DCIT-1(1), BHILAI, BHILAI vs. LNS INDUSTRIES PVT LTD, BHILAI

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ITA 87/RPR/2025Status: DisposedITAT Raipur26 October 2026AY 2011-1230 pages

In favour of the Revenue: the Revenue's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the CIT(A) was justified in deleting the addition of Rs. 3,02,25,000/- made under Section 68 for AY 2009-10. The Tribunal noted that the assessee had filed share application forms with complete addresses and PANs, confirmations, and ITRs. The AO's assessment order consolidated the discussion for multiple assessment years, and the share applicants were listed in a consolidated table. The Tribunal found that the AO had not doubted the genuineness of the receipts and had not rendered any findings of non-fulfillment of primary conditions under Section 68, namely, identity, creditworthiness, and genuineness of transactions. The AO's reliance on the assessment order for AY 2012-13 was found to be erroneous as that order was reversed by the ITAT. The Tribunal also referred to various High Court and Supreme Court decisions, including Mehta Parikh, N.C. Cables, Softline Creations, Gangeshwari Metals, and Jawahar Lal Oswal, emphasizing that the onus shifts back to the revenue to prove the transaction is not genuine once the assessee provides credible explanations and relevant facts. The Tribunal distinguished the Revenue's cited cases as being based on specific incriminating material and untraceable shareholders, which was not the case here. The Tribunal concluded that the concurrent findings of the lower appellate authorities were purely factual and no substantial question of law arose.

What were the facts?

The Revenue filed two appeals before the Income Tax Appellate Tribunal (ITAT) challenging the deletion of additions made by the Assessing Officer (AO) for Assessment Years (AYs) 2009-10 and 2011-12. The additions, amounting to Rs. 3,02,25,000 for AY 2009-10, were made under Section 68 of the Income Tax Act, 1961, on account of unexplained share application money. The AO's assessment order, dated 30.12.2016, was passed under Section 143(3) read with Section 147 of the Act. The Commissioner of Income Tax (Appeals) [CIT(A)] had deleted these additions. The assessee, LNS Industries Pvt. Ltd., is engaged in the trading of cigarettes and safety matches. The reassessment proceedings were initiated based on findings in the assessment order for AY 2012-13, where the assessee was held to have failed to prove the identity, genuineness, and creditworthiness of share applicants.

What were the issues?

1. Whether, on the facts and circumstances of the case, the CIT(A) was justified in deleting the addition of Rs. 3,02,25,000/- made by the AO under Section 68 on account of unexplained share application money for AY 2009-10? Assessee's Contentions: The assessee argued that it had discharged its onus by providing the share application forms with complete addresses and PANs, confirmations, ITRs (except for one entity), and in some cases, balance sheets and audit reports. The CIT(A) found that the immediate source of deposits was verifiable from bank statements, ITRs, and confirmations, and the burden had shifted to the AO. The assessee also contended that the first proviso to Section 68 is not applicable to AY 2009-10. Furthermore, the addition made in AY 2012-13 on similar grounds was deleted by the ITAT, and the Revenue's appeal to the High Court was withdrawn. The assessee asserted that the identity, genuineness, and creditworthiness of the shareholders were proved. Revenue's Contentions: The Revenue argued that the investments were made through bogus companies, and the genuineness of the transactions was not proved. The Revenue relied on the order of the Assessing Officer.

Which sections of the Income-tax Act were involved?

Section 68,Section 143(3),Section 147,Section 250

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, RAIPUR BENCH, RAIPUR

Before: SHRI PARTHA SARATHI CHAUDHURY & SHRI Dr. DIPAK P. RIPOTE

For Appellant: Shri S.R. Rao, Adv
For Respondent: Shri Rituparna Namdeo, CIT-DR

आदेश /ORDER

PER BENCH : These two appeals filed by the Revenue against the order of the Learned Commissioner of Income Tax (Appeals), NFAC, Delhi [Ld.CIT(A)], passed u/s. 250 of the Income Tax Act, 1961 (‘the Act’) for AYs 2009-10 and 2011-12 on 19.12.2024, emanating from the Assessment Order u/s 143(3) r.w.s. 147 of the Act, dated 30.12.2016.

2.

Since, the issue involved is same, for the sake of convenience, these two appeals were heard together and are disposed of by this common order.

3.

First, we shall take up the appeal of the Revenue in ITA No.86/RPR/2025 for AY 2009-10.

2 ITA No.86 & 87/RPR/2025, LNS Industries Pvt. Ltd.

4.

The Revenue has raised the following grounds of appeal : “1. Whether on the facts & circumstances of the case the Ld.CIT(A) was justified in deleting the addition of Rs.3,02,25,000/- made by the AO u/s. 68 on account of unexplained share application money?

2.

The order of the ld.CIT(A) is erroneous both in law and on facts.

3.

Any other ground which may be adduced at the time of hearing.” Submission of Ld. DR :

5.

The Ld. DR submitted that investments made were through bogus companies. Therefore, the genuineness of the transaction is not proved. The Ld. DR strongly relied on the order of the Assessing Officer (AO).

5.1 The Ld. DR filed letter which is scanned and reproduced here as under :

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Submission of Ld. AR :

6.

The Ld. AR filed petition under Rule 27 of the Income Tax Appellate Tribunal Rules, 1963.

6.1 The Ld. AR filed written submissions which is as under : “1. The appellant derives income from trading of cigarette and safety matches, etc.

2.

Return of income for A.Y. 2009-10 was filed on 29/09/2009 declaring total income of Rs.34,25,860/-. The return was processed and accepted u/s.143(1) of the Income-tax Act, 1961.

3.

Subsequently, on the basis of findings in assessment order for Α.Υ. 2012-13, wherein it was held that the assessee failed to prove identity, genuineness and creditworthiness of the persons who have applied for allotment of shares, the reassessment proceedings were initiated. (Reasons recorded Page-208 to 210 of Assessee's PB) and (Assessment order Page 1-9 of Assessee's PB)

4.

During re-assessment proceedings, the appellant made requisite compliances. However, largely relying on the findings in assessment order for A.Y. 2012-13, the ld. AO has completed the assessment and made addition of Rs.3,02,25,000/- representing share application money received during the year as unexplained cash credit u/s.68 of the Act.

5.

The addition was made solely on the grounds that

(a) the immediate source of deposit remained to be established;

(b) similar investment in share application money was made in Α.Υ. 2012-13;

(c) The findings in said assessment order have strong bearing, hence adopted.

6.

The addition made in AY 2012-13 was deleted by Hon'ble ITAT vide its order in ITA No.110/RPR/2017 dated 16.04.2018. (Page 211-219 of Assessee's PB) Further appeal filed by Revenue before Hon'ble High Court was also withdrawn due to bar considering monetary limits for filing further appeal.

7.

Aggrieved by assessment order for assessment year under consideration, appellant filed first appeal which was partly allowed.

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8.

The appeal was allowed on merits, while the legal grounds were dismissed.

9.

Present appeal is filed by Revenue challenging order of ld. CIT (Appeals).

10.

