ITO, NEW DELHI vs. M/S. SUKHNA REAL ESTATE PVT. LTD., GHAZIABAD

PER BENCH: The aforesaid bunch of 22 appeals relating to above named 16 assessees pertain to quantum of assessment passed u/s 143(3) for the assessment years 2012-13 and 2013-14 arising out of 9 separate impugned appellate orders. The issues involved in all the 22 appeals are arising out of identical set of facts and are inextricable interconnected with each other and common issue is permeating in all the appeals with similar additions.

Brief Background of the case

May, 2018 under the Insolvency and Bankruptcy Code, 2016. In nutshell the primary addition in all the appeals pertain to additions u/s.68 on the credits in the form of share capital/share premium and/ or loan and advances appearing in the books of assessee companies in the Assessment Year 2012-13 in 15 cases; in A.Y. 2013-14 in 3 cases; and Assessment Year 2014-15 in one case. The core contention of the assessee before us has been in a nutshell is that the funds have been channeled from the regular books of account of Bhushan Energy Ltd. which is a subsidiary of Bhushan Steel Ltd. into a maze of group companies in the form of share capital and/or loan and advances. The accounted funds, i.e., recorded in the Bhushan Energy Ltd. have been routed through web of group companies and finally re-routed back into the books of Bhushan Energy Ltd. The Assessing Officer on the other hand has treated the share capital/ share premium and or loan and advances appearing in the balance sheet of aforesaid assessee companies as alleged introduction of unaccounted funds of the assessee companies into the regular books of account which has been added u/s.68. In six cases, the bonus share issued by the respective assessee company has also been added by the Assessing Officer which was merely in the nature of transfer entries representing capitalization of reserve and surplus. Apart from that, commission expenses on notional basis u/s.69C alleged to have been paid by the assessee for availing such accommodation entries from the group companies has also

been added by Ld. CIT (A) by way of enhancement. Though in majority of cases Ld. CIT (A) has deleted the addition made u/s 68. At a glance the addition made in the case of the assessee can be tabulated in the following manner:

Sl. Name of the Assessee Date of A.Y Asses Quantum of Details of No. & Asst. sment addition(s) original nature of additions made by Order Order made by the Ld. return – the A.O. u/s A.O date of filing of ITR & income declared 1. Angel Cement Pvt. Ltd. 31.03.20 2012- 143(3) 26.09.2012 - Share Capital – sec 68 15 13 66,00,00,000 3,803/- - Current liabilities (payables) – 54,70,00,000 sec 68 2. Delight Resorts Pvt. Ltd. 30.03.20 2012- 143(3) 29.09.2012 - Share Capital – section 68 15 13 10,00,00,000 (-) - Advance – section 68 66,56,47,519 3,80,468/- - 50% disallowance of employee 5,22,890 benefit expenses 3. Delight Resorts Pvt. Ltd. 30.11.20 2014- 143(3) 30.09.2014 - Advance – section 68 16 15 37,70,00,000 47,080/- 4. Jawahar Credit & Holdings Pvt. 27.03.20 2012- 143(3) 24.09.2012 Ltd. 15 13 73,50,00,000 2,70,000/- - Share Capital – section 68 5. Jingle Bells Aluminium Pvt. Ltd. 27.03.20 2012- 143(3) 26.09.2012 - Share Capital – section 68 15 13 62,00,00,000 3,167/-

bonus shares of Rs. 20,63,40,000/-) – section 68 13. Sukhna Steel Pvt. Ltd. 26.03.20 2012- 143(3) 20.09.2012 - Share capital (including 15 13 26,16,80,000 7,844/- bonus shares of Rs. 16,80,000/-)– section 68 14. Sunlight Tours & Travel Pvt. Ltd. 26.03.20 2012- 143(3) 29.09.2012 - Share Capital (including 15 13 52,01,68,000 3,69,875/- bonus share of Rs. 12,01,68,000/-) – section 68

TOTAL 10,65,22,85,409

Apart from that there were certain minor additions of disallowance of employee benefit expenses in the case of Delight Resort Pvt. Ltd. for Assessment Year 2012-13 which has been deleted by CIT(A) and no appeal has been filed by the Revenue; and disallowance u/s.14A in the case of Stylish Construction Pvt. Ltd. which has been contested.

were identical set of facts and circumstances. In majority of the cases the addition made u/s.68 and 69C by the Assessing Officer have been deleted by CIT(A) primarily on the ground that assessee has discharged the onus of establishing the requisite ingredients u/s.68 and after examining the fund flow statement as to how the money has originated from Bhushan Energy Ltd and gone back to same company. In certain cases additions have been confirmed by the ld. CIT(A) mainly relying upon the reasoning given by the Assessing Officer. In tabular form the additions confirmed and deleted by the ld. CIT (A) in all the appeals are as under:

Sl. Name of the Assessee & A.Y Asst. Quantum of Confirmatio Appeal before No. nature of addition made by Order Addition n (C) or the Hon’ble the Ld. A.O u/s Deletion (D) ITAT filed by by the Ld. Revenue (R) C.I.T (A) or Assessee(A) 1. Angel Cement Pvt. Ltd. 2012-13 143(3) - Share Capital – sec 68 66,00,00,000 Deleted (D) R - Current liabilities (payables) 54,70,00,000 D R – sec 68 2. Delight Resorts Pvt. Ltd. 2012-13 143(3) - Share Capital – section 68 10,00,00,000 D R - Advance – section 68 66,56,47,519 D R - 50% disallowance of 5,22,890 D Not challenged employee benefit expenses 3. Delight Resorts Pvt. Ltd. 2014-15 143(3) - Advance – section 68 37,70,00,000 D R 4. Jawahar Credit & Holdings Pvt. 2012-13 143(3) Ltd. 73,50,00,000 D R - Share Capital – section 68 1,47,00,000 Fresh A - Alleged Undisclosed addition Commission Income [added made by by C.I.T (A)] C.I.T (A) 5. Jingle Bells Aluminium Pvt. 2012-13 143(3) Ltd. 62,00,00,000 D R - Share Capital – section 68 1,24,00,000 Fresh A - Alleged Undisclosed addition Commission Income [added made by by C.I.T (A)] C.I.T (A) 6. Kasper Information Technology 2012-13 143(3) Pvt. Ltd. 46,00,00,000 D R - Share Capital – section 68 92,00,000 Fresh A - Alleged Undisclosed addition Commission Income [added made by by C.I.T (A)] C.I.T (A)

Sl. Name of the Assessee & A.Y Asst. Quantum of Confirmatio Appeal before No. nature of addition made by Order Addition n (C) or the Hon’ble the Ld. A.O u/s Deletion (D) ITAT filed by by the Ld. Revenue (R) C.I.T (A) or Assessee(A) 7. Kasper Information Technology 2013-14 143(3) Pvt. Ltd. 16,00,00,000 C A - Share Capital – section 68 8. Landsky Real Estate Pvt. Ltd. 2013-14 143(3) - Share Capital – section 68 16,00,00,000 C A - Advances – section 68 2,60,00,000 C A 9. Sintex Consumer Electronics 2012-13 143(3) Pvt. Ltd. 78,22,80,000 D R1 - Share Capital (including bonus shares of 18.228 crores) – section 68

