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M/S. Jds Ventures India Ltd… vs ITO | ITAT Mumbai 2022 | BharatTax

M/S. JDS VENTURES INDIA LTD,MUMBAI vs. ITO 10 (2) (1), MUMBAI

ITA 1597/MUM/2021Status: DisposedITAT Mumbai17 October 2022AY 2012-1325 pages

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Cases cited in this judgment

Detected automatically from the text. The count shows how many other judgments on BharatTax rely on the same authority.

(Central)-1 v. NRA Iron & Steel (P) Ltd.
412 ITR 161 · 2019 · SC
685 citing
CIT v. Orchid Industries Pvt. Ltd.
397 ITR 136 · 2017 · HC
222 citing
CIT v. S. Nelliappan
66 ITR 722 · 1967 · SC
87 citing
PCIT v. Bikram Singh
85 Taxmann.com 104 · 2017 · HC
79 citing
S.K. Bothra & Sons, HUF v. Income-tax Officer, Ward- 46(3), Kolkata
347 ITR 347 · 2012 · HC
65 citing
Principal CIT v. Vaishnodevi Refoils & Solvex
96 Taxmann.com 469 · 2018 · SC
47 citing
PCIT v. Vaishnodevi Refoils & Solvex
89 Taxmann.com 80 · 2018 · HC
46 citing

Income Tax Appellate Tribunal, “F” BENCH, MUMBAI

Before: SHRI S. RIFAUR RAHMAN, HONBLE & MS KAVITHA RAJAGOPAL, HONBLEShri N.R. Aggarwal

For Appellant: Shri N.R. Aggarwal

For Respondent: Ms. Vranda U. Matkari

Hearing: 12.08.2022Pronounced: 17.10.2022

ORDER PER S. RIFAUR RAHMAN (AM)

1. This appeal is filed by the assessee against the order of the Learned Commissioner of Income Tax (Appeals)-17, Mumbai [hereinafter in short “Ld.CIT(A)”] dated 18.03.2019 for the A.Y. 2012-13.

(A.Y. 2012-13) M/s. JDS Ventures India Limited 2. Brief facts of the case are, assessee filed its return of income for the A.Y. 2012-13 on 29.09.2012 declaring total income of ₹.25,40,740/-. The case was processed u/s. 143(1) of Income-tax Act, 1961 (in short “Act”) by CPC, Bangalore. Subsequently the case was selected for scrutiny u/s. 143(3) of the Act under CASS and notice u/s. 143(2) and 142(1) of the Act were issued and served on the assessee. In response, AR of the assessee attended and submitted the relevant information as called for.

3. During the assessment proceedings, Assessing Officer observed from the record that assessee has not carried out any business as projected, as the project has not taken off. However, the assessee has taken over chemical manufacturing unit in Sarigam, Gujarat. Further, Assessing Officer observed that assessee has issued 26000 equity shares of face value of ₹.10 each on a premium of ₹.990/- per share. In order to verify the genuineness of the transaction, Assessing Officer issued notices u/s. 133(6) of the Act to all the shareholders who had been allotted shares during the year, calling for necessary details. The details of shareholders with their financial position as extracted by the Assessing Officer are given below: - (A.Y. 2012-13) M/s. JDS Ventures India Limited Return of No of Profit income for Name and address of the shares Share Share Total amount before Financial Sl.NO. company applied capital premium paid tax Year for 2011-12 1. 2. 3. 4. 5. 6. (4+5) 7.

