PR COMMISSIONER OF INCOME TAX-I vs. M/S GANGA PROJECTSP LTD

In these appeals, common questions of law and facts are involved, hence, they are decided by this common judgment.

By way of these appeals, the appellant has challenged the judgment and order of the Tribunal whereby the Tribunal has dismissed the appeals of the department and cross objections of the assessee are allowed.

This Court while admitting the matters framed the following substantial questions of law:- In Appeal No.331/2017 “ii) Whether on the facts and circumstances of the case and in law the Tribunal has erred in confirming the order of CIT(A) of deletion of additional of Rs.51,00,000/- for the assessment year 2006-07 on account of unexplained cash credits in the form of share capital issued by the assessee? iii) Whether on the facts and circumstances of the case and in law the Tribunal has erred in confirming the order of CIT(A) that the assessee has discharged its onus of establishing the identity, creditworthiness and genuineness as regards the transactions concerning the allotment of shares ignoring the facts that contrary evidences in the form of cash paid and cheques received were found and seized during the course of search proceedings in the Surendra Kumar Jain Group?” In Appeal No.332/2017 “ii) Whether on the facts and circumstances of the case and in law the Tribunal has erred in confirming the order of CIT(A) of deletion of additional of Rs.60,00,000/- for the assessment year 2005-06 on account of unexplained cash credits in the form of share capital issued by the assessee? iii) Whether on the facts and circumstances of the case and in law the Tribunal has erred in confirming the order of CIT(A) that (3 of 10) [ITA-331/2017] the assessee has discharged its onus of establishing the identity, creditworthiness and genuineness as regards the transactions concerning the allotment of shares ignoring the facts that contrary evidences in the form of cash paid and cheques received were found and seized during the course of search proceedings in the Surendra Kumar Jain Group?” In Appeal No.334/2017 “ii) Whether on the facts and circumstances of the case and in law the Tribunal has erred in confirming the order of CIT(A) of deletion of additional of Rs.55,00,000/- for the assessment year 2005-06 on account of unexplained cash credits in the form of share capital issued by the assessee? iii) Whether on the facts and circumstances of the case and in law the Tribunal has erred in confirming the order of CIT(A) that the assessee has discharged its onus of establishing the identity, creditworthiness and genuineness as regards the transactions concerning the allotment of shares ignoring the facts that contrary evidences in the form of cash paid and cheques received were found and seized during the course of search proceedings in the Surendra Kumar Jain Group?”

Counsel for the appellant has taken us to the order of AO as well as CIT(A) and also the Tribunal and contended that the Tribunal has seriously committed an error in allowing the cross objections filed by the assessee and dismissing the department’s appeal and contended that the view taken by the Tribunal is required to be reversed inasmuch as entries which were given relief after accommodating the parties.

However, now the issue is well settled. Counsel for the respondents regarding first issue, relied on the judgment of this Court in the case of CIT vs. ARL Infratech Ltd.; (2017) 394 ITR 383 (Raj.) decided on 20th September, 2016, wherein taking into (4 of 10) [ITA-331/2017] consideration the decision of the Supreme Court, this Court has observed as under:- “4. Taking into consideration the aforesaid facts, the Tribunal in para 2.6, observed as under: "Adverting to the facts of the given case, we are of the considered opinion that all the shares applicants stand identified. The assessee has provided PANs of the share applications. The mode of payment has also been made explained. There is no direct or indirect relation between the assessee-company and the share applicants. The statements recorded during survey has got no evidentiary value and the law is very much settled on this issue. In any case, even under the provisions of section 68 of the Act, the assessee cannot be forced to prove the source of the source. The law on this subject is also settled by numerous decisions. The alleged report of the Inspector of the Department who is stated to have visited at the given address of the share applicants was never put or confronted to the assessee. The cumulative effects of these reasons is that the impugned addition cannot be added in the hands of the assessee-company. Accordingly, we order to delete the entire additions and allow the appeal of the assessee."

