. Escorts Tradelink Pvt. Ltd.'s Corporate Identification Number is (CIN) U51909WB1996PTC078723 and its registration number is 78723. Its Email address is rungtaramgarh@gmail.com and its registered address is DIAMOND PRESTIGE, ROOM NO.310, 41A, A.J.C., BOSE ROAD, KOLKATA, WB-700017 IN Ambica Commerce Private Limited is a Private incorporated on 16th February, 2009. It is classified as Non-Govt company and is registered at Registrar of Companies, Kolkata. Directors of Ambica Commerce Private Limited are Mohmad Ambika Commerce P Ltd Pyare, Sudip Kumar Shaw, Ambica Commerce Private Limited's Corporate Identification Number is (CIN) U51109WB2009PTC132781 and its registration number is 132781. Its Email address is rungtaramgarh@gmail.com and its registered address is DIAMOND PRESTIGE, ROOM NO.310,41 A, A.J.C., BOSE ROAD, KOLKATA, WB-700017 IN Mr. Infradev Private Limited is a Private incorporated on 26th June, 2009. It is classified as Non-govt company and is registered at Registrar of Companies, Kolkata. Directors of Mr. Infradev Private Limited are Abhishek Rungta and Maya Rungta. M.R. Infradev P. Ltd Mr Infradev Pvt Limited’s Corporate Identification Number is (CIN) U70200WB2009PTC136320 and its registration number is 136320. Its Email address is rungtaramgarh@gmail.com and its registered address is SA No.01/R/2020, ITA 203 & 225/R/19 A.Y. 2015-16 M/s Maa Chinnamastika Cement & Ispat P.Ltd. Vs. ACIT/DCIT-Cir-2, Ranchi Page 7 DIAMOND PRESTIGE, ROOM NO.310, 41 A, A.J.C., BOSE ROAD, KOLKATA, WB700017 IN Mr. International Private Limited is a Private incorporated on 16th July, 2009. It is classified as Non-govt company and is registered at Registrar of Companies, Kolkata. Directors of Mr. International Private Limited are Abhishek Rungta and Maya Rungta. M.R. International P. Ltd. Mr. International Private Limited's Corporate Identification Number is (dN) U74900WB2009PTC136892 and its registration number is 136892. Its Email address is rungtaramgarh@gmail.com and its registered address is DIAMOND PRESTIGE, ROOM NO.310, 41 A, A.J.C., BOSE ROAD, KOLKATA, WB-700017 IN 7. The CIT(A) after relying on various decisions quoted in his order, confirmed the action of the Assessing Officer and dismissed the appeal of the assessee.
Before us, ld Authorised Representative explained the source of the loan taken by the assessee company from eight companies.
On the other hand, ld Departmental Representative supported the orders of lower authorities and relied on the following decisions and filed copies of the same: i) Shree Bhagwati Concast Pvt Ltd. Vs ITO (ITA No.33/Jp/15 A.Y. 2005-06 order dated 16.2.2018.(Jaipur Tribunal) ii) CIT vs. Nova Promoters & Finlease (P) Ltd. (ITA No.342 of 2011) order dated 15.2.2012 (Delhi H.C.) iii) CIT vs. NR Portfolio Pvt Ltd (Income Tax Appeal No.1019/2011) order dated 22.11.2013 (Delhi H.C.) iv) Rajmandir Estate Pvt Ltd. Vs Pr. CIT (g.a.hnO.509 OF 2016 with ITAT No.113 of 2016) order dated 13.5.2016 (Cal H.C.).
We have heard the rival submissions, perused the orders of lower authorities and materials available on record. In the instant case, the assessee company has claimed to have received loan from eight companies aggregating to Rs.14,61,50,000/- during the year under appeal. The assessee in support of the above loan transaction filed before the Assessing Officer the following documents: i) Confirmation of loan. ii) Copy of PAN card of loan creditors. iii) Audited balance sheet of loan creditors. iv) Bank statement of the loan creditors from where the loan was granted to the assessee.
However, the Assessing Officer not accepted the above loan and added the entire amount of Rs.14,61,50,000/- to the income of the assessee by invoking the provisions of section 68 of the Act. The Assessing Officer observed that out of eight companies, address of four companies are same. He also observed that the incomes declared by eight companies were meagre. The Director of the assessee company, who was also a Director in a number of companies from whom loan was taken by the assessee company, though once appeared before him in pursuance to summon issued under section 131 of the Act and his statement was also partially recorded but did not appear later on before the Assessing Officer for completing the recording of statement. In one of the lending company, namely, Ambica Commercial Pvt Ltd., SA No.01/R/2020, ITA 203 & 225/R/19 A.Y. 2015-16 M/s Maa Chinnamastika Cement & Ispat P.Ltd. Vs. ACIT/DCIT-Cir-2, Ranchi Page 8 from whom loan of Rs.10,00,000/- was accepted by the assessee company, Shri Mohd. Pyare and Shri Sudip K Shaw were the Directors. These two persons are employees of the companies belonging to the assessee group companies. These two persons also not appeared before the Income Tax Officer, Ward 2(1), Ranchi.
In view of above, the Assessing Officer treated the entire investment made by all the eight companies with the assessee company as non-genuine and he held that the assessee’s own money was routed through circuitous routes through different companies as under:
1. 1. Nagina Exports & Finvest Pvt Ltd,. : Rs. 4,83,00,000 2. Tolasariya Viniyog Pvt Ltd. : Rs. 4,36,00,000 3. Lupin Commodeal Pvt Ltd. : Rs. 4,14,00,000 4. Jit Finance Ltd., : Rs. 1,00,00,000 5. Mohanka Exports Pvt Ltd. : Rs. 12,00,000 6. Ambika Commerce Pvt Ltd. : Rs. 10,00,000 7. M.R.Infradev Pvtd. : Rs. 3,50,000 8. M.R.International Pvt Ltd. : Rs. 3,00,000 Total : Rs.14,61,50,000 13. On appeal, the CIT(A) confirmed the action of the Assessing Officer.