(A.Y. 2012-13) M/s. JDS Ventures India Limited mean that the transactions are genuine. The AO and the CIT (A) have rightly held that the identity, creditworthiness and the genuineness are all in doubt. Moreover, the Court notes that that these amounts have been advanced to the Assessee without any explanation as to their relationship with the Assessee, the reason for the payment of such huge amounts, as also whether any repayments have, in fact, been made. There are contradictions in the explanation given by the Assessee and the statements recorded by these four individuals, which are irreconcilable. For example, in the case of Shri Ram Chander/Ram Charan, he had initially stated that he had given Rs.10,00,000/- out of the proceeds of sale of the land but thereafter it was claimed by him that the money had come from her sister Vidya. Such contradictions clearly render all these transactions dubious. The ITAT could not have, merely because the payments were through cheques, held that the transactions were genuine. The ITAT erred in simply accepting the explanation of the Assessee qua the four transactions. The ITAT, clearly, did not follow the binding precedent in Divine Leasing & Finance Ltd. (supra), which in no uncertain terms requires that the authorities are duty bound to investigate the creditworthiness of the creditors, subscribers and the genuineness of the transactions. Thus the ITAT did not merely give findings of fact but misapplied the law. Hence the authorities CIT v. S. Nelliappan [1967] 66 ITR 722 (SC), Orissa Corpn. Pvt. Ltd. (supra), Gun Nidhi Dalmia (supra) do not support the Assessee's case. The Assessee has failed to discharge his initial burden as the explanation given by the Assessee and the four individuals does not appear to be credible. Hence it could be seen that the aforesaid narration of facts are totally distinguishable with facts of the instant case before us, which are not reiterated for the sake of brevity. 9.4. Finally the ld DR placed reliance on the recent decision of the Hon’ble Apex Court in the case of Principal CIT vs NRA Iron & Steel (P) Ltd reported in 412 ITR 161 (SC) wherein the decision on addition made towards cash credit was rendered in favour of the revenue. We have gone through the said judgement and we find in that case, the ld AO had made extensive enquiries and from that he had found that some of the investor companies were non-existent which is not the case before us. Certain investor companies did not produce their