Sl. Name of the Assessee & A.Y Asst. Quantum of Confirmatio Appeal before No. nature of addition made by Order Addition n (C) or the Hon’ble the Ld. A.O u/s Deletion (D) ITAT filed by by the Ld. Revenue (R) C.I.T (A) or Assessee(A) - Unsecured loans – section 68 19. Track Casting India Pvt. Ltd. 2012-13 143(3) - Share Capital – section 68 31,00,00,000 D R - Unexplained expenses 7,75,000 D Not challenged (alleged commission expenses) - sec 69C

TOTAL 10,68,85,85,409

Assessees herein under identical facts and circumstances. Whereas in most of the captioned cases the additions made by the Ld. A.O(s) u/s 68 have been deleted by the Ld. CIT (A)s on the ground that the Assessees have effectively established the necessary ingredients of section 68, whereas in few cases the Ld. CIT(A)s have upheld the additions made by the A.Os u/s 68 on the ground that the concerned Assessees have availed accommodation entries in the garb of share capital and/or loans & advances. In the remaining cases the Ld. C.I.T(A)s have opined that the Assessees have essentially worked as entry providers for providing facility to route transactions in lieu of certain commission income. Another peculiar fact to be noted is that, even with respect to the same Assessee, divergent views have been taken by different officers at the first appellate stage in relation to similar additions u/s 68 made in different A.Ys. For instance:-

• In SI. No. 6 - Kasper Information Technology Pvt. ltd. wherein addition u/s 68 has been deleted by the Ld. CI.T(A) for A.Y. 2012-13 as against SI. No. 7 - Kasper Information Technology Pvt. ltd. wherein similar addition u/s 68 has been confirmed by the Ld. CIT (A) for A.Y. 2013-14.

• In Sl. No, 17- Globus Real Infra Pvt. Ltd. A.Y 2012-13 wherein addition u/s 68 has been deleted by the CIT(A) as against Sl. No. 18 - Globus Real Infra Pvt. Ltd. A.Y. 2013- 14 wherein similar addition u/s 68 stands confirmed by

the Id. CIT(A).

Sl. Name of the A.Y GROUNDS TAKEN BY THE ASSESSEE BEFORE THE HON’BLE No. Assessee & ITA ITAT No. Ground challenging the Other Grounds upholding of addition u/s 68 on account of Share Capital/ Share Premium and/or Loans & Advances

Sl. Name of the A.Y GROUNDS TAKEN BY THE ASSESSEE BEFORE THE HON’BLE No. Assessee & ITA ITAT No. Ground challenging the Other Grounds upholding of addition u/s 68 on account of Share Capital/ Share Premium and/or Loans & Advances

(i.e. the return of income and assessment order) and outside the subject matter of assessment appealed against. Ground 3: That the Ld. C.I.T(A)-05, New Delhi erred in making fresh addition of Rs. 1,47,00,000/- and thus enhancing the income of the Appellant to the said extent without issuing a prior show cause notice as mandated u/s 251(2) of the Act for providing a reasonable opportunity to the Appellant of showing cause against such enhancement, thus resulting in gross violation of principles of natural justice.

Sl. Name of the A.Y GROUNDS TAKEN BY THE ASSESSEE BEFORE THE HON’BLE No. Assessee & ITA ITAT No. Ground challenging the Other Grounds upholding of addition u/s 68 on account of Share Capital/ Share Premium and/or Loans & Advances

enhancing the income of the Appellant to the said extent without issuing a prior show cause notice as mandated u/s 251(2) of the Act for providing a reasonable opportunity to the Appellant of showing cause against such enhancement, thus resulting in gross violation of principles of natural justice.

Sl. Name of the A.Y GROUNDS TAKEN BY THE ASSESSEE BEFORE THE HON’BLE No. Assessee & ITA ITAT No. Ground challenging the Other Grounds upholding of addition u/s 68 on account of Share Capital/ Share Premium and/or Loans & Advances

i) Grounds challenging the confirmation/deletion by the Ld. C.I.T(A)of additions made by the A.O u/s 68 on account of alleged

unexplained credit in the form of share capital/ share premium and/or loans & advances (as the case may be) received by the Assessee(s) – Challenged by the Department where the addition stands deleted by the Ld. C.I.T (A)(16 cases)and challenged by the Assessee(s)(3 cases)where the addition stands confirmed by the C.I.T (A). ii) Department’s Ground challenging the deletion by the Ld. C.I.T(A) of the additions made by the A.O u/s 68 with respect to increase in share capital of the Assessee-company on account of issue of bonus shares(3 cases).

iii) Assessee’s Ground challenging the fresh addition (enhancement) made by the Ld. C.I.T (A)on account of alleged commission income @ 2% for providing facility to route the impugned financial transactions without introducing new source of income beyond record without issuing prior show cause notice u/s 251(2) – challenged by the Assessee in the cases of Jingle Bells Aluminium Pvt. Ltd. (A.Y. 2012-13), Kasper Information Technology Pvt. Ltd. (A.Y. 2012-13) and Jawahar Credit & Holding Pvt. Ltd. (A.Y. 2012-13).

iv) Department’s Ground challenging the order of the Ld. C.I.T(A)restricting addition to Rs. 5 lacs from an addition of Rs. 23,32,813/- made by the A.O u/s 14A of the I.T. Act, 1961 read with Rule 8D of the I.T. Rules, 1962 – challenged by the Department in the case of Stylish Construction Pvt. Ltd. for A.Y. 2012-13.

v) Department’s Ground challenging the alleged admission of additional evidence by the Ld. C.I.T(A) without giving opportunity to the Ld. A.O in violation of Rule 46A of the I.T. Rules, 1962 – challenged by the Department in the cases of Angel Cement Pvt. Ltd. (A.Y. 2012-13), Delight Resorts Pvt. Ltd. (A.Y. 2012-13) and Stylish Construction Pvt. Ltd. (A.Y. 2012-13).

vi) Assessee’s Ground challenging the passing of exparte order by the Ld. C.I.T. (A) – urged by the Assessee in the case of Globus Realinfra Pvt. Ltd. (earlier known as Sur Buildcon Pvt. Ltd.) for A.Y. 2013- 14.

Assessing Officer u/s.68 on account of sums credited in the books of the assessee in the form of share capital/share premium and / or loans and advances as a lead case.