The ld. CIT(A) has rendered elaborate reasons for arriving at the conclusions and his findings in brief are as under:-

a) The allegation that appellant has not been able to establish immediate source of deposit in the bank accounts of share applicants is an afterthought is not correct for the immediate source is verifiable from copy of bank statement ITR and confirmation. Appellant had discharged its onus and the burden has shifted towards the ld. A.O. In fact he did not require the appellant to prove immediate source of investment. (Para-6.2.30).

b) The first proviso to sec. 68 is applicable from 01.04.2013, whereas the appellant's case is for a 2009-10. Therefore, it is not applicable to the case of appellant. However appellant has explained the nature and source of such sum. (Para-6.2.32).

c) The appellant had discharged the onus cast upon it beyond the doubt. (Para-6.2.33).

d) Appellant also furnished necessary evidences in support of its contentions and established the identity of remittees, genuineness of transactions and nature and source of receipts as required by sec. 68. The addition is not justified ((Para-6.2.33).

e) The ld. A.O. has not doubted genuineness of the receipts. (Para- 6.2.34).

f) The ld. A.O. did not dispute above facts nor did he render any findings of non-fulfilling of the primary conditions required to support explanation u/s. 68 i.e. (i) identity of creditors (ii) creditworthiness of creditor and (iii) genuineness of transactions (Para-6.2.36).

g) The ld. A.O. relied on assessment order for A.Υ.2012-13 dated 30.3.2015, which was reversed by Hon'ble ITAT in its own case for said Assessment year (Para-6.2.51).

h) The identity with respect to shareholders has been proved by appellant (Para-6.2.54).

i) The genuineness of the transactions has been proved by appellant (Para-6.2.56).

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j) The creditworthiness has been proved by appellant. The findings of are based on decision of Hon'ble ITAT in his own case for AY 2012-13, wherein the findings of the ld. Assessing Officer have been reversed hence the appeal was allowed on merits. (Para-6.2.64). In this view of the matter and considering the legal position settled in this matter in the case laws relied upon before ld. CIT(A), appellant humbly prays that the appeal of Revenue may kindly be dismissed in the interest of justice.”

6.2 The Ld. AR relied on the case laws filed in the paper book.

Findings and Analysis :

7.

We have heard both the parties and perused the records. The Assessing Officer-Dy. CIT, Income Tax-1(1), Bhilai passed a common assessment order for AYs 2008-09, 2009-10, 2010-11 and 2011-12 u/s 143(3) r.w.s. 147 of the Act on 30.12.2016. There is no separate discussion assessment year wise. Rather, even the names of the share applicants are mentioned in a consolidated table for four assessment years.

7.1 For AY 2009-10, the assessee had received Share Application Money from following persons : S. No. Share Applicant Share Application Amount Received 1 Shri Sunil Agarwal 6,65,000.00 2 Shri Nimish Sunil Agarwal 5,65,000.00 3 Smt. Rekha Agarwal 85,000.00 4 Smt. Neha Agarwal 29,10,000.00 5 Debdaru Vinimay Pvt. Ltd. 35,00,000.00 6 Nabratna Vinimay Pvt. Ltd. 55,00,000.00 7 R.K. Enterprises 1,70,00,000.00 Total 3,02,25,000.00

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7.2 It is an admitted fact that during assessment proceedings, the assessee filed following documents:  Copy of share application form which includes complete address and PAN  Copy of confirmations  Copy of ITR except for M/s. R.K. Enterprises  In some cases, copy of balance sheet and audit report.

7.3 These facts have been recorded by the AO in the assessment order. However, the AO in the assessment order held as under : “5. The assessee's explanation is not found acceptable. The Income- tax assessments are made as per provisions of Income-tax Act and on the basis of facts and evidences available on record. The Department has nothing to do with allegations reportedly made by some relatives. The claim of receipt of share application monies from M/s.Ceja Traders Pvt. Ltd. M/s. Nabaratna Vinimay Pvt, Ltd. M/s. Debdaru Vinimay Pvt. Ltd., M/s. Arcade Dealcom Pvt. Ltd., M/s. Vanila Vinimay Pvt. Ltd. is not correct. All these companies are Kolkata based shell companies. It is well settled as on date that persons having unaccounted money are ploughing back their unaccounted money in the garb of share application monies/ accommodation entries in the names of Kolkata based shell companies. The mechanism adopted by these entities is that they receive cash from the beneficiaries and deposit in some non-descript company from there such funds are transferred to another company. Likewise after several layers of transactions, the money is finally transferred to the ultimate beneficiary. The investing companies hardly have any financial strength of their own. Nominal income is shown in their cases and their investments in turn remain in other identical shell companies. The aforementioned so called shareholders are identical to such companies. The assessee filed confirmatory letters, Copy of Acknowledgement of ITR, Audit Report and Form No.2, Return of Allotment in the cases of M/s. Debdaru Vinimay Pvt Ltd., Nabratna Vinimay Pvt. Ltd., M/s.Arcade Dealcom Pvt. Ltd., Vanila Vinimay Pvt.Ltd. But nothing was filed confirming investment by M/s.Ceja Traders Pvt. Ltd. These companies are only paper companies. Despite making requisite technical compliances on paper, nothing physically exists at the given addresses. Under these circumstances, it is established and held that the investment in the form of share capital by that concern is nothing but assessee's own money brought in the guise of share application money. Since the assessee failed to explain the creditworthiness of these companies and genuineness of the

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transaction, said investment shown in the names of above shell companies is added to the total income u/s.68 of the Act.

6.

In the case of other applicants the assessee files confirmation of account, copy of ITR and in some cases copy of relevant extract bank statement, copy of share application, Copy of balance sheet were not filed. In the case of Mr. Ansar Ahmed Saiyad it was submitted that he is a non resident Indian who was to take 28,00,000 shares of the company and as against this he paid Rs.7,00,00,000/- on different dates. Copies of share application, memorandum of understanding and intimation of partial payments are filed. But copy of extract of bank statement showing immediate source of deposit was not filed. In the case of MSA Trading FZC, a non-resident entity copy of confirmation, Independent Auditor's report were filed. Shri Sunil Kumar Agrawal has signed the reports in the capacity of Managing Director. In this case also copy of extract of bank statement showing immediate source of deposit was not filed. Shri Sunil Agrawal and Smt. Rekha claimed that they have invested in share application money and for same period they were NRIs. In these cases also the assessee could not produce any evidence to establish immediate source of investment. Although the assessee filed above documents in support of his contention, the immediate source of deposit remained to be established. It has been stated that though the authorized capital is less, the shares were allotted at premium subsequently and no adverse inference is called for. It is imperative to mention here that similar investment in share application money was made in the financial year 2011-12 i.e. assessment year 2012-13. The assessment for AY.2012-13 was completed u/s.143(3) of the Act vide assessment order dated-30/03/2015 and the facts and issues were elaborately discussed in para-5 of the said assessment order. There is no change in the assessee's submission. Since the facts of the case for this year have strong bearing with those discussed in said assessment order, instead of loading this order with repeating the findings, I would record my respectful agreement and rely on them. Therefore, looking to the facts and circumstances of the case, the following amounts are added year-wise to the total income u/s.68 as unexplained credits in the garb of share application money. A. Yrs. 2008-09 2009-10 2010-11 2011-12 Amount Rs. 3,21,78,367/- 3,02,25,000/- 4,61,57,605/- 9,71,50,000/-

In view of above discussion I am satisfied that the assessee has concealed the particulars of its income and filed inaccurate particulars, therefore, penalty proceedings u/s.271(1)(c) are separately initiated.”