(A.Y. 2012-13) M/s. JDS Ventures India Limited bank statements proving the source for making investments in assessee company, which is not the case before us. Source of funds were never established by the investor companies in the case before the Hon’ble Apex Court, whereas in the instant case, the entire details of source of source were duly furnished by all the respective share subscribing companies before the ld AO in response to summons u/s 131 of the Act by complying with the personal appearance of directors. In the instant case before us, after the relevant details were furnished by the assessee before the ld AO , no enquiries were further made by the ld AO with the share subscribers. The ld AO merely relied on the statement of Shri Praveen Kumar Jain and proceeded to make the addition. Hence the decision relied upon by the ld DR is factually distinguishable and does not advance the case of the revenue. 9.5. We find that as per the mandate of section 68 of the Act, the nature and source of credit in the books of the assessee company has been duly explained by the assessee. The credit is in the form of receipt of share capital and share premium from share applicants. The nature of receipt towards share capital is well established from the entries passed in the respective balance sheets of the companies as share capital and investments, as the case may be. Hence the nature of receipt is proved by the assessee beyond doubt. In respect of source of credit, the assessee has to prove the three necessary ingredients i.e identity of share applicants, genuineness of transactions and creditworthiness of share applicants. The identity of share applicants is proved beyond doubt by the assessee by furnishing the name, address, PAN of share applicants together with the copies of balance sheets and income tax returns. With regard to the creditworthiness of share applicants, these companies are having capital and reserves in several crores of rupees and the investment made in the assessee company is a small part of their capital as could be evident from the aforesaid table. These transactions are also duly reflected in the balance sheets of the share applicants. By this, the creditworthiness of share applicants is also proved beyond doubt. With regard to genuineness of transactions, the monies have been directly paid to the assessee company by account payee cheques out of sufficient bank balances available in their respective bank accounts. The share applicants have confirmed the fact of (A.Y. 2012-13) M/s. JDS Ventures India Limited investment in share capital and share premium by filing a confirmation together with an affidavit from their directors and have also confirmed the payments which are duly corroborated with their respective bank statements and all the payments are by account payee cheques. No verification was carried out by the ld AO in the instant case either by issuing notices u/s 133(6) of the Act or by issuing summons u/s 131 of the Act with the share applicants. 9.6. Undisputedly the Share Applicants in this case are the bank account holders in their respective banks in their own name and are sole owner of the credits appearing in their bank account from where they issued cheques to the assessee. For the proposition that a Bank Account holder himself is the 'owner' of 'credits' appearing in his account (with the result that he himself is accountable to explain the source of such credits in whatever way and form, the same have emerged) support can be derived from section 4 of Bankers Book Evidence Act 1891 which reads as under:- "4. Mode of proof of entries in bankers' books: Subject to the provisions of this Act, a certified copy of any entry in a bankers' book shall in all legal proceedings be received as prima facie evidence of the existence of such entry, and shall be admitted as evidence of the matters, transactions and accounts therein recorded in every cases where, and to the same extent as, the original entry itself is now by law admissible, but not further or otherwise.” 9.6.1. Following the said provisions, the co-ordinate bench of Allahabad Tribunal in the case of Anand Prakash Agarwal reported in 6 DTR (All-Trib) 191 held as under:- “The question that remains to be decided now is whether the subject matter of transfer was the asset belonging to the transferor/donors themselves. There is enough material on record which goes to show that there were various credits in the bank accounts of the donors, prior to the transaction of gifts, which undisputedly belonging to the respective donors themselves, in their own rights. No part of the credits in the said bank' accounts was generated from the appellant and/or from its associates, in any manner. The certificates issued by the banks are construable as evidence about the ownership of the transferors or their respective (A.Y. 2012-13) M/s. JDS Ventures India Limited bank accounts, as per s.4 of the Bankers' Books evidence Act 1891, which read as under: "4. Where an extract of account was duly signed by the agent of the bank and implicit in its was a certificate that it was a true copy of an entry contained in one of the ordinary books of the bank and was made in the usual and ordinary course of business and that such book was in the custody of the bank, it was held admissible in evidence. Radheshyam v. Safiyabai Ibrahim AIR 1988 Bom. 361 : 1987 Mah. 725: 1987 Bank J 552.” In view of the position of law as discussed above, it is always open for a borrower to contend, that even the “creditworthiness” of the lender stands proved to the extent of credits appearing in his Bank Account and he should be held to be successful in this contention.” 9.7. We find that the Hon’ble Calcutta High Court in the case of S.K. Bothra & Sons, HUF v. Income-tax Officer, Ward- 46(3), Kolkata reported in 347 ITR 347(Cal) had held as follows: “15. It is now a settled law that while considering the question whether the alleged loan taken by the assessee was a genuine transaction, the initial onus is always upon the assessee and if no explanation is given or the explanation given by the appellant is not satisfactory, the Assessing Officer can disbelieve the alleged transaction of loan. But the law is equally settled that if the initial burden is discharged by the assessee by producing sufficient materials in support of the loan transaction, the onus shifts upon the Assessing Officer and after verification, he can call for further explanation from the assessee and in the process, the onus may again shift from the Assessing Officer to assessee.