SI.No. Name of the parties Total Share Share Capital Premium Bhushan Finance Pvt. Ltd. 15000000 285000000 300000000 1 2 NRA Iron & Steel Pvt. Ltd. 15000000 285000000 300000000 3 Sri Brij Bhushan Singal 4500000 40500000 45000000 4 B B Singal (HUF) 900000 8100000 9000000 5 Sri Kishori Lal(HUF) 675000 6075000 6750000 6 Smt. Uma Singal 2025000 18225000 20250000 7 Smt. Archna Mittal 1350000 12150000 13500000 8 Sri Neeraj Singal 900000 8100000 9000000 9 Neeraj Singal (HUF) 1350000 12150000 13500000 10 Smt. Ritu Singal 1800000 16200000 18000000 Total 43500000 691500000 735000000

company has received share capital and share premium aggregating to Rs.73,50,00,000/-, the assessee vide reply dated 22.12.2014 submitted the details of address along with PAN, their confirmation letters and their bank statements highlighting the relevant entries. In order to verify the genuineness of the transaction, the Assessing Officer sent u/s. 133(6) dated 09.01.2015 from the subscriber company, namely, Bhushan Finance Pvt. Ltd. and NRA Iron and Steel Pvt. Ltd. and asked to furnish the following details:- 1. Copy of Bank Statement from where funds have been given to above assessee company (JCHPL). 2. Source of funds raised for making investment in the above company, (JCHPL). Please provide complete chain details of funds received in your bank account giving Name/Address/PAN of the person from whom the said funds have been received. 3. Name of the person, who offered the shares of the company on behalf of JCHPL. Also submit offer prospects in this regard. Also provide justification of buying the share premium supporting with documentary evidences. 4. Name of the person (Mediator) through whom the deal was negotiated for making investments in share/share application money. 5. Copy of application form in respect of share application money paid to JCHPL. 6. Copy of acknowledgement of receipt share application Form and share certificate. 7. Copy of share certificate of the above company (JCHPL).

“(a) During the year the Assessee Company has issued 3000000 fully paid up shares each at a premium of Rs.190/-, 15,00,000 partly paid up shares converted into fully paid up shares at a premium of Rs. 90/- each to various parties (details already filed earlier) With regard to the issue of shares at a premium and the justification for the same it s submitted as under: (b) Although the term share premium has not been defined in any

statute, the commonly accepted meaning thereof refers to it being the amount paid over and above the nominal value of the shares and securities of a company. (g) The calculation of premium which a company can garner is the combined result of the interplay of various factors intrinsic, normative and even perceptual some or most of which are not capable of any degree of quantification/enumeration. The decision to ask for a premium was based on perceptions as to the company’s ability to raise funds based on future business prospects, planning and outlook In the financial markets the ability of an investor to command a premium and the willingness of an investor to invest at the said premium are based on the intangible factors and issues such as the economic outlook, future business plans etc and the same should be considered as genuine reasons. Such decisions and activities are invariable based on intangible perceptions and thought processes and not based on any nuts and bolts, any physical genuine reasons. The decision of the Investor Companies to invest in the shares at a premium Mm based on the thought process, and ground realities prevailing at that, point of time. Moreover as already discussed above there are/were no specific guidelines/rectification/stipulations as to the manner of calculation of premium in the case of an unlisted company. As such it becomes the prerogative of the Board of Directors of a investor company to decide the premium which it can command and the wisdom of an investor as to whether he would be willing to pay the same. In the given case the calculation of premium which the Assessee Company could command was based on its future plans and the expected inflows therefrom with facts and projections were found to be acceptable to the investors and accordingly no adverse

view can be arrived at with regard to the same.”

Rs. Date Debit Credit 22.03,2012 30,00,00,000 3,00,00,000 23.03.2012 4. Uma Singal. Bank: Punjab National Bank, C,P, New Delhi A/c No. 0133002l60006815 Rs. Date Debit Credit 26.03.2012 2,00,00,000 26.03.2012 5,00,000 26.03.2012 2,02,50,000

Rs. Date Debit Credit 26.03.2012 1,35,00,000 26.03.2012 1,35,00,000

Rs. Date Debit Credit 26.03.2012 2,25,00,000 26.03.2012 90,00,000

26.03.2012 67,50,000

On the perusal of the bank statement Assessing Officer observed that these subscriber company and individual investment did not have their own creditworthiness and they were just an accommodation entry. He further observed that on perusal of the financials of the assessee company it can be seen that it has not done any business activity and the major part of the turnover derived from the dividend and miscellaneous income. He has also analyzed the books profit of the assessee company before issue of share on premium as on 31.03.2011 which was as under:

A. Equity 1. Share Holder's funds (in Rs.) Share Capital 88000000 Reserves Reserve and Surplus 172746598 Total 260746598 No. of shares 10150000

Value per share 25.68 per share

A.Y. 2011-12 114440

A.Y. 2012-13 (820515)

The assessee company has very nominal business profit. It is only common sense that past performance should be given suitable weight age for the valuation of a company and its shares but the same has been totally ignored in the instant case. Furthermore, no correspondence or any documentary evidence has been brought on record in the assesses company replies submitted in the course of the assessment proceedings to justify the so called bright future prospects of the company which would enhance the profitability and consequentially lead to higher valuation of the shares.

To test the credibility of the valuation, an effort was made to verify the future results of Assessee Company with reference to the financial results filed for A.Y. 2011-12 and 2012- 13. The comparative figures are as under:

A.Y. income Interest, Total Net Profit EPS from Dividend & Claimed by the Income, Operation other assessee Income 2011-12 393934 2380822 2774756 114440 0.01 2012-13 368137 368137 (0.05) (820515)

assessee has failed to prove the genuineness of the transaction and the creditworthiness of the parties.

“6.1 I have gone through the submissions by the appellant, assessment order, report of AO, rejoinder by appellant and perused the case laws relied upon. 6.2 The appellant has raised two grounds of appeals which is related to the addition of Rs.73,50,00,000/- and interlinked. Therefore, both the issues are taken together. 7. It is seen from the assessment order that appellant has not provided proper confirmation at the first instance, however, notices issued u/s 133(6) of the Act to the investors, has been replied with. There is no financial capacity of various investors

to subscribe share capital with high premium in the appellant company. The appellant expressed their inability to produce the directors of the investor companies or the individuals. It is also seen by the AO that the amount has been received by the investors, just before subscribing the shares in the appellant company. The subscribers did not have their own creditworthiness as in most of the cases the amount has been received on transfer and there is hardly any business activity by those investors. 7.1 It is observed by the AO that the appellant company is showing very nominal income having limited resources and reserves, therefore, such high premium is not justified. The origin of funds to the subscribers/investors is not clear and there is no economical/logical explanation for the transactions. Accordingly, the AO held that it is unexplained being a sham transaction in the guise of capital introduction, without the tax payments. Accordingly, after relying upon various case laws, this addition was made, invoking provisions of section 68 of the Act. 7.2 It is contended by the appellant that it has provided all the documents of the investors such as audited account, copy of ITR, confirmation, bank account and other details to substantiate that these transactions are genuine and payments have been received through banking channels. It is also contended, as reproduced above, that desired information has been duly provided in compliance to notice u/s 133(6) of the Act, all the investors are assessed to tax and assessment order u/s 143(3) of the Act has been provided in few cases. It

is also stated that for the year under consideration, there was no statutory requirement to evidence and justify the source of source of the funds invested. The appellant also relied upon various judgments, as quoted in its submission, reproduced above, to justify that these transactions are genuine and addition u/s 68 is not called for as onus cast upon the appellant company has been duly discharged. It is also argued that the issue of share premium is a matter to be decided upon by the various investors and the companies concerned and not within the powers of AO to step into the shoes of business entities. It is also stated that reasons for making impugned additions are generic in nature and based on the interpretation by AO without clinching evidence. 7.3 On going through the submissions of the appellant, it is observed that all the ten investors are submitting their return of income, the transactions has been done through the banking channels. 7.4 The appellant has cited a number of decisions of the jurisdictional High Court and other jurisdictions, wherein the Hon'ble Court has disapproved the attempt of the AO to look into the source of the source of the deposits, which was not the mandate of the law in the year under appeal. The amendment of section 68 w.e.f. 01.04.2013 cannot be held, or interpreted, to be retrospective in nature. The appellant has also relied on decisions of the Hon'ble High Court of Delhi wherein it has been held that share capital cannot be assessed in the hands of the company even if the subscribers to the increased share capital were held to be not genuine.