In our view, the decision of the Supreme Court in the case of CIT v. Lovely Exports P. Ltd. reported in MANU/SC/8539/2008 : [2009] 319 ITR (St.) 5 (SC) held as under: "Can the amount of share money be regarded as undisclosed income under section 68 of the Income- tax Act, 1961? We find no merit in this special leave petition for the, simple reason that if the share- application money is received by the assessee- company from alleged bogus shareholders, whose names are given to the Assessing Officer, then the Department is free to proceed to reopen their individual assessments in accordance with law. Hence, we find no infirmity with the impugned judgment."

Counsel for the respondents relied upon the following decisions: (i) CIT v. Orissa Corporation P. Ltd. MANU/SC/0249/1986 : [1986] 159 ITR 78 (SC), (ii) Shree Barkha Synthetics Ltd. v. Asst. CIT MANU/RH/0760/2005 : [2006] 283 ITR 377 (Raj), (iii)

Taking into consideration the observations relied on by the respondents and the judgment of the Delhi High Court in the case of CIT v. Value Capital Services P. Ltd. reported in MANU/DE/2791/2008 : [2008] 307 ITR 334 (Delhi) more particularly, the observations

Taking into consideration the observations made by the twin decisions as observed by the Tribunal that all the share applicants stand identified. The assessee has provided permanent account numbers of the share applicants. The mode of payment has also been explained. There is no direct or indirect relation between the assessee-company and the share applicants. The statements recorded during survey has got no evidentiary value without any supporting documents or evidence.”

He also relied on the decision of this Court in case of CIT Jaipur vs. M/s Sideways Investment Pvt. Ltd. in Tax Appeal No. 55/2000 and other connected matter decided on 25th October, 2016, wherein while considering the identical issue, this Court held as under:- “3. The only point which came for our consideration is that the Tribunal while considering the matter in paragraph no.8 observed as under:- "we have heard the rival parties and have perused the material available on record. The undisputed facts are that the appellant company received Rs.

The amount of Rs.2,30,75,000/- which has been received from M/s Sartaj Machines Pvt. Ltd., Jullundhar was not a bonafide transaction it is only a paper company for the purpose of transaction.

Counsel for the appellant Mr. Mathur has taken us through the findings of the AO and CIT(A) and has contended that the observations which are made in paragraph no.5 by the Tribunal was for the subsequent year being one of the member is common. In both the matters as in paragraph no.5 this Court framed following question in the appeal preferred by the assessee No.43/2001 vide order dated 9.8.2016 as under:- "whether on the facts and circumstances of the case in law the Tribunal was justified in law in confirming the addition, when the assessee has discharged its primary burden of proving the identity and capacity of the creditor and genuineness of the transaction and the onus shifts to the revenue to show by material evidence that the amount standing in the name of third party does not belong to him but the assessee."

We have heard counsel for the parties.

Taking into consideration the requirement by the assessee that he has proved identity, transactions and the same is reflected in the balance sheet of M/s Sartaj Machines Pvt. Ltd. was established, in that view of the matter, the tribunal has not committed any error in accepting the transactions which were made.

In the first matter, the issues are required to be answered in favour of the assessee against the Department.

In the second matter, the tribunal has rightly distinguished since for the earlier transactions, no machinery was supplied, and therefore, observed as under:- "No portion of the amount so received has been shown utilised for the purpose of the transaction claimed to have been entered. The notes appended to the Balance Sheet of the company state at Note No. 5 that the company deals in sale, purchases, allotment of shares/warrants, hence quantitative details are not furnished. It did not say that the company was doing the business of material for which the alleged credits are standing in their accounts. In fact the investments have been made purchase of shares of Usha Group of companies".