14. We find that the assessee company has claimed that all the eight companies from whom loan in question was taken belonged to the same group to which the assessee company belonged to. In other words, the loans in question were taken from group companies and not from any outsider. As the companies belonged to the same group, it was normal that the four of the companies had the same address. So, no adverse inference could have been drawn from the above fact.
15. In respect of Mohd. Pyare and Sri Sudip K Shaw, it was submitted that they were employee of the group companies. They were not the promoter directors but were appointed as Directors for the sake of day to day administrative convenience. Simply because a Director is not a promoter director, it cannot be branded as a dummy director.
16. Simply because the amount of loan advanced by each of the eight companies was more than the income of the relevant year, it cannot be concluded that the loans were not genuine. Because the loan can be advanced out of refund received of the loan advanced in earlier years or by disposal of other investments acquired in earlier assessment years or even from borrowings made.
17. Regarding the source from which the each of the 8 companies in question advanced loan to the assessee company, it was explained as under: Name Amount Source Ambica Commerce Pvt Ltd. 10,00,000.00 Loan Jeet Finance Pvt Ltd. 1,00,00,000.00 Refund of loan M/s. Infradev Pvt Ltd. 3,50,000.00 Loan M.R. International Pvt Ltd. 3,10,000.00 Loan Mohanka Exports Pvt Ltd. 12,10,000.00 Loan Lupin Commdean Pvt Ltd 4,14,00,000.00 Refund of loan/loan taken Nagina Exports & Finvest Pvt Ltd. 4,83,00,000.00 Refund of loan/loan taken/sale of shares Tolasariya Viniyog Pvt Ltd. 4,36,00,000.00 Refund of loan/loan taken 18. We find that no material has been brought on record to show that the assessee’s own money was brought in as in the form of loan by circuitous method. The above loan is in the realm of suspicion or surmises and not that by any material.
SA No.01/R/2020, ITA 203 & 225/R/19 A.Y. 2015-16 M/s Maa Chinnamastika Cement & Ispat P.Ltd. Vs. ACIT/DCIT-Cir-2, Ranchi Page 9 19. On appreciation of the entire facts of the case available, we find that the identity of eight loan creditors who are group companies are not in dispute. The genuineness of the transaction and the creditworthiness of the loan creditors stands explained from the confirmation account of bank statement of the creditors and the audited financial statement of the creditor companies. Thus, prima facie, the onus which was on the assessee company stands discharged.
Thereafter, the revenue could not bring any material apart from suspicion or surmises to show that the assessee’s own money was ploughed back vide the loan in question.
Further, it is observed from the confirmation of loan account of eight companies under consideration that the assessee company had paid interest on loan in question to all the eight loan creditors. The said payment of interest was considered by the lower authorities as genuine and no disallowance out of the same was made.
Hence, we are of the constrained to hold that the addition of Rs.14,61,50,000/- in question cannot be sustained. We, therefore, delete the addition of Rs.14,61,50,000/- and allow the appeal of the assessee.” Learned CIT-DR at this stage referred to the alleged introduction of undisclosed income by way of share capital / premium and unsecured loans he took us to pages 15 to 28 in the assessment order. He also referred to hon’ble apex court’s recent decision in PCIT Central-1 vs. NRA Iron & Steel Pvt. Ltd. SLP No.29855 of 2018.
We do not find force in either of these arguments. We make it clear that hon’ble apex court’s decision and other judicial precedents (supra) herein above do not involve an instance of group entity turning out to be share subscribers. The same is distinguished therefore Coming to other arguments, we find that this assessee has satisfied all the three parameters namely identity, genuineness and creditworthiness of the group entities qua both share capital / premium as well as unsecured loans in question. We reiterate that learned co-ordinate bench (supra) has already considered at least four entities M/s Tolasariya Viniyog Pvt. Ltd., M/s Mohanka Exports Pvt. Ltd, M/s Nagina Export & Finvest Pvt. Ltd., & M/s Lupin Commedeal Pvt. Ltd. (supra) and held that same as genuine parties.
4. Learned CIT-DR took us to the Assessing Officer’s detailed discussion in his assessment order dated 30.12.2017 (page-2 onwards) inter alia SA No.01/R/2020, ITA 203 & 225/R/19 A.Y. 2015-16 M/s Maa Chinnamastika Cement & Ispat P.Ltd. Vs. ACIT/DCIT-Cir-2, Ranchi Page 10 indicating that although this taxpayer had claimed the foregoing four investor(s) as group entities, it could not satisfactorily discharge its onus of proving genuineness and creditworthiness thereof. More particularly since the said entities had been having meagre sources of business income in the corresponding time span. And that the assessee’s four so-called group investors; although sent their replies in respect to sec. 133(6) process before the assessing authority during scrutiny, chose not to appear beofre him. Coupled with this, M/s Raunak Ispat Enterprises Pvt. Ltd. was also found subjected to similar sec 68 addition of Rs.492,888,019/- in assessment year 2012-13 whereas we are dealing with assessment year 2015-16. The Assessing Officer declined assessee’s plea that the impugned addition to this extent leads to double assessment of the very sum in its hands. He therefore considered financials of all these entities to observe that the said alleged meagre sums nowhere justified their respective investments in assessee’s share capital / premium. He also took note of the dubious mechanism employed by all these group companies to introduce unaccounted money(ies) in the garb of share capital. In his opinion, the mere fact of the investor entities turning out to be group concerns would not help the assessee in view of the overwhelming doubtful financials, their common director Shri Alok Rungta’s deposition(s) during survey and thereafter failing to throw light on various clinching aspects including the corresponding board’s resolutions, three of the said entities having common email ids & addresses in Kolkata, the local office attendant’s statement unable to explain their business activities and the alleged five folded money trial wherein the assessee was sought to be established as the alternate beneficiary (pages 15-24 in assessment order), non-appearance of two common director(s) S/Sh Mohammad Pyare and Sudip Kumar Shaw (supra) were found to be key reasons for making the impugned addition. Both these persons were found to be director(s) in many such entities on Ministry of Corporate Affairs DINS. They were held as mere dummy directors since based in Jharkhand. All this formed sufficient reasoning for the Assessing Officer to add the impugned share capital of SA No.01/R/2020, ITA 203 & 225/R/19 A.Y. 2015-16 M/s Maa Chinnamastika Cement & Ispat P.Ltd. Vs. ACIT/DCIT-Cir-2, Ranchi Page 11 Rs.23,33,31,810/- as bogus unexplained cash credits as upheld in the CIT(A)’s lower appellate discussion.