Such addition could only be made in the hands of the alleged bogus share holder. The order of the Hon'ble Delhi High Court in the case of CIT vs. Lovely Exports Pvt. Ltd. 299 ITR 268 has been upheld by the Apex Court. In the case of CIT vs. Kamdhenu Steel and Alloys Ltd. 206 Taxman 254, the Hon'ble Delhi High Court has held that the assessee cannot be fastened with the liability u/s 68 unless a causal connection between the cash deposit in the bank and the assessee is established. The Hon'ble Delhi High Court in the case of ClT vs. Nova Promotors and Finlease (P) Ltd. has held that the AO is duty bound to investigate the creditworthiness of the creditor and genuineness of the transaction. Where the complete particulars of the share applications are furnished to the AO and the AO has not conducted any enquiry into the same or has no material in his possession to show that those particulars are false, then no addition can be made in the hands of the company u/s 68. 7.5 However, it is observed in this case that the appellant could not justify the immediate payment towards investment in shares for the funds received from investors and similarly the amount has been invested by appellant company in various investments made in shares immediately after receiving the share capital. The appellant could not produce the directors of few investor companies, who have heavily invested in the appellant company for no cogent reason. It is also observed from the assessment order of all such persons that they are not carrying out any worthwhile activities nor have actual worth to invest in the appellant company at such

high premium. The source and destination companies are having common address. In the report of AO, it is also mentioned that appellant company is not having worth for which such heavy premium in shares can be invested and justified. Further, the appellant company is not showing any worthwhile income since past and it has limited reserves and surplus. 7.6 It is also stated in the report of AO that the investment made by various investors, in the appellant company has received funds from the companies and persons related to Bhushan Steel Ltd which was further routed through the appellant company and further invested in eight companies as share application. In its reply, the appellant has not given any satisfactory reply to this fund flow and also the payments made by investors, immediately after receiving the funds from above companies. 7.7 Further, the address of the investors and the investment made by appellant company are same. 7.8 All these features as discussed in the foregoing paragraphs, 7.5 to 7.7 indicates that though the documentations are complete with respect to the investors and the appellant/company, payments received and made through banking channels and other formalities are complete, however, inability to produce directors in the case of investor company, investment at such high premium without justification and having no net worth or reserves and surplus and immediate investment in appellant company after receiving the funds, which was further invested by the

appellant company to other companies for such amount received, same address etc. shows that the appellant company and its investors, especially companies are nothing but a creation of paper companies to transfer its funds from Bhushan Steel Ltd. and other individuals related to them, to various companies as shown in flow chart, through the appellant company. 7.8 As stated earlier, there is no worth/reserve of the appellant company nor any business carried out, the investor companies and other persons are also hot carrying out any visible business activity, therefore, this is nothing but routing of its funds by the Bhushan Steel Ltd. and its related parties where neither the investors and other persons nor the appellant company are ultimate beneficiary. The funds received were given to the other companies, as soon as it is received and the assets in the balance sheet is shown in the form of investment in shares for the share application money and premium thereon received. The appellant has also not given any cogent reasoning for the fund flow shown by the AO in his report. 7.9 Therefore, looking to the facts and circumstances of this case where basic requirement to justify the identity, creditworthiness and genuineness of transaction has been prima facie established but looking to the fact and analysis as narrated above, these transactions are found to be for routing finances of M/s Bhushan Steel Ltd. and other persons, through appellant Company and it is just paper company where appellant is not the ultimate beneficiary because it has

further passed on those funds to various companies as shown in the flow chart. 7.10 In view of above, it is to be stated that as per the practice and also seen in various cases, the said person (in this case appellant) charges the amount to provide such entries which is generally 2% of the total transactions. Therefore, considering that the appellant has been providing the facility to route these financial transactions, the 2% of the total amount is treated as undisclosed income of the appellant, not shown in its return of income. This comes to Rs. 1,47,00,000/-. 7.11 Since the details have been duly provided with respect to the referred companies and the additions are out of the ambit of provisions of section 68 of the Act due to the reason that these investors companies are held to be just a paper company or conduit in the case of other investors for providing entries and

routing the finances, therefore, the addition to the extent of Rs. 1,47,00,000/- is sustained for charges received in providing such entries, not disclosed by the appellant. For the balance amount, the appellant gets a relief.”

 The assessee never came  Appellant companies are Angel 2012-13 Section 1. Cement Pvt 68: forward to prove identity, having adequate reserves Ltd. Share creditworthiness & to make investment. genuineness (ICG)of capital the  The -Revenue’s (SC) share transactions. assessee has  The summons addressed to Appeal premium discharged its burden cast – Rs. 66 contributors remained upon it to prove identity, crores uncompiled with. creditworthiness & Notice 133(6) returned back genuineness (ICG) of the Other un-served from all the transactions(Page 37 – payables parties (Page – 4, Para 3.2) CIT(A) order).  Summons returned back (current  Investor companies have liability) - un-served from three submitted documents to Rs. 54.70 parties namely Cantabile prove the ICG of the crores (Left), Sintex (No such firm), transactions. (Page 31 – 37 Supreme (no such firm) – CIT(A)’s order). The Total: Rs. (Page– 4, Para 3.2) source of funds invested in  The assessee adopted a 120.7 share capital and share crores prevaricate and non-co- premium by each investor operation attitude (Page 6, stands explained (Page 37 Para 3.5) – CIT(A) order)  The confirmations submitted by the assessee  The source of funds by the are not even self-serving to investor companies in the prove ICG of the appellant in its share transactions. ICG of the capital stands explained. transaction is not (Page 37 – CIT(A) order). established. (Page 6, Para 3.5)  All the investor companies  Simply furnishing PAN or are assessed to tax in their Assessment particulars/ jurisdiction either in Delhi address is not enough, as or in Mumbai. The copies they do not facilitate cross of assessment have been verification. (Page – 7, Para submitted(Page 37 – CIT(A) 3.6 – AO’s order) order).  Genuineness and creditworthiness of these  The appellant company parties remain unverified. has filed copies of bank The assessee failed to statement, profit & loss discharge its onus account, balance sheets to completely. (Page – 7, Para establish source of funds – 3.7 – AO’s order) in hands of investor  No sufficient balance in companies(Page 37 – bank accounts, cheque CIT(A) order). issued to assessee cleared  The AO contention in by way of receipt of making the addition on transfer entry from another ground that the notice U/s associated concern, nature 133(6) and summons U/s of transaction reveal they 131 could not be served is are not real business not acceptable as the transactions, similar to trade investor companies have of an entry operator. Thus been assessed to tax U/s amount received can be 143 of the Act, therefore termed as ‘bogus all the details must have accommodation entry’ been filed before their received by assessee (Page – respective AO's. Therefore 7, Para – 3.7 – AO’s order). it can be said that these companies are very much