The said judgment has been challenged before the Supreme Court in SLP No 18732/2017 which came to be dismissed on 13th October, 2017. 8. He has further relied on the decision of this Court in Principal Commissioner of Income Tax vs. M/s Interarch Estate Pvt. Ltd., (DBITA No. 258/16) decided on 14th November, 2017 wherein it has been held as under:- “4. Counsel for the respondent has relied upon the decision of this court in CIT vs. M/s Hotel Gaudavan Pvt. Ltd., DBITA No. 608/2009 decided on 25/4/2017. He also relied on DBITA No. 96/2015 decided on 3/5/2016 wherein it has been held as under:- “7. A bare perusal of the assessment order reveals that the AO has made the addition on suspicion which is based on the statements of third party Shri Aseem Kumar Gupta, admittedly, recorded in the back of the assessee. It has come on record that the share application money of Rs. 50,00,000/- was received from Moderate Credit Corporation Ltd., a listed company. It is not disputed before this Court that the investment made was received by account payee cheque and the same was refunded by an account payee cheque when the company dropped its project. In the considered opinion of this court, in absence of any cogent evidence on record establishing that the money shown to have received as share application money, was as a matter of fact, unaccounted money belonging to the assessee company, the finding arrived at by the AO, which is based on suspicion, has rightly been held not sustainable in the eyes of law. Suffice it to say that the finding arrived at by the CIT(A), affirmed by the ITAT, which remains a finding of fact, cannot be said to be capricious or perverse.”

He has also relied upon the judgment in wherein it has been held as under:- “8.The reference to the statements made by some of the persons related with the said investing companies is of no effect because such statements could not have been utilized against

In any case, the points as sought to be raised by the appellant in the present case are all the matters relating to appreciation of evidence. The relevant factors have been taken into account and considered by the appellate authorities before returning the findings in favour of the assessee.

Ultimately, the question as to whether the source of invest- ment or of credit has been satisfactorily explained or not remains within the realm of appreciation of evidence; and the Courts have consistently held that such a matter does not give rise to any substantial question of law. In the case of Commissioner of In- come Tax Vs. Orissa Corporation (P) Ltd.: (1986) 159 ITR 78 (SC), the Hon'ble Supreme Court held as under:- “13. In this case, the assessee had given the names and ad- dresses of the alleged creditors. It was in the knowledge of the Revenue that the said creditors were income-tax assessees. Their index numbers were in the file of the Revenue. The Rev- enue, apart from issuing notices under s. 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 credi- tors 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 socalled alleged creditors. In those circumstances, the assessee could not do any thing further. In the premises, if the Tribunal came to the conclusion that the assessee has dis- charged the burden that lay on him, then it could not be said that such a conclusion was unreasonable or perverse or based on no (10 of 10) [ITA-331/2017] evidence. If the conclusion is based on some evidence on which a conclusion could be arrived at, no question of law as such arises."

In CIT Vs. Shree Barkha Synthetics Ltd.: 182 CTR (Raj.) 175, in a similar nature matter, this Court observed that the Tri- bunal having found that the companies from which the share ap- plication money had been received by the assessee-company were genuinely existing and the identity of the individual in- vestors were also established and they had confirmed the fact of making investment, the finding that assessee had discharged ini- tial burden and addition under Section 68 could not be sustained, was essentially a finding of fact. This Court said,- "

A perusal of the aforesaid finding goes to show that deletion has been made on appreciation of evidence, which was on record Finding that there was existence of investors and their confirma- tion has been obtained, were found to be satisfactory. All these conclusions are conclusions of fact based on material on record and, therefore, cannot be said to be perverse so as to give rise to question of law, which may be required to be considered in this appeal under s.260A of the IT Act." In view of the above, the issue is reguired to be answered in favour of the assessee against the department.”

In that view of the matters, both the issues in these appeals are required to be answered in favour of the assessee against the department.

Hence, the appeals stand dismissed. (VIJAY KUMAR VYAS),J (K.S.JHAVERI),J A.Sharma/19-21