We have given our thoughtful consideration to rival pleadings against and in support of the impugned share capital / premium additions. Case records comprising of various detailed paper books stand perused. There is no dispute that the assessee has declared the impugned share capital / share premium to have come from group entities. We make it clear that this clinching “group entities” relation has gone unrebutted from the department side. Hon Gujarat high court’s decision Tax Appeal No. 1180 of 2018 Principal Commissioner of Income Tax-2 vs. Gyscoal Alloys Ltd. (supra) (upholds tribunal similar conclusion in case of unexplained share capital / premium coming from group entities in DCIT vs. Gyscoal Alloys Ltd. dated 06.04.2018) as follows:- “The issue pertains to the share application money received by the respondent-asses see-company. The Assessing Officer added a sum of Rs. 9.99 Crores [rounded off] in the hands of the assessee with the aid of Section 68 of the Income- tax Act, 1961 ["the Act" for short]. CIT[A] deleted such addition primarily on the ground that the assessee had established the source, genuineness of the transactions and the creditworthiness of the investors. In further detailed' consideration, the Tribunal confirmed the view of CIT[A], making the following observations :- "I have carefully considered the facts of the case, the assessment order and the written submission of the appellant. The appellant has received an amount of Rs. 9,99,99,900/- on account of share capital and share premium from M/s. General Capital and Holding Co. Pvt. Ltd, Ahmedabad during the year. The AO held that the creditworthiness and the genuineness of the transaction were not proved by the appellant and accordingly made the addition under Section 68 of the Act for the above amount. The appellant has submitted that all three ingredients such as, credit worthiness, genuineness and the identity of the share applicant have been proved and therefore, the addition should not have been made by the AO. CITAXAP/l180/20 18 ORDER During the course of appellate proceedings, the assessment records were also obtained from AO and the same have also been examined by me to ascertain the facts correctly. The share applicant company M/s. General Capital has been duly con finned the fact of making investment in the appellate company. The amounts have been received through banking channel. The same are duly reflected in the annual accounts of that company. The extracts of the bank statement which have been filed before me during the course of appellate proceedings as well as before the AO clearly show that there are no cash deposits as mentioned by the AO in the assessment order. The observation of the AO that the cash has been deposited and subsequently cheques were issued is factually SA No.01/R/2020, ITA 203 & 225/R/19 A.Y. 2015-16 M/s Maa Chinnamastika Cement & Ispat P.Ltd. Vs. ACIT/DCIT-Cir-2, Ranchi Page 12 incorrect. The director of the company also attended before AO and confirmed the fact. It is also noted that both the companies, that is the appellant company as well as the share applicant are managed by the same group of persons. Honourable High Court of Gujarat has consistently held that if the assessee has given sufficient proof in respect of the share application, no addition can be made in the hands of the assessee. If the AO has any doubt about the source of the share applicant further investigation can be made in the hands of the share applicant, but not in the case of the appellant. ." CITAXAP/l180/2018 ORDER It can thus be seen that the entire Issue is based on appreciation of material on record. CIT[A] and the Tribunal concurrently came to the conclusion that the assessee had discharges its basic onus. The investors have confirmed the transactions. Such transactions were carried out through the banking channel. The director of the investing company had also appeared before the Assessing Officer and also con finned the transactions. The CIT[A] and the Tribunal also did not confirm the Assessing Officer's finding that the assessee failed to establish the creditworthiness or genuineness of the transactions. No question of law arises. Tax Appeal is dismissed.”
The Revenue further fails to dispute the co-ordinate bench’s discussion (supra) has taken note of the Assessing Officer’s multi-folded reasoning i.e. Mr. Alok Rlengta’s survey and post survey’s statement, dummy directors S/Sh Muhammad Pyar and Sudip Shaw, suspicious financial statement (supra) to hold that these group entities are very much genuine and creditworthy investors. And also that the CIT(A)’s has relied upon his order in said earlier assessment year which already stands reversed. We also note that the factual position is no different in case of the remaining two investors parties namely M/s Raunak Ispat Enterprises Pvt. Ltd. and M/s Exclusive Infra Projects Pvt. Ltd., (supra) as well wherein the learned lower authorities adopted the very reasoning to decline assessee’s explanation without drawing any distinction on facts or law. We inter alia take into account all these factual and legal aspects as well as the relevant case records; including the latter two entities regular assessments alongwith their audit reports bank statements, returns & source of source and sec. 143(3) assessment, to hold that the assessee has successfully discharged its onus of proving identity, genuineness and creditworthiness of its share investors parties.