List of case laws relied upon by present at the given the A.O address and has got all necessary establishments • CIT V NR Portfolio Pvt Ltd. (Page 37/38 – CIT(A) • CIT V Nova Promoters and order).  The AO did not bring any Finlease Pvt Ltd. • Kale Khan Mohd. Hanif V adverse material to reject the explanations and CIT. • CIT V Lachhman Das Oswal evidences submitted by the appellant except non- • Nanak Chandra Laxman Dass compliance of 131 and V CIT (1982) 140 ITR 151 133(6) (Page 38 – CIT(A) (All.) order). • R Dalmia V CIT (1976) 113  Neither any person has ITR 522 (Del.) given any statement nor • CIT V Debi Prasad has made any allegation Vishwanath Prasad (1968) against these 72 ITR 194 (SC) companies(Page 38 – • CIT V Hero Cycles Pvt Ltd. CIT(A) order) • CIT V Stepwell Industries Ltd  The reasons given by AO and Others. are very generic in nature • SumatiDayal V CIT (1995) and not backed by any 214 ITR 801 (SC) concrete evidence(Page 38 • CGT V Dr. George Kuruvilla – CIT(A) order). (1969) 74 ITR 328 (SC)  There was no cash deposit • CIT V Joseph John (1967) 67 in the bank accounts of ITR 74 (SC) the parties from share • RB Seth Champa Lal Swarup capital received(Page 38 – V CIT (1965) 60 ITR 493 (SC) CIT(A) order). • CIT V R Venkataswamy Naidu (1956) 29 ITR 529 (SC) List of case laws relied upon by • Sreelekha Banerjee V CIT CIT(A) (1963) 49 ITR 112 (SC) • AnrajNarainDass V CIT • MoD Creatiosn Pvt Ltd V (1951) 20 ITR 562 (Punj.) Income Tax Officer • A.D. Jayaveerapandia Nadar (2013) 354 ITR 282 V CIT (1964) 54 ITR 401 (Delhi) (Mad.) • CIT V Kamdhenu Steel • Shankar Industries V CIT and Alloys Ltd and (1978) 114 ITR 689 (Cal.) Others 206 taxmann 254 • Oriental Wire Industries P Delhi Ltd. V CIT (1981) 131 ITR 688 • CIT V Gangeshwari (Cal.) Metals Pvt Ltd (2013) 30 • Sikri & Co. Pvt Ltd V CIT taxmann.com 328 (1977) 106 ITR 682 (Cal.) • CIT V Oasis Hospitalities • VeljiDeoraj& Co. V CIT (2011) 333 ITR 119 (1968) 68 ITR 708 (Bom.) (Delhi) • KM Sandhu & Sons Pvt Ltd V • ITO V Neelkanth CIT (1999) 239 ITR 77 (Cal.) Finbuild ITA No. • CIT V Kerala Roadlines 2821/Del/2009 dated Corporation 01/04/2015 • Roshan Di Hatti V CIT • ITO V NC Cables Ltd 4122/Del/2009 • ITO V Rakam Money Matters P. Ltd 2821/Del/2011 • ACIT V Kisko Castings Pvt Ltd • CIT V Fair Finvest Ltd • CIT V Expo Globe India Ltd.

have been undertaken with explanationsof the a purpose to defraud the Appellant (Page – 25, revenue and is a colorful Para – 3.1 – CIT(A)’s device (Page 4 – AO’s Order). Order). The assessee failed  to bring on record that why That Pace Iron is an the Axis bank account is investment company being maintained at Angul, and having SC of Rs 2.41 Orrisa, detail of the person crores and advances of who maintains the account Rs. 32.7 crores as on at such location (Page 4 – March 31, 2011 (Page – AO’s Order) 24, Para – 3.1 – CIT(A)’s  Bank account opened on Order). March 22, 2012, major advances received in bank  There are no cash account maintained at deposits in the bank Orrisa only (Page 4 – AO’s accounts of in case of Order). All the bank accounts both the investors (Page from where money – 24, Para – 3.1 – CIT(A)’s transferred are apparently Order). located at Angul, Orrisa (Page 5 – AO’s Order). All  Group companies have bank accounts are joint bank filed various details in accounts including support of subscription assessee’s bank account made, replies U/s 133(6) (Page 5 – AO’s Order) filed by parties, AO  ICG of the transaction and having no credible the investor are deeper and information to deny obstructive than mere explanations of completion of paper work or appellant with either documentation (Page 8 – genuineness or AO’s Order). Assessee is a creditworthiness (Page – private limited company, 30, Para – 3.3 – CIT(A)’s neither came out with any Order). public issue nor issued any advertisement, still failed to  Therefore it is held that produce the persons who appellant has filed invested towards share necessary details capital shows that the regarding identity and transactions are merely creditworthiness(Page – accommodation entry (Page 30, Para – 3.3 – CIT(A)’s – 8/9 – AO’s Order) Order)  In a private limited company, it is generally not difficult on Regarding addition related to part of assessee to produce advances recived during the persons who have invested year : substantially toward share  That the amount capital (Page 9 – AO’s received as advance Order). Sequence of events have been adjusted like, failure on assessee’s against sale of shares in part to bring directors of case of four companies subscriber companies, and balance refunded failure to file future project and wholly refunded in reports, huge investments case of one company made into assessee (Page – 31, Table Para – company in the second year 4.1 – CIT(A)’s Order). of operation, indicates that what is apparent is not real  Appellant filed relevant and only a colorable device documents from the to convert unaccounted creditors (Page – 31, money without paying any Table Para – 4.1 –

taxes (Page 9 – AO’s Order). CIT(A)’s Order) There is no presumption  that a cash credit is genuine Creditors doing regular merely because a payment business and advance was made by cheque. adjusted against sale of Assessing authority shall shares (Page – 31, Table accept cash credit only if the Para – 4.1 – CIT(A)’s transaction is true and Order). genuine (Page 10 – AO’s Order).  Assessment in case of  If the liability shown in the the most of the creditor account is found to be bogus have been completed and there is no plausible U/s 143(3) of the Act and reasonable explanation (Page – 32, Table Para – by the assessee, the amount 4.1 – CIT(A)’s Order). can certainly be added to That AO did not conduct income of the assessee (Page any further inquiry to 10 – AO’s Order) suggest that creditors do not have Regarding expenses claimed and creditworthiness or disallowed transactions are not No evidence furnished in support genuine (Page – 32, of expenses claimed as employee Table Para – 4.1 – benefit and other expenses CIT(A)’s Order). amounting to Rs 3.79 lakhs and Rs. 6.22 lakhs being unverifiable  Ratios of judicial expenses (Page – 11 – AO’s precedents discussed in Order) previous ground (Share capital) are equally Case laws relied upon by A.O: applicable to this ground of appeal. Therefore • CIT-II V MAF Academy Pvt addition deleted. (Page – Ltd (2014) 42 32, Table Para – 4.1 – taxmann.com 377 (Delhi) CIT(A)’s Order) • Nova Promoters &Finlease, Delhi High Related to addition on Court employees benefit expenses • N. R. Portfolio (P) Ltd and other expenses: [2014] 42 taxmann.com 339 (Delhi HC) The details produced during • V.I.S.P. (P) Ltd. V appellate proceedings shows Commissioner Of Income- that expenditure is incurred Tax 265 ITR 202 (MP HC) for the business of the company and bear a close and intimate nexus with the business of the company (Page – 33, Table Para – 5 – CIT(A)’s Order). Major portion of expenditure incurred for complying with statutory formalities and compliances necessary for operation of company. Therefore AO is directed to deleted the disallowance (Page – 33, Table Para – 5 – CIT(A)’s Order)