7.4 Aggrieved by the assessment order, the assessee filed an appeal before the Ld. CIT(A). Elaborate submission was made by the assessee before the Ld. CIT(A). The Ld. CIT(A) has

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discussed the submission of the assessee at length. The Ld. CIT(A) allowed the appeal of the assessee on merits. The relevant paragraphs of the order of the Ld. CIT(A) are reproduced here as under : “6.2. Ground No – 2 This ground pertains to addition of Share Capital. The assessee has submitted before the AO that all the above share applicants are assessed to Income tax and are filing their return of income regularly. All the share applicants have submitted share application forms while applying for shares wherein they have furnished complete details of their addresses, PAN, etc. Their confirmation and copies of their ITR have also been obtained and submitted with the AO.

6.2.1 The appellant contends that in view of the above submission, the identities of all the share applicants are proved beyond any doubt. The appellant had further submitted before the AO that confirmation of account, copy of ITRS and copy of Audited financial statements in respect of most of the persons.

6.2.4 Regarding genuineness of the transactions, it was submitted that all the money was received through banking channels. Further it was submitted that some of the share applicants are corporate entities and registered with the ROC. It was contended that all the share applicants are assessed to income tax and relevant details were filed.

6.2.5 With regards to acceptance of share application money from non-resident, the appellant had submitted that vide its letter dated 24/10/2009 addressed to the Investment Approval Department of Reserve Bank of India and informed the inward remittance and requested them to inform any further formalities that may be required. However, no communication has been received till date of completion of assessment.

6.2.6 During the course of hearing. Shri Sunil Agrawal, Director and his wife Smt. Rekha Agrawal also attended and reiterated these facts.

6.2.24 The appellant contends that during assessment proceedings before A.O. it was explained that all the share applicants viz. Shri Sunil Agarwal, Shri Nimish Agarwal, Smt. Rekha Agarwal and Smt. Neha Agarwal are family members and that Shri Sunil Agarwal and Shri Nimish Agarwal are directors of the company. Confirmations were filed from all the parties along with other details.

6.2.25 Further, in the case of these share applicants, identity has been proved beyond doubt through personal appearance and genuineness of the transaction through furnishing the details of bank accounts i.e. money was received through proper banking channel.

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6.2.26 That regarding creditworthiness of share applicants the appellant has submitted as under:

a) Shri Sunil Kumar Agarwal, Director and his wife Smt. Rekha Agarwal also attended the assessment proceedings and confirmed the facts. Incidentally it is submitted that Shri Sunil Kumar Agarwal is Managing Director of Appellant company. Smt Rekha Agarwal w/o of Shri Sunil Agrawal has also confirmed the transactions. Apellant contends that It is pertinent to submit that in the same facts, the investment made by Smt. Rekha Agarwal was accepted in A.Y. 2013- 14 in assessment made u/s 143(3) of the Act. All necessary documentary evidences viz. Income Tax Returns, copy of bank statements and confirmation of accounts were submitted before the Id. Assessing Officer.

b) Shri Nimish Sunil Agarwal- He is one of the directors in the appellant company, therefore his identity is very well established. He was proprietor of M/s LNS Match Inc. In so far as creditworthiness is concerned, his Income Tax Return for A.Y. 2009-10 was submitted during assessment proceedings in which he has declared total income of Rs.23,87,351/- (before set off of brought forward losses) along with confirmation of accounts. All the transactions were routed through banking channel. Copy of bank statements were also submitted.

c) Smt. Neha Agarwal She is daughter of director Shri Sunil Agarwal. She has been regularly filing her Income Tax Return and she had declared total income of Rs.12,35,120/- in ITR filed for A.Y. 2009-10. Further during the relevant financial year, amount of Rs. 13,54,985/- was credited in her bank account on account of maturity of FDR in December 2008. Relevant documents for establishing her identity and creditworthiness were submitted during the assessment proceedings viz. confirmations of accounts, copy of bank statements depicting immediate source of funds and copy of Income Tax Return. Since all the transactions were undertaken through proper banking channel, genuineness of transactions is established beyond any doubt.

d) Debdaru Vinimay Private Limited- As may be seen from audited balance sheet of the company, it was having net worth of Rs. 14,20,00,000/- as on 31st March the immediately preceding financial year 2006-07 which undoubtedly substantiates its creditworthiness. Since the company is duly registered under the Companies Act, 1956 and was regularly filing annual return with Ministry of Corporate Affairs, the identity of the company is known to all. Copies of audited balance sheet, Income Tax Return and confirmation of accounts were submitted before Id. A.O. Further, it has made payment through banking channel, duly recorded in the books of account of both share applicant and the appellant, the genuineness of transactions is proved beyond any doubt.

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e) Nabratna Vinimay Private Limited- As may be seen from audited balance sheet of the company, it ..vas having net worth of Rs.21,41,50,000/- which undoubtedly substantiates its creditworthiness. Since the company is duly registered under the Companies Act, 1956 and was regularly liling annual return with Ministry of Corporate Affairs, the identity of the company is known to all. Copies of audited balance sheet, Income Tax Return and confirmation of accounts were submitted before Id. A.O. Further, it has made payment through banking channel, duly recorded in the books of account of both share applicant and the appellant, the genuineness of transactions is proved beyond any doubt.

6.2.27 As regards R.K. Enterprises, Rs. 1,70,00,000/- was received from it and an amount of Rs. 1,20,00,000/- has been repaid in the same year leaving closing balance of Rs.50,00,000/- and this fact was also submitted before the Id A.O. and due to strained relations party is not cooperating. It was also submitted that since R.K. Enterprises is assessed to tax with some A.O. of Income tax oflice at Bhilai, facts may be verified from records of the office. Due to strained relations the balance amount of Rs.50,00,000/- was also repaid in the financial year 2013-14 and this fact of re-payment has been admitted without any reservations. Since amount was repaid, shares were not allotted to the said party. Therefore, it has not made any investments in the appellant company. The appellant company had established the identity, genuineness of the transaction and capacity/ creditworthy of all share applicants beyond the doubt and as under: (i) Identity was established by the very fact that the detailed documents such as PAN, Passport and through personal appearance before the Ao. (ii) Genuineness of the transaction by furnishing transaction details with Bank account statement and conlirmatory letter and even details of source of source of funds (iii) Capacity and/or creditworthiness by furnishing the ITR filed before Income Tax Department.

6.2.28 The Assessee contends that the A.O. while passing the order ignored all these facts, detailed submission and documentary evidence only on the ground that immediate source of deposit remained to be established which in fact was also substantiated by producing documentary evidences during the course of assessment proceedings, however A.O. made his conclusions without adverting on these submissions.

6.2.29 Further, in case of investor companies, A.O. has assumed that all Kolkata based companies are shell companies without any cogent material and held that investment made by these companies are appellants own money. Appellant has submitted all the relevant documents related to these companies which establishes their creditworthiness and genuineness of transactions. The shares were subsequently allotted. Nothing otherwise than that furnished or

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submitted by the appellant, was brought on record or any material which proves that the money was its own of the appellant company by the AO.

6.2.30 Further allegation that the appellant has not been able to establish immediate source of deposit in the bank accounts of share applicants is after thought and is not correct for the immediate source is verifiable from the copy of bank statement, ITR and confirmation. The Appellant had discharged its onus and the burden has shifted towards Id. Assessing Officer. In fact he did not require the assessee to prove immediate source of investment.