SA No.01/R/2020, ITA 203 & 225/R/19 A.Y. 2015-16 M/s Maa Chinnamastika Cement & Ispat P.Ltd. Vs. ACIT/DCIT-Cir-2, Ranchi Page 13 7. We now come to the latter limb of unsecured loan addition issue of Rs.436,85,914/- treated as unexplained cash credits during the course of assessment and restricted to Rs.93,36,031/- only in the CIT(A)’s discussion as under:- “9. The 3rd issue raised by the AR relating to ground nos. 2 & 6 was with respect to the addition of Rs.4,36,85,914/- being the unsecured loan and interest added U/s 68. This issue was briefly argued in 3 parts by the AR as mentioned in his written submissions. The points raised were:- • Companies to whom interest was paid for the opening balance of loan amount and no fresh loan was received during the year under consideration. • Companies to which the interest was paid against part loan amount received during the year. • Company namely M/s Bhutoria Electricals Pvt. Ltd. which had a opening debit balance for the year under consideration. 9.1 It is seen from the order of assessment that the assessing officer making the above addition had made a similar finding in all cases stating that the genuineness, creditworthiness and the identity could not be proved and as such, the addition of unsecured loan amount and the interest paid is being made U/s 68 of the IT Act.
9.1.1 The AR of the appellant along with the ledgers of each company has filed a chart of the above addition which is reproduced herein below: Sl.No. Name Principal Amount Interest Paid Total Received (including TDS) 1. M/s Naina Export & 18,00,000 33,70,969/- 51,70,969/- Finvest Pvt. Ltd. 2 M/s Tolasariya Viniyog 15,00,000 33,79,782 48,79,782/- Pvt. Ltd. 3 M/s Lupini Commodeal 10,00,000 22,69,395 32,69,395/- Pvt Ltd. 4 M/s Mohanka Export Pvt. --- 98,540 98,540/- Ltd., 5 M/s Bhutoria Electricals 1,90,94,150 Pvt., Ltd. (1,71,79,150 was the opening 8,728 1,91,02,878/- balance in debit side i.e. assessee company was to receive the same in beginning of the year, however received 1,90,94,150) 6 M/s Escorts Tradlink Pvt. 10,50,000 18,227 10,68,227/- Ltd. 7 M/s JIT Finance Pvt. Ltd., ---- 12,11,551 12,11,551/- 8 M/s Exclusive Infra Total amount 15,00,370/- projects Pvt. Ltd. received (balance amount Rs.9,98,00,000/- i.e. amount out of which received less SA No.01/R/2020, ITA 203 & 225/R/19 A.Y. 2015-16 M/s Maa Chinnamastika Cement & Ispat P.Ltd. Vs. ACIT/DCIT-Cir-2, Ranchi Page 14 shares allotted for amount Rs.9,82,99,630/- converted into (addition made share capital) above) 9 M/s Raunak Ispat Total amount 400/- (balance Enterprises Pvt. Ltd. received amount i.e. Rs.13,32,00,000/- amount received out of which less amount shares allotted converted into for4 share capital) Rs.13,31,99,600/- (addition made above) 10 M/s R M Iron & Steel Pvt. ---- 45,81,148 45,81,148/- Ltd., 11 M/s R M Conscast Pvt. 5,43,706 5,17,862 10,61,568/- Ltd., 12 M/s Sidhi Vinayak Loh ---- 5,94,827 5,94,827/- Ydyog Pvt. Ltd. 13 Aloke Steel Industries ----- 11,46,259 11,46,259/- Pvt. Ltd. 2,49,87,856 1,38,17,506 4,36,89,914/- 9.2 Considering the findings drawn by the assessing officer in the order of assessment and the submissions put forward by the AR, the issue under consideration is adjudicated as under:- 9.2.1 With respect to M/s Nagina Export & Finvest Pvt. Ltd., M/s Tolasariya Viniyog Pvt. Ltd. M/s Lupin Commodeaal Pvt. Ltd and M/s RM Concast Pvt. Ltd., it is seen that the assessing officer has made the addition of the principal amount + the interest amount wherein the interest paid is more than the principal received during the year. A table showing the complete details of the same is reproduced below. The AR pointed out that the amount of principal which has been added was received by the appellant company only on 31/03/2015, being the last date of the financial year. Further interest was also paid on the amount of opening balance which was brought forward from the previous year. The AR also argued that for the earlier years, no such addition has been made for the principal amount received din the course of regular assessment or reassessment U/s 147/143(3). Moreover, no addition for the interest amount paid can be made U/s 68 and that never in past has the interest payment been disallowed. Name Principal Amount Interest paid Addition amount received (including TDS) M/s Nagina Export & Finvest 18,00,000 33,70,969/- 51,70,969/- Pvt Ltd. M/s Tolasariya Viniyog Pvt. Ltd. 15,00,000 33,79,782 48,79,782/- M/s Lupin Commodeal Pvt. Ltd. 5,43,706 5,17,862 10,61,568/- Total 48,43,706/- 95,38,008/- 1,43,81,714/- 9..2.2. The ledger for the same is scanned and printed below:- Maa Chhinnamastika Cement & Ispat Pvt. Ltd. At-Hehat, P.O. –Barkakana, Dist. Ramgarh NAGINA EXPORT & FINEVEST Pvt. Ltd. Ledger Account Diamond Prestige, Room No. – 310 41A, AJC Bose Road, Kolkata 1-Apr-2014 to 31-Jan-2019 Date Particulars Vch Vch Debit Credit Type No.