Case laws relied upon by CIT(A) • CIT V Lovely Exports 317

ITR 218 (SC)

• CIT V Fair Finvest Ltd

• CIT V Kamdhenu Steel and Alloys Ltd 361 ITR 220 (Del. HC)

• CIT V Vrindavan Farms (P) Ltd ITA NO. 71/2015 (Del. HC)

• CIT V Rakam Money Matters ITA No. 778/ 2015 (Del. HC)

• CIT V Gagandeep Infrastrusctre Pvt Ltd (Bombay HC)

 The assessee company failed  The ICG of transactions 3. Delight 2014-15 Section 68 Resorts Pvt Advance to file the requisite details have been established Ltd received (Page 5, Para (6a) – AO’s from the fact that both during the order). companies are having the  The assessee has failed to Revenue’s year closing balance of the R&S Appeal Rs 37.70 discharge its onus to prove of Rs.261 crore (Janitor) crores that the said transaction and Rs.65 crore (Bhisham) was legitimate (Page 5, Para as on 31.03.2013. (Page 19, (6a) – AO’s order). Para 3.4 – CIT(A)’s order)  Closely  Shri held companies Dinesh Kumar usually receive share capital Aggarwal, Director, M/s from friends, relatives and Janitor Infra attended the not from unknown third proceedings before CIT(A) parties. In the present case dated June 29, 2017 and there is no connection or furnished the new address, relationship between the explained the adjustment alleged subscribers and the of advance towards assessee, for advance purchase of shares, filed providers to become copy of accounts, order investors (Page – 6, Para 6(b) U/s 143(3) and also – AO’s order). explained the opening  It is necessary to have some balance of Reserves and detail if not complete to Surplus being Rs 261 establish identity and crores (Page 18, Para 3.2)  Shri availability of funds and how Rakesh Mehta, these unconnected parties Director, Bhisham Energy, decided to become investor attended the proceedings in absence of any business before CIT(A), furnished obligation(Page – 6, Para 6(b) the new address, – AO’s order) explained the adjustment  No interest was paid, the of advance towards purpose of advance is purchase of shares in missing, huge fund subsequent year, filed transaction which clearly copy of accounts and also means dummy explained the opening transactions(Page – 6, Para balance of Reserves and 6(b) – AO’s order). Surplus being Rs. 65 crores  Both the companies have (Page 19, Para 3.3  There are no cash deposits meager income (Page – 6,

Para 6(b) – AO’s order) in the bank account of  These facts indicate and lenders, advances given reflect proper paperwork or are out of reserves documentation but available as on 31.03.2013 genuineness, (Page – 19, Para - 3.4, creditworthiness and CIT(A)’s order)  The present AO Ward 9(4), identity are deeper and obstructive (Page 8, 2nd Para) New Delhi was called in  It may, as in the present CIT(A)’s office dated July case, required entail a 27, 2017 and was informed deeper scrutiny (Page 8, 2nd of proceedings having been Para – AO’s order) attended by the directors.  It would be incorrect to state The facts of case were that the onus stands discussed with AO in detail discharged if the transaction (Page – 19, Para – 3.4 – is done through banking CIT(A)’s order).  Both the companied have channels or account payee instruments (Page 8, 3rd Para the requisite capacity to – AO’s order) lend, basis the position of funds as on March 31, Case laws relied upon by A.O 2013 and during the • Kale Khan Mohammad assessment year (Page – Hanif V CIT (1963) 50 ITR 3.5, Para – 3.5 - CIT(A)’s 1,4 (SC) order)  CIT(A) has held that the • Sreelekha Banerjee V CIT additions if any be (1963) 49 ITR 112 (SC) • considered/ made in case Nanak Chandra Laxman of lenders and they have Dass V CIT (1983) 140 ITR requisite capacity to lend 151 (All.) • as they have adequate A. D. Jayaveerapandia balances lying under share Nadar V CIT (1964) 54 ITR capital and reserves, 401 (Mad.) • therefore the addition Oriental Wire Industries P made in case of appellant Ltd V CIT (1981) 131 ITR is unwarranted. (Page 20 – 688 (Cal.) CIT(A)’s order). • Sikri & Co. Pvt Ltd V CIT (1977) 106 ITR 682 (Cal.) • VeljiDeoraj& Co. V CIT CIT(A) has not relied upon the (1968) 68 ITR 708 (Bom.) case laws except in the case of • AnrajNarainDass V CIT Lovely Exports, on the basis of (9151) 20 ITR 562 (Punj.) which CIT(A) has held that • K. M. Sandhukhan& Sons addition, if any, may be Pvt Ltd V CIT (1999) 107 considered in case of lenders. Taxman 402/ 239 ITR 77 (Cal.) • Shankar Industries V CIT (1978) 114 ITR 689 (Cal.) • CIT V Kerala Road Lines (1986) 162 ITR 669 (Ker.) • Nova Promoters &Finlease • CIT V Nipun Builders & Developers [2013] 350 ITR 407 (Delhi)   4. Jawahar 2012-13 Section On perusal of bank All the ten investors are Credit & 68: statement, it is observed submitting their return Capital Pvt Share that subscriber companies of income, transactions Ltd capital/ and individual investors did have been done through share not have their own banking channel (Page – Revenue’s& premium creditworthiness, as the 34, Para – 7.3 – CIT(A)’s Assessee’s Rs. 73.50 money come into their Order).