6.2.31 The issue of transaction with M/s. R.K. Enterprises, which is assessed to tax with the same Assessing Officer was not even verified before making addition and it clearly shows that the action of Assessing Officer is arbitrary and unjustified. The Assessing Officer simply sidelined all the evidences and hastened to draw adverse conclusions without any justification. The AO has tried to reject all the explanation and evidences of the assessee without any valid reason or brought on record any corroborate material which proves that the alleged share application money is nothing but its own money of the appellant company.

6.2.54 The identity with respect to all the shareholders has been proved by the appellant before the assessing officer.

6.2.55 Next coming to the genuineness of the transaction, the appellant has proved that all the sources of the amounts received are through banking channels and this proves the genuineness of transactions.

6.2.56 With respect to genuineness of transactions, this has been proved by the appellant as per the discussion above. However the same is summarised here.

6.2.57 In the assessment order, there is great reliance placed by the assessing officer for the current year on the assessment order passed by the assessing officer dated 30 March 2015 for the AY 2012-13 and assessing officer has given the finding that the facts and issues were elaborately discussed in paragraph 5 of the said assessment order. AO contends that There is no change in the said submission and Since the facts of the case for this year have a strong bearing on those discussed in the said assessment order. The AO also stated that he would record is respectful agreement and rely on the same.”

7.5 Finally, the Ld. CIT(A) allowed the appeal of the assessee.

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7.6 Aggrieved by the order of the Ld. CIT(A), the Revenue filed an appeal before the Tribunal.

8.

We are again reproducing list of share applicants for AY 2009-10. S. No. Share Applicant Share Application Amount Received 1 Shri Sunil Agarwal 6,65,000.00 2 Shri Nimish Sunil Agarwal 5,65,000.00 3 Smt. Rekha Agarwal 85,000.00 4 Smt. Neha Agarwal 29,10,000.00 5 Debdaru Vinimay Pvt. Ltd. 35,00,000.00 6 Nabratna Vinimay Pvt. Ltd. 55,00,000.00 7 R.K. Enterprises 1,70,00,000.00 Total 3,02,25,000.00

8.1 They all have filed copy of share applications form before the AO and the Ld. CIT(A).

9.

We will discuss each share applicant here onwards:

Shri Sunil Agarwal

10.

Mr. Sunil Kumar Agarwal is Director of the assessee company and Smt. Rekha Agarwal is his wife. Both of them attended before the AO during the assessment proceedings and confirmed the investment. Both of them filed copy of Income Tax Returns, Copy of Bank Statements, and Confirmation of accounts. Thus, identity of Mr. Sunil Kumar Agarwal and Smt. Rekha Agarwal was duly established during assessment proceedings. These facts have not been disputed by the Revenue. They also filed copy of share application form which specifies the number of shares, amounts and Cheque Numbers

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by which the payments were made. It is also observed that the ITAT in assessee’s own case in ITA No. 110/RPR/2017 for AY 2012-13 has accepted assessee’s submission and held that investments made by the Mr. Sunil Kumar Agarwal were genuine, accordingly, ITAT for AY 2012-13 had directed the AO to delete addition of Rs.4,90,20,000/-. It has been submitted by the Ld. DR that Revenue’s appeal has been dismissed by the Hon’ble High Court on account of low tax effect for AY 2012-13.

10.1 We have perused the copy of the bank statement of Mr. Sunil Kumar Agarwal filed in the paper book at Page Nos. 163 to 165, it is observed that Mr. Sunil Kumar Agrawal invested Rs.5,00,000/- in assessee company on 31.01.2009, as per bank statement the balance as on that date was Rs.10,61,765/-. Thus, there was sufficient balance when the amount was invested. Similarly, Rs.1,65,000/- was through a JV entry. These facts have not been disputed by the AO. Copy of Mr. Sunil Kumar Agarwal’s return of income is at page No. 161 of the paper book. For AY 2009-10, Mr. Sunil Kumar Agarwal had filed return of income on 31.03.2010, showing total income of Rs.9,10,570/-. Mr. Sunil Kumar Agarwal is assessed with ITO, Ward-4, Bhilai.

Smt. Rekha Agarwal

11.

Smt. Rekha Agarwal invested Rs.85,000/- on 01.10.2008 through Axis bank account and at that point of time the balance in the account was Rs.99911.5. Copy of the said account is at Page No. 171 of the paper book. Copy of return filed by the Smt. Rekha Agarwal is at page No. 169 of the paper book and she is assessed with ITO Ward-4, Bhilai. These facts have not been disputed by the Revenue. All these documents were filed before lower authorities.

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Shri Nimish Sunil Agarwal

12.

Shri Nimish Sunil Agarwal filed return of income for AY 2009-10 on 19.06.2010 declaring total income of Rs.3,50,400/- (copy at page no. 166 of the paper book). Shri Nimish Sunil Agarwal is assessed with ITO, Ward-4, Bhilai. Copy of bank statement of Shri Nimish Sunil Agarwal is at page 168 of the paper book which shows sufficient balance when the amount was invested. The assessee filed copy of confirmation of account duly signed by the Shri Nimish Sunil Agarwal which is at page no. 167 of the paper book. These facts have not been disputed by the Revenue. All these documents were filed before lower authorities.

Smt. Neha Agarwal

13.

The assessee filed copy of Income Tax Return acknowledgment filed by Smt. Neha Agarwal for AY 2009-10 at page No. 173 of the paper book. Her total income for AY 2009- 10 was Rs.12,35,120/-. It is noted that she is assessed with ITO, Ward-4, Bhilai. The assessee filed copy of confirmation duly signed by Smt. Neha Agarwal. At Page No. 175 of the paper book, the assessee filed copy of the relevant page of bank statement of Smt. Neha Agarwal of ICICI Bank, Bhilai. These facts have not been disputed by the Revenue. All these documents were filed before lower authorities.

Debdaru Vinimay Pvt. Ltd.

14.

The assessee filed copy of confirmation filed by the Debdaru Vinimay Pvt. Ltd. at page No. 177 of the paper book. The assessee field copy of audit report of Debdaru Vinimay Pvt. Ltd. along with balance sheet, profit and loss account for AY 2009-10. The assessee filed copy of acknowledgement of return

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of income of Debdaru Vinimay Pvt. Ltd. for AY 2009-10, filed on 16.09.2009. These facts have not been disputed by the Revenue. All these documents were filed before lower authorities.

14.1 We have carefully studied the balance sheet and profit and loss account filed by the assessee of Debdaru Vinimay Pvt. Ltd. As per balance sheet as on 31.03.2009 the Reserve and Surplus was Rs.13,90,68,978/-. Thus, Debdaru Vinimay Pvt. Ltd. had sufficient funds to make the investment of Rs.35,00,000/- in assessee company during AY 2009-10. It is also observed that Debdaru Vinimay Pvt. Ltd. had shown sales of Rs.1,55,80,000/- and purchases of Rs.12,69,80,000/- as on 31.03.2009. It has shown closing stock of Rs.11,11,20,000/-. Thus, as per the profit and loss account and balance sheet, Debdaru Vinimay Pvt. Ltd. is a company doing business activity. It is duly registered with ROC.

Nabratna Vinimay Pvt. Ltd.

15.