SA No.01/R/2020, ITA 203 & 225/R/19 A.Y. 2015-16 M/s Maa Chinnamastika Cement & Ispat P.Ltd. Vs. ACIT/DCIT-Cir-2, Ranchi Page 15 1-4-2014 Dr. Opening Balance 4,51,93,886.7 24-03-2015 Cr. S.B.I.C.C. Ranchi- 1311 27,58,065.00 10687248050 Payment Ch.No.591694 USED FOR RTGS 25-3-2015 Dr. S.B.I.C.C. Ranchi- 10687248050 Receipt 1065 BEING RTGS REVERSED 27,58,065.00 DATED 24.03.15 Cr. SBI C.C. Ranchi-10687248050 Ch.No.591705 USED FOR RTGS Payment 1319 27,58,055.00 Cr. Share Application A/c BEING APPLICATION RECEIVED FOR 85271 EQUITY 1370 4,51,93,66330.00 SHARES OF RS 100/- EACH ON THE PREMIUM OF RS 430/- PER accepte SHARES AS PER SHARE d APPLICATION DATED 25.03.15 31-3-2015 Cr. TDS (Payable) 3,07,253.00 BEING TDS DEDCTED ON INTEREST Journal ON LOAN @ 10% Dr Interest on U/Loan BEING INTEREST PROVIDED @ 9% Journal 30,64,517.00 P.A for 275 DAYS AS PER VOUCHER Dr. S.BI C.C Ranchi-106872480050 BEING AMOUNT RECEIIPT Receipt 1109 15,00,000.00 THROUGH RGS- HDFCR52015033161500506 Cr. Closing Balance 4,83,84,349.00 4,98,84,571.70 15,00,222.70 1-8-2015 Dr. Opening Balance 4,98,84,571.70 4,98,84,571.70 Maa Chhinnamastika Cement & Ispat Pvt. Ltd. At-Hehat, P.O. –Barkakana, Dist. Ramgarh Lupin Commodeal Pvt. Ltd. Ledger Account Diamond Prestige, Room No. – 310 41A, AJC Bose Road, Kolkata 1-Apr-2014 to 31-Jan-2019 Date Particulars Vch Vch Debit Credit Type No. 1-4-2014 Dr. Opening Balance 3,04,25,310.20 24-03-2015 Cr. S.B.I.C.C. Ranchi- 10687248050 Payment 1309 18,56,777.00 Ch.No.591692 USED FOR RTGS 25-3-2015 Cr. Share Application A/c BEING APPLICATION RECEIVED FOR Journal 1370 3,04,25,180.00 57406 EQUITY SHARES OF RS 100/- EACH ON THE PREMIUM OF RS 430/- PER SHARES AS PER SHARE APPLICATION DATED 25.03.15 31-3-2015 Cr. TDS (Payable) BEING TDS DEDCTED ON INTEREST 2,06,309.00 ON LOAN @ 10% DR Interest on U/Loan BEING INTEREST PROVIDED @ 9% Journal 20,63,086.00 P.A upto 31.212.2014 Dr. S.BI C.C Ranchi-10687248050 BEING AMOUNT RECEIIPT Receipt 1107 10,00,000.00 THROUGH RGS- HDFCR52015033161497324 Cr. Closing Balance 3,24,88,266.00 3,34,88,396.20 10,00,130.20 3,34,88,396.20 3,34,88,396.20 1-3-2016 Dr. Opening Balance
9.2.3 The findings of the AO as per the assessment order for the year under consideration as well as the earlier years and the oral and written submission of the AR have been considered. After considering all the facts and circumstances of the SA No.01/R/2020, ITA 203 & 225/R/19 A.Y. 2015-16 M/s Maa Chinnamastika Cement & Ispat P.Ltd. Vs. ACIT/DCIT-Cir-2, Ranchi Page 16 case for the year under consideration and for A.Y 22013-14 including the order of the AO as well as the order of the Learned. CIT(A) and also in view of my findings in para 8.2 above, I hereby confirm the addition on account of principal amount totaling to Rs.48,43,706/- u/s 68 in the name of above mentioned companies. As regards the addition u/s 68 with respect to interest, I find lot of force in the argument of the AR as mentioned in the written submissions along with the documents placed on record. it is seen that the opening balance of the loan amounts as reflected in the ledger account stands accepted and no addition for the same was made in the past as per record and assessment order submitted by the AR. As such, no addition for the interest paid against the same can be made. On perusal of the earlier assessment orders, it has been ascertained that the AO has never ever examined and given a finding that the principal amounts received in the earlier years which is part of opening balance have not been utilized for the purpose of business. Under these circumstances, there is absolutely no justification for disallowance of interest of the principal amount borrowed in the earlier years and the AR has submitted that the respective principal amounts were duly utilized for that purpose of business. Moreover, as per the provisions of the Act, disallowance of interest cannot be made u/s 68 and the relevant specific provisions for disallowance of interest is section 36(1)(iii). The AO has not made any effort to ascertain and to establish that the principal amounts have not been utilized for the business either as per the assessment orders for the year under consideration or as per the assessment order of the earlier years. Therefore, it is held that there is absolutely no justification for disallowance of interest pertaining to the opening balance. However, as per the assessment order for the year under consideration as well as the decision as per this appellate order with respect to the principal amount received during the year which is added U/s 68 which has been confirmed as per this order, interest u/s 36(1)(iii) is not allowable on the principal amount. The AR reiterated that the principal amount was received only on 31/03/2015 and therefore the AO is directed to disallow the proportionate interest u/s.36(1)(iii). The remaining addition on account of interest is hereby deleted. 9.3 For M/s Mohanka Export Pvt. Ltd, M/.s JIT Finance Pvt. Ltd., M/s RM Iron & Steel Pvt Ltd., M/s Sidhi Vinayak Loh Udyog Pvt. Ltd., and M/s Alok Steel Industries Pvt Ltd., it is seen that the assessing offier has made the addition only on account of the interest amount and no principal amount was r4eceived during the year and therefore there was no addition of princip0al amount. The details furnished by the AR is tabulated below:- Name Principal Amount Interest Paid Addition amount received (including TDS) M/s Mohanka Export ---- 98,540 98,540/- M/s JIT Finance Pvt Ltd. ----- 12,11,551 12,11,551/- M/s R./M Iron & Steel Pvt. Ltd. ----- 45,81,148 45,81,148/- M/s Sidhi Vinayak Loh Udyog Pvt. ------ 5,94,827 5,94,827/- Ltd. Aloke Steel Industries Pvt. Ltd. ----- 11,46,259 11,46,259/- Total ---- 76,32,325/- 76,32,325/- 9.3.1 The findings of the AO as per the assessment order for the year under consideration as well as the earlier years and the oral and written submissions of the AR have been considered. As regards the addition u/s 68 with respect to interest, I find lot of force in the argument of the AR as mentioned in the written submissions along with the documents placed on record. On perusal of the earlier assessment orders, it has been ascertained that the AO has never ever examined and given a finding that the principal amounts received in the earlier years as per assessment order U/s 143(3) and/or 147 have not been utilized for the purpose of business.