 Appeal crores account seldom rests for a The amendment of day, finds its destination section 68 to look into immediately. It seems an the source of source accommodation entry to w.e.f. 01.04.2014 cannot evade tax (Page 6, Para be held to be 3.6.1 – AO’s Order) retrospective in nature  Assessee company has not (Page – 34, Para – 7.4 – done any business activity, CIT(A)’s Order)  major part of turnover is Appellant could not derived from dividend and justify payment towards miscellaneous income (Page investment in shares 6, Para 3.7.1 – AO’s Order) and similar amount  Past performance totally invested by appellant ignored for valuation of company (Page 35, Para company, did not bring 7.5 – CIT(A)’s order)  anything on record to Appellant could not justify bright future produce directors for no prospect of the company cogent reason (Page 75, which could enhance its Para 3.5 – CIT(A)’s order)  profitability leading to Investors not carrying higher valuation (Page – 7, any worthwhile activity Para – 3.7.2, Sub Para – (a)- (Page 35, Para 7.5 – AO’s Order) CIT(A)’s order)   EPS is negative, major net Source and destination income constitutes companies are having miscellaneous income common address (Page nothing to do with 35, Para 7.5 – CIT(A)’s objectives of company, order)  difficult to digest why Appellant company is investors would invest in not showing any such a company which has worthwhile income and no future objectives. has limited reserves and  Prima facie appears that surplus (Page 35, Para subscribers are well aware 7.5 – CIT(A)’s order)  of nature of transactions Appellant company has (Page – 8 – AO’s order) not given any  Assessee failed to justify satisfactory reply charging of premium (Page regarding fund flow – 8 – AO’s order) (Page 35, Para 7.6 –  Transaction between CIT(A)’s order)  assessee company and its Though the investor’s are unusual in documentation is nature and character, complete in all respects transactions being off- like banking channel, market unable to verify, confirmation etc conclusion leading this considering inability to transaction to be a sham produce directors, it transaction is that money seem that appellant received again invested in company and its investor are nothing but form of share capital (Page 8, Para 3.8 – AO’s order) a creation of paper  Assessee did not explain companies to transfer funds from Bhushan case even after so many opportunities (Page 8, Para Steel Ltd through 3.8 – AO’s order) appellant company  The onus is on the assessee (Page 36, Para 7.7 – to prove the ICG of the CIT(A)’s order)  transactions. The assessee No reserves/ No funds has failed to discharge its nor any business, it is onus(Page 10, Para 3.9.1 – nothing but routing of AO’s Order). funds by Bhushan Steel

 The assessee has also failed (Page – 36, Para 7.8 – to submit the documents CIT(A)’s order)  related to credits in the The basic requirement books(Page 13, Para 3.9,7 – to justify the identity, AO’s order). creditworthiness and  Merely filing some papers genuineness of the in support of transaction transaction has been cannot be termed as prima facie genuine transaction(Page established.(Page – 36, 13, Para 3.9,7 – AO’s order). Para 7.9 – CIT(A)’s order)  Neither the appellant Case laws relied upon by the A.O company nor the investors are ultimate • McDowell & Co Ltd. [1985] beneficiary of the transactions but there is 154 ITR 148 • routing of funds from Workmen of Associated Bhushan Steel Ltd. The Rubber Industry Ltd V funds received are given Associated Rubber Industry to other companies as Ltd [1986] 157 ITR 77 (SC) • soon as they are CIT V Durga Prasad More 82 received(Page – 36, Para ITR 540 (SC) • 7.9 – CIT(A)’s order) Bombay Oil Industries Ltd V  Therefore, the CIT(A) DCIT [2000] 82 ITD 626 has deleted addition of • CIT V Sree Meenakshi Mills Rs. 73.5 crores and Ltd 63 ITR 609 made addition of Rs. • CIT V Precision Finance Ltd 1.74 crores @ 2 percent (1994) 208 ITR 405 for routing these • Bharati Pvt Ltd V CIT W.B. transactions of having (1978) 111 ITR 991 been providing a fluid • CIT V Frostair (P) Ltd ITA No. mechanism from one 183 0f 2002 and 1638 of company to another. 2006 (Page – 37, Para 7.10 – • CIT V Youth Construction CIT(A)’s order) (P) Ltd 44 taxmann 364 • Vaibhav Cotton Co Pvt Ltd, Indore V AssesseeITA No. 253/Ind/2010 Indore Bench • Bombay Oil Industries ltd V DCIT [2000] 82 ITD 626 • Mancherial cement V Income Tax Officer ITA No. 115/Hyd/2012 • Nipun Builders and Developers Pvt Ltd )Delhi HC) ITA No. 120/2012 • Nova Promoters &Finlease Pvt Ltd   5. Jingle Bells 2012-13 Section 68 No replied received from The assessments U/s Aluminium Share parties mentioned at Para 143(3) of the Act in case Pvt Ltd capital/ 3.3(Page 3 – AO’s order) of investor companies  share Replies received from 5 out have been completed Revenue’s & premium of 7 parties, incomplete accepting the contention Assessee’s Rs. 62 replies received for 6-7 of the said companies Appeal crores points out of 11 points and no major addition asked, replies received in has been made on this same pattern, even print count (Para 7.3 – Page 37 outs are same. So – CIT(A)’s order)  genuineness of Though the transactions are doubtful documentation is

(Para 3.7/ 3.7.1, Page 6 – complete in respect of AO’s order) investor companies, the  Speed post booked from findings of the AO that Delhi but registered office non availability of investor in Punjab and Chandigarh companies at the given (Para 3.7.2 – Page 6 – AO’s address, inability to order) produce directors, no net  It shows that assessee worth, no justification for itself replied to notices such a high premium, sent U/s 133(6), IG is transferring of funds of dubious (Para 3.7.3 – Page Bushan Steel to various 7 – AO’s order) companies, shows that  Registered offices of investor and appellant investor companies are company are nothing but located in different cities a creation of paper but are having their banks companies.(Page 39 – operated from Delhi just to Para 7.8 - CIT(A)’s order)  facilitate assessee (Para CIT(A) has observed that 3.7.4, Page 7 – AO’s order) neither the appellant  Summons were issued to company nor the directors of Imperative investors are ultimate Buildwell, Cantabile beneficiary of the Minerals and Mining and transactions but there is Classic Transportation, as routing of funds from per inspector’s report no Bhushan Steel Ltd. The such company exist at such funds received are given address (Para 3.5, Page 3 – to other companies as AO’s order) soon as they are  Subscriber companies did received.  not have creditworthiness The basis requirement to as money seldom rests for justify ICG of transaction a day in their accounts, has prima facie been finds its destination established (Page – 39, immediately; investor Para 7.10 – CIT(A)’s order)  companies have no profit Looking to the fact and making apparatus no analysis, these business activity. It is just transactions are found to an accommodation entry to be routing finances of evade taxes (Para 3.8.1, Bhushan Steel and these Page 8 – AO’s order) are just paper companies  Assessee company has very where appellant company nominal business profit, is not the ultimate (3.87) negative EPS, major beneficiary (Page – 39, miscellaneous income Para 7.10 – CIT(A)’s order)  nothing to do with Considering the business objectives of companies are paper assessee company, prima companies and appellant facie appears that assessee has been providing and as well as subscribers facility to route these are well aware about transactions, the 2% of nature of transactions total amount (comes to (Para 3.9.1, Page 9/10 – Rs. 1.24 cr) is treated as undisclosed income of AO’s order)  That the credits of Rs 62 the appellant, not shown crores are hit by Section 68 in return of income (Page of the Act.(Para 3.10.9, 40, Para 7.11 – CIT(A)’s Page 16 – AO’s order). The order)  onus is on the assessee to Since details have duly prove the ICG of the been provided with transactions.(Para 3.10.8, respect to referred Page 15 – AO’s order). The companies, the additions