The assessee filed copy of confirmation of Nabratna Vinimay Pvt. Ltd. The assessee filed copy of annual report of Nabratna Vinimay Pvt. Ltd., copy of share application form, copy of acknowledgment of Income Tax Return for AY 2009-10. These facts have not been disputed by the Revenue. All these documents were filed before lower authorities. On perusal of the balance sheet it is observed that Reserve and Surplus as on 31.03.2009 was Rs.20,97,69,000/-. Cash and Bank balance as on 31.03.2009 was Rs.51,73,778/-. On perusal of the profit and loss account of Nabratna Vinimay Pvt. Ltd., it is also observed that Nabratna Vinimay Pvt. Ltd. had shown sales of Rs.2,18,55,000/- and purchases of Rs.20,50,55,000/- as on 31.03.2009. It has shown closing stock of Rs.18,26,05,000/-.

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This explains that it was doing business activity and had sufficient funds to invest. It is duly registered with ROC. This establishes Identity, genuineness and creditworthiness.

R.K. Enterprises

16.

It was submitted before the AO that there has been certain dispute between R.K. Enterprises and the assessee. However, the assessee had submitted that the amount was returned in subsequent year. The assessee had filed share application form of R.K. Enterprises before the AO. It was submitted that R.K. Enterprises was assessed with the same AO where assessee was assessed.

17.

Thus, in this case, the assessee had filed all the necessary documents to prove the identity, creditworthiness and genuineness of the share applicants. These facts have been discussed at length by the Ld. CIT(A). The Ld. AO has not brought on record any documents to prove contrary. The Ld. AO & Ld. DR has not disputed the documents filed. The AO merely without any documentary evidence alleged that the investment was not genuine. However, we have at length discussed above about each Share Applicant to establish identity, genuineness and creditworthiness.

18.

In this background, we will discuss the case laws relied by the assessee to support the order of the Ld. CIT(A).

19.

The Hon’ble High Court of Chhattisgarh in the case of ACIT vs Venkateshwar Ispat P Ltd 319 ITR 393 has held as under : Quote, “3. Briefly stated, the facts of the case are that the assessee- company filed its return for the assessment year 1989-90. In the assessment proceedings, the Assessing Officer called upon the

17 ITA No.86 & 87/RPR/2025, LNS Industries Pvt. Ltd.

assessee to establish the identity and creditworthiness of the share applicants as the balance-sheet reflected the capital amount of Rs. 26,45,200. In order to confirm the investment, notices were issued to the shareholders in their given addresses and in 29 cases, the letters sent were returned unserved with the remark that the address is not complete or other similar reason. The Assessing Officer, not satisfied with the explanation of the assessee, added Rs. 13,36,000 towards holdings of the shareholders, whose confirmation could not be adduced.

4.

Before the Commissioner of Income-tax (Appeals), the assessee sought permission for adducing additional evidence under rule 46A of the Income-tax Rules, 1962, which was accepted and appeal of the assessee was allowed on the basis of additional evidence adduced by the assessee as also keeping in view of the fact that for subsequent assessment year, the share holders investment was confirmed during the assessment proceedings.

5.

The appeal preferred by the Revenue was further dismissed by the impugned order.

6.

Mr. Dubey, learned senior advocate appearing for the respondent submits that apart from the reasons assigned by the respondent, the Tribunal, wherein it has been held that the investment has been verified on the basis of the additional evidence adduced by the assessee, in view of the latest judgment of the hon'ble Supreme Court in the matter of CIT v. Lovely Exports P. Ltd. [2009] 319 ITR (St.) 5 ; [2008] 216 ITR (St.) 195, investment by the alleged bogus shareholders in a company cannot be regarded as the undisclosed income of the assessee-company, though individual investors can be proceeded against by the Department.

7.

Mr. Rajeshwar Rao, learned counsel for the appellant, does not dispute their ratio of law laid down by the hon'ble Supreme Court in the aforesaid judgment.

8.

We have heard learned counsel for the parties and perused the impugned order.

9.

In the matter of Lovely Exports P. Ltd. [2009] 319 ITR (St.) 5, the question before the hon'ble Supreme Court was—whether the amount of share money can be regarded as undisclosed income under section 68 of the Act ? Answering the above question, the hon'ble Supreme Court has held 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, but it cannot be regarded as undisclosed income of the assessee- company.

18 ITA No.86 & 87/RPR/2025, LNS Industries Pvt. Ltd.

10.

Thus, in view of the binding judgment of the hon'ble Supreme Court as also the findings recorded by the Commissioner of Income- tax (Appeals), which have been subsequently confirmed in appeal by the Appellate Tri bunal, we are of the opinion that there is no question of law, much less a substantial question of law, arising for adjudication of this appeal. The appeal is, accordingly, dismissed.” Unquote.

20.

The Hon’ble Delhi High Court in the case of PCIT vs Himachal Fibres Ltd [2018] 98 taxmann.com 172 (Delhi)has held as under : Quote, “2. The Assessing Officer (AO) noted that the assessee was a sick company during the relevant assessment year but had nevertheless garnered substantial amounts to the extent of Rs. 12 crores invested by two share applicants i.e. M/s. Khaitan United Sales Pvt. Ltd. and M/s. Garg Corporation Ltd. After taking into account the material placed before him, the AO concluded that the identity of the shareholders and the genuineness of the transaction had not been established and accordingly brought to tax the said amount. The CIT (A), who sought a remand report, noted that the AO had recorded in the course of his order that the assessee was a sick company to start with and that it had come out of the woods in 2010. The CIT (A) also noticed that the remand report disclosed that the AO did not carry out any enquiries with respect to the identity of the share applicants whose address was provided. The assessee had contended that the share applicant was neither tainted nor was unverifiable and that what was provided was sufficient to warrant an enquiry. The ITAT endorsed the opinion of the CIT (A).

3.

It is urged that the findings rendered by the CIT (A) and the ITAT with respect to the inappropriateness of the addition under Section 68 of the Act are perverse and not based upon facts. Learned counsel stressed that the primary burden of establishing the identity of the applicant, the genuineness of the transaction and the creditworthiness of the party is always upon the assessee, who in this case, did not discharge it.

4.

The ITAT in this case noted and held as follows:

“6. Now it was the turn of revenue to be aggrieved. The revenue has filed this appeal in year 2013 and no paper book from revenue side is filed to show specific perversity in unambiguous findings of learned CIT(A). Only written note on decisions u/s. 68 is filed by Ld. CIT-DR. We have been taken through the records by assistance of representative of both sides. We have gone through assessee's paper bookrunning into 57 pages placed on records. Our findings ground wise is given herein after. A propos revenue's first ground assailing deletion of addition made u/s 68, it is found that assessee's case on

19 ITA No.86 & 87/RPR/2025, LNS Industries Pvt. Ltd.

given facts and documents specially unchallenged shareholder affidavits and in view of lack of enquiry by the AO during assessment and remand proceedings, is squarely covered by Hon'ble Apex court decision in case of Lovely exports 216 CTR 195 wherein it is held that:

"2. Can the amount of share money be regarded as undisclosed income under s. 68 of IT 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 AO, 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." It is noteworthy that in period under consideration for AY 2007-08 said decision was fully applicable.

7.