SA No.01/R/2020, ITA 203 & 225/R/19 A.Y. 2015-16 M/s Maa Chinnamastika Cement & Ispat P.Ltd. Vs. ACIT/DCIT-Cir-2, Ranchi Page 17 Moreover, there was no addition or disallowance of interest as per the assessment order for earlier years. Under these circumstances, there is absolutely no justification for disallowance of interest of the principal amount borrowed in the earlier years and the AR has submitted that the respective principal amount was duly utilized for the purpose of business. Moreover, as per the provisions of the Act, addition of interest cannot be made u/s. 68 and the relevant specific provisions for disallowance of interest is section 36(1)(iii). Further, the AO has not made any effort to ascertain and to establish that the principal amount being the opening balance have not been utilized for the business either as pr the assessment order for the year under consideration or as per the assessment order of the earlier years. Moreover, the AR submitted that the principal amounts borrowed in the earlier years were duly utilized for the purpose of business of the appellant. In view of these facts, it is held that there is absolutely no justification for disallowance of interest pertaining to the opening balance especially when there is no finding that the principal amounts were not utilized for the purpose of business either as per present assessment order or as per earlier assessment orders. Therefore, the addition of interest amount made U/s 68 for above mentioned companies is not justifiable and hence the addition on this account is hereby deleted. 9.4 For M/s Bhutoria Electricals Pvt Ltd. the assessing officer made an addition of Rs.1,91,02,878/-. The AR pointed out that out of the above, Rs.1,71,79,150/- was the opening debit balance i.e. the appellant was to receive the same from M/s Bhutoria Electrical Pvt Ltd., As such, the AR argued that no addition of this amount can be made U/s 68 in the hands of the appellant as the same was receivable as on 01/04/2014. The AR supported his contention with the copy of the audited accounts and balance sheet as n 31/03/2014 wherein it was submitted that the said amount of Rs.1,71,79,150/- is also appearing in the audited balance sheet in the asset side under Trade Receivables. Further, the AR also furnished the ledger account of this company, on perusal of which, it is ascertained that the said amount of Rs.1,71,79,150/- was received out of the opening balance as on 01/04/2014 and the same was received by the appellant on various dates till 20/12/2014. The ledger for the same is scanned and printed below:- Maa Chhinnamastika Cement & Ispat Pvt. Ltd. At-Hehat, P.O. –Barkakana, Dist. Ramgarh BHUTORIA ELECTRICALS PVT. LTD. Ledger Account Diamond Prestige, Room No. – 310 41A, AJC Bose Road, Kolkata 1-Apr-2014 to 31-Jan-2019 Date Particulars Vch Vch Debit Credit Type No. 1-4-2014 Cr. Opening Balance 1,71,79,150 20-5-2014 Dr. S.B.I.C.C.Ranchi- Receipt 192 10,00,000.00 10687248050 HDFCH 30-5-2014 Dr. S.B.I.C.C. Ranchi- Receipt 198 8,50,000.00 10687248050 Ch. No. HDFCH 14-8-2014 Dr. S.B.I.C.C. Ranchi- Receipt 465 19,29,150.00 10687248050 RTGS HDFCR52014081452829690 16-8-2014 Dr. S.B.I.C.C. Ranchi- 8,00,000.00 Receipt 466 10687248050 RTGS RECIIVED INTO A/C HDFCR5201481652868552 4-9-2014 Dr S.B.I.C.C. Ranchi-1068724850 Receipt 504 18,00,000.00 BEING AMOUNT RECEIVED FROM THROUGH RTGS HDFCR52014090453498439 Dr. S.B.I.C.C. Ranchi- 22-10-20104 SA No.01/R/2020, ITA 203 & 225/R/19 A.Y. 2015-16 M/s Maa Chinnamastika Cement & Ispat P.Ltd. Vs. ACIT/DCIT-Cir-2, Ranchi Page 18 10687248050 Receipt 597 25,00,000.00 BEING AMOUTN RECEIVED THROUGH RTGS HDFCR52014102255216188 Dr. S.B.I.C.C. Ranchi- 10687248050 BEING AMOUTN Receipt 598 35,00,000.00 RECEIVED THROUGH RTGS HDFCR52014102255216477 Dr. S.B.I.C.C. Ranchi- 13-11-2014 Receipt 623 35,00,000.00 10687248050 BEING AMOUNT RECEIVED THROUGH RTGS HDFCR520141111355933782 20-12-2014 S.B.I.C.C. Ranchi- Receipt 717 23,00,000.00 Dr. 10687248050 HDFCR 16-2-2015 Dr. S.B.I.C.C. Ranchi- 7,15,000.00 Receipt 900 106877248050 BEING AMOUNT RECEIVED THROUGH RTGS 24-3-2015 Cr. S.B.I.C.C. Ranchi- 1312 7,140.00 Payment 10687248050 Ch. No. 591700 USED FOR RTGS 31-3-2015 Cr. TDS (Payable) 794.00 Journal BEING TGDS DEDUCTED ON INTEREST ON LOAN @ 10% Dr. Interest on U/Loan BEING INTEREST PAYABLE @ 9% P.A. FFOR 45 DAYS AS PER Journal 869 7,934.00 VOUCHER. Dr. S.B.I.C.C. Ranchi- 10687248050 Receipt 1108 12,00,000.00 BEING AMOUTN RECIPT THROUGH RTGS- HDFCR52015033161491081 Carried Over 1,71,87,084.00 1,91,02084.00 Continued