(A.Y. 2012-13) M/s. JDS Ventures India Limited 1137 in Civil Appeal No. 21073 / 2009 dated 30.7.2010 arising from the order of Hon’ble Bombay High Court had held as under:- ORDER Delay condoned. Leave granted. Heard learned counsel on both sides. We have examined the position. We find that the shareholders are genuine parties. They are not bogus and fictitious. Therefore, the impugned order is set aside. The appeal is allowed accordingly. No order as to costs. In the instant case before us, the share subscribing companies are duly assessed to income tax. It is not in dispute that the share subscribing companies are in existence. It is not in dispute that the share subscribing companies are duly assessed to income tax and their income tax particulars together with the copies of respective income tax returns with their balance sheets are already on record . Hence it could be safely concluded that they are genuine shareholders and not bogus and fictitious. Accordingly, the ratio laid down by the Hon’ble Apex Court in the case of M/s Earthmetal Electricals P Ltd supra would be squarely applicable to the facts of the instant case. 9.9. We would like to add that receipt of share capital for a company is not a prohibited transaction, as that is one of the main source of raising funds for a company to run its intended activities. Once all the relevant details of the investor companies were filed by the assessee before the ld AO , it is incumbent on the part of the ld AO to trigger the further verification on the investor companies by either issuing notice u/s 133(6) or summons u/s 131 of the Act to examine the veracity of the documents furnished before him. In the instant case, admittedly no such verification was carried out by the ld AO. The only premise on which addition was made was by placing reliance on the statement recorded from Shri Praveen Kumar Jain during the course of his search action. In these facts and (A.Y. 2012-13) M/s. JDS Ventures India Limited circumstances, there is absolutely no reason to draw any adverse inference on the impugned transactions and the documents submitted by the assessee. 9.10. We find that the same investor companies were subject matter of adjudication by the co-ordinate bench of this tribunal in the case of Ambee Investment & Finance Pvt Ltd vs ITO in and 3948/Mum/2017 dated 8.2.2019 wherein the transactions with the investor companies Olive Overseas Pvt Ltd (Real Gold Trading Pvt Ltd) ; Nakshatra Business Pvt Ltd (Hema Trading Co. Pvt Ltd) ; Javda India Impex Ltd ; Lexus Infotech Ltd and Kush Hindusthan Entertainment Ltd were considered and issue decided in favour of the assessee. The relevant operative portion of the order passed by this tribunal in ITA Nos. 3899 & 3948/Mum/2017 dated 8.2.2019 supra are as under:- “8. We have gone through the assessment order and the order of CIT(A) and noted that the AO noticed from the Bank Account submitted by the assessee that these are non-genuine transactions. The entire basis of the AO was on the investigation done by the office of DGIT Investigation, Mumbai. From the above assessment order, it is clear that the AO has not made any enquiry or investigation and no evidence to controvert the factual details submitted by the assessee was brought on record by the Assessing Officer. The statement of Shri Pravin Kumar was supplied and no cross-examination was provided. There nothing on record about the result of investigation having done by the DGIT (Investigation), Mumbai. The papers filed by the assessee clearly demonstrate that the identity, creditworthiness and genuineness of the transaction is proved. The assessee has prima facie discharged its onus and AO has not carried out any inquiry. In view of the above, we confirm the order of CIT(A) and this issue of Revenue’s appeal is dismissed.” The facts of the instant case before us squarely fit in into the facts before the co-ordinate bench of this tribunal in the aforesaid case. Though this decision was rendered in the context of transactions with 5 parties mentioned supra, the same documents that were filed for these 5 parties were filed by the assessee herein for the other two parties also viz Reynolds Petro Chem Ltd and (A.Y. 2012-13) M/s. JDS Ventures India Limited Utkantha Trading Pvt Ltd. Hence the decision rendered thereon would apply with equal force for these two companies also. 9.11. We find that the Hon’ble Apex Court recently in the case of Principal CIT vs Vaishnodevi Refoils & Solvex reported in (2018) 96 taxmann.com 469 (SC) had dismissed the SLP of the Revenue. The brief facts were that the addition u/s 68 of the Act was made by the Assessing Officer in respect of capital contributed by the partner of the firm. The Hon’ble High Court noted that when the concerned partner had confirmed before the Assessing Officer about his fact of making capital contribution in the firm and that the said investment is also reflected in his individual books of accounts, then no addition could be made u/s 68 of the Act. The decision of Hon’ble Gujarat High Court is reported in (2018) 89 taxmann.com 80 (Guj HC) . The SLP of the revenue against this judgement was dismissed by the Hon’ble Supreme Court. 9.12. We also find that the Hon’ble Jurisdictional High Court in the case of CIT vs Orchid Industries Pvt Ltd reported in 397 ITR 136 (Bom) had held as under:- “5. The Assessing Officer added Rs. 95 lakhs as income under Section 68 of the Income Tax Act only on the ground that the parties to whom the share certificates were issued and who had paid the share money had not appeared before the Assessing Officer and the summons could not be served on the addresses given as they were not traced and in respect of some of the parties who had appeared, it was observed that just before issuance of cheques, the amount was deposited in their account.