Further, the case of assessee is also covered on facts noted in learned CIT (A) order by Hon'ble Apex court decision in case of Mehta Parikh, 30 ITR 181 that without examining the deponent affidavits cannot be straightway rejected. Also noted here is the aspect of lack of enquiry by AO from share holders u/s.68which is repeatedly held in various decisions by Jurisdictional Delhi high court in decisions mentioned in assessee's paper book at sr no. 13 namely Hon'ble Delhi high court decisions in cases (a) N.C. Cables 391ITR 11 (b) Softline creations 387 ITR 636 and c) Gangeshwari Metals 361 ITR 10. Further, we note recent full bench of Hon'ble P&H high court decision in case of Jawahar Lal Oswal reported at 382 ITR453 in context of section 68 additions, wherein it is lucidly held that:

"... The principle that governs a deeming provision is that the initial onus lies upon the revenue to raise a prima facie doubt on the basis of credible material. The onus, thereafter, shifts to the assessee to prove that the gift is genuine and if the assessee is unable to proffer a credible explanation, the Assessing Officer may legitimately raise an inference against the assessee. If, however, the assessee furnishes all relevant facts within his knowledge and offers a credible explanation, the onus reverts to the revenue to prove that these facts are not correct. The revenue cannot draw an inference based upon suspicion or doubt or perceptions of culpability or on the quantum of the amount, involved particularly when the question is one of taxation, under a deeming provision. Thus, neither suspicion/doubt, nor the quantum shall determine the exercise of jurisdiction by the Assessing Officer ….. Further a deeming provision requires the Assessing Officer to collect relevant facts and then confront the assessee, who is thereafter, required to explain incriminating facts and in case he fails to proffer a credible information, the Assessing Officer may validly raise and inference of deemed income under section 69-A. As already held, if the assessee proffers an explanation and discloses all relevant facts within his knowledge, the onus reverts to the revenue to adduce

20 ITA No.86 & 87/RPR/2025, LNS Industries Pvt. Ltd.

evidence and only thereafter, may an inference be raised, based upon relevant facts, by invoking the deeming provisions of Section 69-A of the Act. It is true that inferences and presumptions are integral to an adjudicatory process but cannot by themselves be raised to an adjudicatory process but cannot by themselves be raised to the status of substantial evidence or evidence sufficient to raise an inference. A deeming provision, thus, enables the revenue to raise an inference against an assessee on the basis of tangible material and not on mere suspicion, conjectures or perceptions."

8.

Decisions cited by learned CIT-DR are carefully gone through and same are found to be distinguishable on facts as same are earlier to aforesaid decisions and in all those decisions specific incriminating material in form of investigation wing information was there and it was noted in those cases that shareholders are not traceable whereas facts in present case are otherwise as neither any incriminating material is there nor shareholders are found to be non traceable.'

5.

In this case, the assessee was a sick company; it pulled out of the woods in 2010. To tide over its financial sickness, apparently, it sought the help of the share applicants. The identity of those share applicants was clearly revealed. As noted by both the lower appellate authorities, no suspicion is attached to the said share applicants; moreover, the AO did not conduct any further enquiry except resting his conclusions on surmises.

6.

In these circumstances, the Court is of the opinion that the concurrent findings rendered are purely factual. No substantial question of law arises. The appeal is, therefore, dismissed.” Unquote.

21.

The SLP filed by Revenue before the Hon’ble Supreme Court in the above case has been dismissed.

22.

The Hon’ble Bombay High Court in the case of Commissioner of Income-tax- 1 v. Gagandeep Infrastructure (P.) Ltd. [2017] 394 ITR 680 (Bombay) has held as under : Quote, “ 1. This Appeal under Section 260-A of the Income Tax Act, 1961 (the Act) challenges the order dated 23rdApril, 2014 passed by the Income Tax Appellate Tribunal (the Tribunal). The impugned order is in respect of Assessment Year 2008-09.

2.

Mr. Suresh Kumar, the learned counsel appearing for the Revenue urges the following re-framed questions of law for our consideration:— "(i) Whether on the facts and in the circumstances of the case and in law, the Tribunal was justified in deleting the addition of Rs.7,53,50,000/- under Section 68 of the Act being share

21 ITA No.86 & 87/RPR/2025, LNS Industries Pvt. Ltd.

capital/share premium received during the year when the Assessing Officer held the same as unexplained cash credit?(ii) Whether on the facts and in the circumstances of the case and in law, the Tribunal was justified in restricting the disallowance under Section 14A of the Act only to the amount of expenditure claimed by the assessee in the absence of any such restriction under Section 14A and/or Rule 8D?"

3.

Regarding question no.(i):—(a) During the previous relevant to the subject Assessment Year the respondent-assessee had increased its share capital from Rs.2,50,000/- to Rs.83.75 lakhs. During the assessment proceedings, the Assessing Officer noticed that the respondent had collected share premium to the extent of Rs.6.69crores. Consequently he called upon the respondent to justify the charging of share premium atRs.190/- per share. The respondent furnished the list of its shareholders, copy of the share application form, copy of share certificate and Form no.2 filed with the Registrar of Companies. The justification for charging share premium was on the basis of the future prospects of the business of the respondent- assessee. The Assessing Officer did not accept the explanation/justification of the respondent and invoked Section 68 of the Act to treat the amount of Rs.7.53 crores i.e. the aggregate of the issue price and the premium on the shares issued as unexplained cash credit within the meaning of Section 68 of the Act.(b) Being aggrieved, the respondent carried the issue in appeal. By an order dated 24th May, 2011 the Commissioner of Income Tax (Appeals) (CIT(A)) deleted the addition of Rs.7.53 crores made by the Assessing Officer by holding that the Assessing Officer had given no reason to conclude that the investment made (inclusive of premium) was not genuine. This inspite of evidence being furnished by the respondent in support of the genuineness of the transactions. Further he held that the appropriate valuation of the shares is for the subscriber/investor to decide and not a subject of enquiry by the Revenue. Finally he relied upon the decision of the Apex Court in CIT v. Lovely Exports (P.) Ltd. [2008] 216 CTR 195 to hold that if the amounts have been subscribed by bogus shareholders it is for the Revenue to proceed against such shareholders. Therefore it held the Assessing Officer was not justified in adding the amount of share capital subscription including the share premium as unexplained credit under Section 68 of the Act.(c) Being aggrieved, the Revenue carried the issue in the appeal to the Tribunal. The impugned order of the Tribunal holds that the respondent-assessee had established the identity, genuineness and capacity of the shareholders who had subscribed to its shares. The identity was established by the very fact that the detailed names, addresses of the shareholders, PAN numbers, bank details and confirmatory letters were filed. The genuineness of the transaction was established by filing a copy of share application form, the form filed with the Registrar of Companies and as also bank details of the shareholders and their confirmations which would indicate both the genuineness as also the capacity of the shareholders to subscribe to