9.4.1 For In view of thee above, AO is directed to delete the part addition of Rs.1,71,79,150/-. However, the remaining addition of Rs.19,23,637/- is confirmed in light of my findings above with respect to section 68 as per para 9.2.3. Moreover, the addition made U/s 68 for interest amount of Rs.8,728/- is deleted and in lieu of that, AO is directed to disallow the said amount U/s 36(1)(iii). 9.5. With respect to M/s Escort Trade Link Pvt. Ltd, M/s Exclusive Infraprojects Pvt Ltd., and M/s Raunak Ispat Enterprises Pvt. Ltd., it is seen that the assessing officer has rightly made the addition for the principal amount received during the year under section 68. The details furnished by the AR is tabulated below:- Name Principal Amount Interest Paid Addition amount received (including TDS) M/s Escorts Tradelink Pvt. Ltd. 10,50,000 18,227 10,68,227/- M/s Exclusive Infraprojects Pvt Ltd. Total amount 15,00,370/- received (balance amount Rs.9,98,00,000/- i.e. amount out of which shares received less allotted for amount converted Rs.9,82,99,630/- into share capital) (addition made above) M/s RaunakIspat Enterprises Pvt. Total amount 400/- (balance Ltd. received amount i.e. Rs.13,32,00,000/- amount received out of which shares less amount allotted for converted into Rs.13,31,99,600/- share capital)
SA No.01/R/2020, ITA 203 & 225/R/19 A.Y. 2015-16 M/s Maa Chinnamastika Cement & Ispat P.Ltd. Vs. ACIT/DCIT-Cir-2, Ranchi Page 19 (addition made above) 9.5.1 As per para 9.2.3 I have already confirmed the addition of principal amount U/s 68 and as per para 9.2.3, I have already directed the AO to disallow the interest U/s 36(1)(iii). The transactions stated herein are also similar to those mentioned therein. Therefore, the addition on account of Principal amount is hereby confirmed U/s 68 and disallowance of interest is also confirmed U/s. 36(1)((iii).” Learned CIT-DR’s case is that the Assessing Officer’s detailed reasoning has duly proved that all the unsecured loan entities are mere accommodation entry providers only. We find in this backdrop that so far as the confirmed addition of Rs.93,36,031/- as unsecured loan(s) is concerned, these are total seven group entities only i.e. M/s Exclusive Infra Projects Pvt. Ltd, M/s Tolasariya Viniyog Pvt Ltd, M/s Nagina Export & Finvest Pvt.Ltd., M/s Lupin Commodcal Pvt Ltd., M/s R.M. Concast Pvt. Ltd., M/s Bhutoria Electrical Pvt. Ltd., and M/s Escorts Tradelink Pvt. Ltd.; assessed to tax u/s. 143(3) of the Act. These loans have been duly reflected in books followed by interest payments after TDS deduction as well. Learned CIT-DR fails to rebut that these companies have been having regular business transactions with assessee in earlier and latter assessment years wherein the unsecured loans also stand repaid. Learned co-ordinate bench’s order has already deleted identical addition in assessment year(s) 2013-14 (supra) involving almost all of these entities only thereby treating them as genuine parties. There is hardly distinction on facts in case of the remaining entities as well.
8. We see no merit it in the Revenue’s grievance that the CIT(A) ought to have affirmed the entire addition of Rs.4,36,85,914/- including interest than restricting it to Rs.93,36,031/- only since he has made it clear that neither the corresponding principal sum had been credited or received in relevant previous year or the interest payment qua the same stood rejected in regular assessments of earlier and latter assessment years. These clinching aspect has nowhere been controverted from the department side before us. We also notice that the CIT(A)’s findings based on his earlier order in assessment year 2013-14; whilst confirming the impugned addition, stand reversed in learned SA No.01/R/2020, ITA 203 & 225/R/19 A.Y. 2015-16 M/s Maa Chinnamastika Cement & Ispat P.Ltd. Vs. ACIT/DCIT-Cir-2, Ranchi Page 20 co-ordinate bench’s order. The same is adopted mutatis mutandis herein as well in assessee’s favour in absence of any distinction on facts coming from the Revenue side. This addition of unsecured loans and interest of Rs.436,89,914/- is deleted in entirety. The assessee’s foregoing 1st and 2nd substantive grounds alongwith its main appeal Revenue’s 2nd and 3rd substantive grounds in to this effect are rejected.