22 ITA No.86 & 87/RPR/2025, LNS Industries Pvt. Ltd.

the shares. Further the Tribunal while upholding the finding of CIT(A) also that the amount received on issue of share capital along with the premium received thereon, would be on capital receipt and not in the revenue field. Further reliance was also placed upon the decision of Apex Court in Lovely Exports (P.) Ltd. (supra) to uphold the finding of the CIT(A) and dismissing the Revenue's appeal.(d) Mr. Suresh Kumar, the learned counsel appearing for the Revenue contends that proviso to Section68 of the Act which was introduced with effect from 1st April, 2013 would apply in the facts of the present case even for A.Y. 2008-09. The basis of the above submission is that the de hors the proviso also the requirements as set out therein would have to be satisfied.(e) We find that the proviso to section 68 of the Act has been introduced by the Finance Act 2012 with effect from 1st April, 2013. Thus it would be effective only from the Assessment Year 2013- 14onwards and not for the subject Assessment Year. In fact, before the Tribunal, it was not even the case of the Revenue that Section 68 of the Act as in force during the subject years has to be read/understood as though the proviso added subsequently effective only from 1st April, 2013 was its normal meaning. The Parliament did not introduce to proviso to Section 68 of the Act with retrospective effect nor does the proviso so introduced states that it was introduced "for removal of doubts" or that it is "declaratory". Therefore it is not open to give it retrospective effect, by proceeding on the basis that the addition of the proviso to Section 68 of the Act is immaterial and does not change the interpretation of Section 68 of the Act both before and after the adding of the proviso. In any view of the matter the three essential tests while confirming the pre-proviso Section 68 of the Act laid down by the Courts namely the genuineness of the transaction, identity and the capacity of the investor have all been examined by the impugned order of the Tribunal and on facts it was found satisfied. Further it was a submission on behalf of the Revenue that such large amount of share premium gives rise to suspicion on the genuineness (identity) of the shareholders i.e. they are bogus. The Apex Court in Lovely Exports (P.) Ltd. (supra) in the context to the pre- amended Section 68 of the Act has held that where the Revenue urges that the amount of share application money has been received from bogus shareholders then it is for the Income Tax Officer to proceed by reopening the assessment of such shareholders and assessing them to tax in accordance with law. It does not entitle the Revenue to add the same to the assessee's income as unexplained cash credit.(f) In the above circumstances and particularly in view of the concurrent finding of fact arrived at by the CIT(A) and the Tribunal, the proposed question of law does not give rise to any substantial question of law. Thus not entertained.” Unquote. 23. Thus, the proposition of law emanating from the above decisions of the Hon’ble High Courts is that once Assessee has filed documents to prove Identity, Genuineness and

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creditworthiness the onus shifts to the Revenue. The Hon’ble Supreme Court has explained in the case of CIT vs Lovely Exports Pvt Ltd 319 ITR 5(SC) that once the assessee has provided details of the share applicants then no addition can be made u/s 68 in the case of the assessee, and department was free to take action in the case of the share applicant if deem fit.

24.

The ITAT Kolkata in the case of Shankar Traders & Distributors (P.) Ltd. v. Income-tax Officer [2024] 167 taxmann.com 746 (Kolkata - Trib.) has held as under : Quote, “13. From perusal of the above details, we notice that all the alleged share applicants are private limited companies which are registered with the Ministry of Corporate Affairs (MCA) and their credentials are available on MCA portal. All the 13 share applicants are regularly assessed to tax. Books of accounts are duly audited and audited financial statements are attached to the income tax return and are also filed along with the annual return. One cannot deny the possibility that assessee which became a NBFC and being into this trade since 11 years, have been able to approach various private limited companies of which few have consented to apply of equity shares of the assessee company. Proper process has been followed and after filing of the share application and making due payment, allotment has been issued. Copies of the bank statement of each of these companies are available on record and there is no immediate cash deposit prior to issuing of cheque for making alleged investment. Revenue authorities also failed to rebut this fact that against the notice issued by the ld. AO u/s 133(6) of the Act all the share alleged share applicants have replied and had furnished the details along with cover. It is also observed that most of the alleged share applicants have also passed through the scrutiny proceedings for the very same assessment year i.e. A.Y. 2012-13 u/s 143(3) of the Act. All these documents speaks loud enough that identity and creditworthiness of alleged share applicants is established beyond doubt. Genuineness of the transactions is also proved because these companies have sufficient net worth to make the investment and they have applied in a NBFC company for better returns. Once, the assessee has discharged his primary onus, the burden of proof shifts on to Revenue authority and observations of Ld. AO that they are not satisfied with these details will not serve the purpose. At some part of the assessment order the ld. AO has even observed that the assessee had filed submissions and some voluminous paper work which was of no use other than to increase the volume of the assessment report of the assessee company.

24 ITA No.86 & 87/RPR/2025, LNS Industries Pvt. Ltd.

14.

We fail to find any justification in such observation of the ld. Assessing Officer. Rather than mentioning the documents as voluminous paper work, he/ she should have move ahead to examine the correctness of those documents and should have discussed the same in the assessment order. General observation that the ld. AO is not satisfied with the documents filed by the assessee cannot meet the requirement of law. We on perusal audited the balance sheet of the alleged share applicant companies notice that they have sufficient net worth in the form of share capital and accumulated reserve and surplus to explain the source of investment made in the assessee company.

15.

Even the provisions which entitles the revenue authorities to examine the case where a company not being a company in which public are substantially interested receive from any person in any consideration for issue of shares that exceeds the face value of such share, the aggregate consideration received for such shares as exceeds the fair market value of the share to be treated as income of other sources u/s 56(2)(VIIB) of the Act has been inserted by the Finance Act, 2012, with effect from 1st April, 2013 and is therefore not applicable for the year under consideration.

16.

We are thus of the considered view that the assessee has successfully explained the nature and source of the alleged share application money by way of proving the identity and creditworthiness of share applicants and genuineness of the transactions and our view is further supported by the following decisions:-

"a) The Hon'ble Apex Court in the case of CIT v. Orissa Corporation Pvt. Ltd. (supra), under identical circumstances, has held as follows:…………….

14(b). Our views are further fortified by the judgment of the Jurisdictional Calcutta High Court in the case of Principal CIT v. Sreeleathers reported in [2022] 143 taxmann.com 435/448 ITR 332 (Calcutta) has 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

25 ITA No.86 & 87/RPR/2025, LNS Industries Pvt. Ltd.

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 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."

17.

Respectfully following the above decisions, which in our view are squarely applicable on the facts of the instant case, we find that the assessee has successfully discharged the burden of proof primarily casted upon it to explain the identity and creditworthiness of all the alleged thirteens share applicants / shareholder and genuineness of the share transactions and correctness of such details has not been disputed by the Revenue Authorities except making general observations. Therefore, we are inclined to hold that no addition u/s 68 of the Act, is called for. Accordingly, the finding of the ld. CIT(A) is

26 ITA No.86 & 87/RPR/2025, LNS Industries Pvt. Ltd.

set aside impugned addition of Rs.2.30 crore is deleted and all the effective grounds of appeal raised by the assessee are allowed. 18. In the result, the appeal of the assessee is allowed.” Unquote.

25.

Similarly the ITAT Kolkata in the case of Hirak Vyapaar Pvt Ltd vs ITO in ITA 26/KOL/2019 has deleted the addition made on account of share application money.

25.1 The Ld. DR has not rebutted any of the case laws relied by the Ld. AR.

26.

In the case of the assessee, we have already noted that the assessee has filed documentary evidence to prove Identity of Share Applicant, the investment was through banking channel, assessee filed documents to prove creditworthiness of share applicant, and genuineness of transactions. The revenue has not brought on record any documents to rebut or disprove the submission of the assessee. In the order u/s 250 of the Act, Ld. CIT(A) has discussed about each Share Applicant , hence it is incorrect on the part of the revenue to state that Ld.CIT(A) has merely relied on the order of the ITAT for AY 2012-13. In these facts and circumstances of the case respectfully following the decision of Hon’ble Supreme Court (supra) , Hon’ble High Jurisdictional High Court (supra), Hon’ble Delhi High Court, ITAT , we hold that there are no merits in the addition made by the AO u/s 68 for AY 2009-10. Accordingly, we uphold the order of the Ld. CIT(A) and direct the AO to delete the addition.

26.1 Ironically it is not the case of the Revenue that any action has been taken against the above-mentioned share applicants. No such facts have been brought on record by the Revenue.

27 ITA No.86 & 87/RPR/2025, LNS Industries Pvt. Ltd.

27.

In the result, the appeal of the Revenue in ITA No. 86/RPR/2025 for AY 2009-10 is dismissed.

ITA No. 87/RPR/2025 for AY 2011-12

28.

The Revenue has raised the following grounds of appeal : “1. Whether on the facts & circumstances of the case the Ld.CIT(A) was justified in deleting the addition of Rs.9,71,50,000/- made by the AO u/s. 68 on account of unexplained share application money? 2. The order of the ld.CIT(A) is erroneous both in law and on facts. 3. Any other ground which may be adduced at the time of hearing.” 29. Both the sides are unanimous in stating that the facts and the grounds of appeal in ITA No.87/RPR/2025 for AY 2011-12 are identical to the grounds raised in ITA No. 86/RPR/2025 for AY 2009-10 except for the variance in amounts. There is a common assessment order passed by the AO for AYs 2008-09, 2009-10, 2010-11 and 2011-12.

30.

The AO has not mentioned separate names of share applicant for each assessment year, however, for AY 2011-12 the names of the share applicants are as under : S. No. Name of the entity/person Share application money amount 1 Ansar Ahmed Saiyad 7,00,00,000/- 2 J.K. Jain 50,000/- 3 Nimish Agrawal 7,00,000/- 4 Neha Agrawal 9,00,000/- 5 MSA Consultants 1,79,00,000/- 6 Ruhi Agrawal 25,00,000/- 7 Sunil Agrawal 51,50,000/- Total Rs.9,71,50,000/-

28 ITA No.86 & 87/RPR/2025, LNS Industries Pvt. Ltd.

31.

We have already discussed about the Nimish Agrawal, Neha Agrawal and Sunil Agrawal in the ITA No. 86/RPR/2025 for AY 2009-10. The facts are same hence, for these share applicants our findings in ITA No. 86/RPR/2025 will apply mutatis mutandis in ITA No. 87/RPR/2025 as well.

32.

Admittedly, the AO has not made addition for Mr. J.K. Jain. Therefore, there is no need to discuss about Mr. J.K. Jain. Remaining will discuss as under :

Ansar Ahmed Saiyad

33.

The assessee had filed copy of share application, copy of memorandum of understanding between Ansar Ahmed Saiyad and the assessee, regarding investment in shares, copy of intimation regarding payments. Mr. Ansar Ahmed Saiyad is a non-resident Indian and residing in UAE for last 30 years. It was submitted that he runs a business in UAE. Entire payment was through banking channel. All these facts were submitted before the AO and the Ld. CIT(A). The Ld. DR has not brought on record any infirmity in these documents. In these facts the assessee has fulfilled the onus to prove the identity, creditworthiness and genuineness. The AO has not brought on record any documents to contravene the submission of the assessee. We have already reproduced the relevant paragraphs of the assessment order and it can be noted from the assessment order that the AO in the order has only stated that copy of bank statement of Mr. Ansar Ahmed Saiyad was not submitted to prove source of deposits. Prior to amendment brought in section 68 of the Act, which was brought with effect from 01.04.2013, there was no requirement to explain source. We have already discussed the relevant decisions of Hon’ble Supreme Court and the Hon’ble High Courts, on this issue

29 ITA No.86 & 87/RPR/2025, LNS Industries Pvt. Ltd.

while discussing in ITA No. 86/RPR/2025. In these facts, we concur with the findings of the Ld. CIT(A), who has directed the to delete the addition u/s 68 of the Act on account of share application money received from Mr. Ansar Ahmed Saiyad.

MSA Consultants

34.

It is a company incorporated in UAE with 80% share holding with Mr. Sunil Agrawal. During assessment proceedings the assessee had submitted copy of audited financial statements, confirmation of account, application form, Form 2 to prove identity, genuineness and creditworthiness. The AO has not found out any infirmity in these documents. Before the Ld. CIT(A), the assessee has also filed copy of bank statement of MSA Consultants to prove source of investments. Shares were allotted to MSA Consultants in FY 2013-14. These facts have not been rebutted by the Ld. DR. In these facts and circumstances of the case, the assessee has proved the identity, genuineness and creditworthiness, which was the requirement of section 68 of the Act for AY 2011-12. Therefore, the Ld. CIT(A) has rightly directed to delete the addition.

Ruhi Agarwal

35.

During assessment proceedings, it was submitted that Ruhi Agarwal was wife of Nimish Sunil Agarwal, who was one of the Director of the assessee company. Copy of share application was filed. Copy of return of income filed by Ruhi Agarwal for AY 2011-12 was filed during assessment proceedings. As per return of income, Ruhi Agarwal was assessed with DCIT, Bhilai who happens to be Assessing Officer of the assessee also. It was submitted by the assessee that the matrimonial dispute between Ruhi Agrawal and Nimish Agrawal is pending before authorities, hence Assessee could not submit further details

30 ITA No.86 & 87/RPR/2025, LNS Industries Pvt. Ltd.

during assessment proceedings. Ld. CIT(A) has not given any specific findings about Ruhi Agrawal. In these facts and circumstances of the case, we set aside the issue of Share Application money paid by Ruhi Agrwal to the AO for de-novo adjudication. The AO shall provide opportunity to the Assessee.

36.

Ironically it is not the case of the Revenue that any action has been taken against the above-mentioned share applicants. No such facts have been brought on record by the Revenue.

37.

Accordingly, we uphold the order of the Ld. CIT(A) as discussed above except investment by Ruhi Agrawal. Accordingly, the grounds of appeal raised by the Revenue in ITA No. 87/RPR/2025 are partly dismissed in the above terms.

38.

Accordingly as discussed above the ITA 86/RPR/2025 is dismissed and ITA 87/RPR/2025 is partly dismissed.

Order pronounced in the open Court on 26 October, 2026

Sd/- Sd/- (PARTHA SARATHI CHAUDHURY) (Dr. DIPAK P. RIPOTE) JUDICIAL MEMBER ACCOUNTANT MEMBER

पुणे/Pune; िदनांक/Dated : 26 -10-2026 Ravi Kumar आदेश की �ितिलिप अ�ेिषत/Copy of the Order is forwarded to: अपीलाथ� / The Appellant 1. ��थ� / The Respondent 2. 3. The concerned Pr. CIT, Pune 4. DR, ITAT, Raipur Bench, Raipur गाड� फाईल / Guard file. 5. आदेशानुसार/ BY ORDER, // True Copy // Digitally signed by SAMIRAN SAMIRAN BERA BERA // True Copy // Date: 2026.10.29 16:04:07 +05'30' Assistant Registrar आयकर अपीलीय अिधकरण,पुणे/ITAT, Pune

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