9. This leaves us with the Revenue’s first grievance ground in its cross- appeal that the CIT(A)’s has erred in law and on facts in deleting sec. 56(2)(viib) addition on valuation of shares vide following detailed discussion: “7. The first issue is with respect to the ground nos. 5 which relates to the addition of Rs.1,64,66,090/- made U/s 56(2)(viib) alleging that the shares issued by the appellant at a premium was overpricie. The relevant portion for the same has been mentioned in page 1-3 in the order of assessment scanned above. 7.1 During the course of the hearing, the ARE apart from filing the detailed written submission, argued his contention which is summarized as sunder:- ‘The AR of the assessee strongly contended that the Ld. AO was not justified in considering the fair market value (FMV) as on 31/03/2014 being Rs.500.33/- per share against shares allotted on 28/03/2015 at Rs.530/- per share. The AR argued that the valuation should be considered as n the date of transfer rather than referring to the audited accounts of the previous year. The AR furnished the Board resolution and audited accounts as on 26/03/2015 to explain that the valuation of the unquoted shares comes to around Rs.529.33/- per share. The AR further argued that as per the provisions of section 56(2)(viib) and Rule 11UA, the fair market value ought to calculated as on the date of transfer. It was also argued by the AR that the assessing officer has made the addition U/s 68 of the share capital+ premium for the companies to whom shares have been allotted during the year under consideration, which amounts to double addition. Relying upon the above, the AR argued that the assessing officer was not justified in taking the fair market value of the unquoted shares as at 31/03/2014 rather should have accept the value as on 28/03/2015 being the date of transfer. The certified calculation sheet as furnished by the AR is scanned and printed below: DWIVEDI GUPTA & CO. CA SHADRA SADAN METRO Chartered Accounts COMPLEX LANE KUTCHERY ROAD BEHIND O.B.C. RANCHI JHARKHAND 834001 Ph. 93-4859566.0542-2502526 MAA CHHINNMASTIKA CEMENT & ISPAT PVT LTD HEHAL BARKAKANA RAMGARH SA No.01/R/2020, ITA 203 & 225/R/19 A.Y. 2015-16 M/s Maa Chinnamastika Cement & Ispat P.Ltd. Vs. ACIT/DCIT-Cir-2, Ranchi Page 21
Calculation of Book Value per Share TOTAL ASSETS 980,443,256.70 Les: Advance Tax 5,700,000.00 TDS Receivable 52,554.00 TCS Receivable 1,436,642.05 A TOTAL LIABIALITIES 973,254,060.65 Less Reserve & Surplus 239,732,410.53 Share Capital 56,327,500.00 Provision for Taxation 9,402,856.38 B A-B 298,273,570.86 No. of shares 563,275.00 Book Value or 530/- per share Allotment Rs.530/- per share For DWIVEDI GUPTA & Co. Chartered Accountants FR.No.-012584C Sd/-d Partner) (M.No. 407188) (Seal) PLACE : RAMGARH DATED: 26/03/2015 7.2 Findings of the AO in the assessment order and thee written submissions of the AR along with the documentary evidence furnished by him have been duly considered. I find lot of force in the argument put forward by the AR stating that as per the provisions of U/s 56(2)(viib) and rule 11UA, the valuation of the unquoted shares ought to be considered as on date of transfer. The relevant provision of the section was also reproduced by the AR in his written submission which is as under:- [(viib) where a company, not being a company n which the public are substantially interested, receives, in any previous year, from any person being a resident, any consideration for issue of shares that exceeds the face value of such shares, the aggregate consideration received for such shares as exceeds the face value of such shares, the aggregate consideration received for such shares as exceeds the fair market value of the shares: Provided that this clause shall not apply where the consideration for issue of shares is received- By a venture capital undertaking from a venture capital (i) company or a venture capital fund; or (ii) By a company from a class or classes of persons as may be notified by the Central Government in this behalf. Explanation.- For the purposes of this clause,- (a) The fair market value of the shares shall be the value- (i) As may be determined in accordance with such method as may be prescribed; or (ii) As may be substantiated by the company to the satisfaction of the Assessing Officer, based on the value, on the date of issue of shares, of its assets, including intangible assets being goodwill, know-how, patents, SA No.01/R/2020, ITA 203 & 225/R/19 A.Y. 2015-16 M/s Maa Chinnamastika Cement & Ispat P.Ltd. Vs. ACIT/DCIT-Cir-2, Ranchi Page 22 copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature, Whichever is higher; (b) “venture capital company”, “venture capital fund” and “venture capital undertaking” shall have the meanings respectively assigned to them in clause (a), clause (b) and clause (c) of [Explanation] to clause (23FB) of section 10;] Suffice to say, the Assessing Officer has added the impugned share premium as unexplained cash credits and also invoked sec. 56(2)(viib) of the Act on the other hand qua the very sum(s). It is therefore a clear-cut instance of double addition as per this tribunal’s order in (2019) 110 taxmann.com 310 (Mum-Trib) DCIT vs. Pali Fabrics Pvt.Ltd., valuer (supra). The assessee’s registered valuer (supra) had also adopted book value of the shares on the date of transfer only as per the relevant statutory provision. We accordingly see no reason to accept the Revenue’s grievance. Its first substantive ground as well as main appeal ITA 225/Ran/2015 fail therefore. The assessee’s stay application No.01/Ran/2020 is rendered infructuous as we have decided its main appeal itself.
10. This assessee’s main appeal Revenue’s cross appeal is dismissed. Assessee’s SA No.01/Ran/2020 is dismissed as rendered infructuous. A copy of this common order be placed in respective case files. Order pronounced in the court at the close of hearing on Monday, 2nd March, 2020. Sd/- Sd/- (लेखा सद�य) ('या�यक सद�य) (Dr. A.L. Saini) (S.S.Godara) (Accountant Member) (Judicial Member) Ranchi, *Dkp Sr.P.S (दनांकः- 02/03/2020 रांची SA No.01/R/2020, ITA 203 & 225/R/19 A.Y. 2015-16 M/s Maa Chinnamastika Cement & Ispat P.Ltd. Vs. ACIT/DCIT-Cir-2, Ranchi Page 23