assessee has failed to are out of ambit of the discharge its onus. (Para provisions of section 68 3.10.1, Page 12 – AO’s of the Act. Addition to order). the extent of Rs 1.24  The assessee has also failed crore is sustained and for to bring directors of the the balance amount the investor company (Para appellant gets a relief 3.10.2, Page 12 – AO’s (Page 40, Para 7.11 – order) CIT(A) order)   Merely filing some papers Therefore, the CIT(A) has in support of transaction deleted addition of Rs. 62 cannot be termed as crores and made addition genuine transaction.(Para of Rs. 1.24 crores @ 2 3.10.9. Page – 16 – AO’s percent for routing these order) transactions of having been providing a fluid Case laws relied upon by the A.O mechanism from one • McDowell & Co Ltd. [1985] company to another. 154 ITR 148 • Workmen .CIT(A) has reiterated the of Associated following judgments in his Rubber Industry Ltd V order at Page 37 reproduced Associated Rubber Industry hereinafter: [1986] 157 ITR 77 (SC) • CIT V Sree Meenakshi Mills • CIT V Lovely Exports Ltd 63 ITR 609 (SC) • CIT V Durga Prasad More 82 299 ITR 268 • CIT V Kamdhenu ITR 540 (SC) • Bombay Oil Industries Ltd V Alloys and Steel 206 Taxmann 254 DCIT [2000] 82 ITD 626 • • CIT V Frostair (P) Ltd ITA No. CIT V Nova Promoters and Finlease Pvt Ltd 183 0f 2002 and 1638 of 2006 • CIT V Youth Construction (P) Ltd 44 taxmann 364 • CIT V Precision Finance Pvt Ltd (1994)208 ITR405 • Nova Promoters &Finlease (P) Ltd (High Court of Delhi) • Mancherial cement V Income Tax Officer ITA No. 115/Hyd/2012 • Nipun Builders and Developers Pvt Ltd )Delhi HC) ITA No. 120/2012 • Vaibhav Cotton Co Ltd Indore V Assessee ITA No. 253/Ind/2010 Indore Bench   Basic 6. Kasper 2012-13 Section 68 Assessee has not filed any requirement to Information Share confirmation from parties, justify the identity, Technology capital/ but submitted a chart creditworthiness and Pvt Ltd share showing increase in share genuineness (ICG) of the - premium capital & share premium, transaction prima facie Revenue’s& Rs. 46 giving names & addresses of established.  Neither Assessee’s crores parties (Page 5 & 6, Para 3, the appellant Appeal sub para 3(A)(i) –of AO’s company nor the investors (Share order). are ultimate beneficiary of  Capital 8 In order to verify ICG of the transactions but there cr and introducers of share capital/ is routing of funds from premium premium, notices U/s Bhushan Steel Ltd. The

thereon 38 133(6), which remained un- funds received are given to cr) complied, no confirmation other companies as soon ever received not even till as they are received.  Investor date of passing of order. companies (Para 3(A)(ii) – Page 6 – submitted their tax AO’s order). returns, provided  Assessee failed to bring the confirmations, directors of the investor transactions done through company along with books bank, assessment U/s of accounts and 143(3) completed, no confirmation to prove the major addition have been identity of the made on share capital/ contributors. premium (investment)  No confirmations and count.  Nothing mentioned in the return/PAN of parties – cross verification not assessment order possible – onus is on the regarding any statement assessee to prove the ICG - of any person, providing assessee failed to discharge entry. No material brought onus. – assessee’s own on record to conclusively money routed these prove the share capital concerns (Para 4(A)(i) – originated from appellant page 8 – AO’s order). company returned in the  Evidence available form of share capital.  No mandate of the law to impeaching the credentials of the “investor companies” look into the source of and their “directors” (Para source for the year under 4(A)(i) – page 8 – AO’s consideration. The order). amendment of section 68  w.e.f. 01.04.2013 cannot be Amt received through held, or interpreted, to be private placement – retrospective in nature contributors personally  Assessee cannot be known to assessee – must fastened with the liability be aware of whereabouts - u/s 68 unless a causal corporate veil needs to be connection between the lifted – assessee converted cash deposit in the bank its unaccounted funds in and the assessee is the form of share capital established. (relying upn from 4 concerns Lovely Exports and  Assessee failed to submit Kamdhenu Steel Para 7.4 documents related to Page 22 & 23 of CIT(A)’s credits in the books – order)  Where assessee provided various the complete addresses of alleged particulars of the share contributors of share applications are furnished to the AO and the AO has application only to mislead not conducted any dept. (Para 4(A)(vi) -AO’s enquiry into the same or order) has no material in his  Differentiated Lovely possession to show that Exports (SC) on ground those particulars are that it is not having binding false, then no addition effect under\ Article 141 of can be made in the hands the constitution of India – of the company u/s 68. summary dismissal by SC (Para 7.4 Page 23 CIT(A)’s without laying any law is order) not declaration of law. For  The appellant company and this relied upon S. its investor companies are Shanmugavel Nadar. V nothing but a creation of State of Tamil Nadu [2003] paper companies to transfer 263 ITR 658 (SC) its funds from alleged Bhushan Steel Ltd. to Case laws relied upon by the

A.O various companies, through • Kale Khan Mohammad the appellant company and its investor companies. Hanif V CIT (1963) 50 ITR 1  The appellant company has (SC) not given any cogent • CIT V Lachhman Das Oswal reasoning for the fund (1980) 126 ITR 446 (P&H) flow. Appellant company • CIT V Hero Cycles Ltd&Ors is only routing (1997) 228 ITR 463 (SC) transactions of alleged • CIT V Stepwell Industries Bhushan Steel Ltd. and not Limited &Ors (1997) 228 the ultimate beneficiary. It ITR 171 (SC) has further passed on • SumatiDayal V CIT (1976) funds to other companies. 113 ITR 522 (Del). (Para 7.3 & 7.8, page 23 & • R Dalmia V CIT (1976) 113 24) ITR 522 (Delhi)  CIT(A) deleted addition of • CIT V Devi Prasad Rs. 46 crores and made Vishwanath Prasad (1968) addition of Rs. 92 lakhs @ 72 ITR 194 (SC) 2 percent as undisclosed • Sreelekha Banerjee V CIT income received by the (1963) 49 ITR 112 (SC) appellant for routing these • Roshan Di Hatti V CIT transactions of having (1977) 107 ITR 938 (SC) been providing a fluid • CIT V Kerala Roadlines mechanism from one Corp. (1986) 162 ITR 669 company to another. (Ker.) Addition enhanced by Rs • Active Traders Pvt Ltd 92 lakhs for routing [1995] 214 ITR 583 (Cal.) transactions. (Para 7.9 & • Sri Krishna V CIT 142 ITR 7.10, page 24) 618 [All] • Rashibari Tobacco Case laws relied upon by the Processors Ltd. V DCIT CIT(A) [1997] 57 TTJ 120 (Ahd.) • RidhiSidhi Commercial • CIT vs. Lovely Exports Co. Ltd V ACIT [1998] 62 Pvt. Ltd. 299 ITR 268 TTJ 710 (Del.) • CIT vs. Kamdhenu • A GovindarajuluMudaliar Steel and Alloys Ltd. V CIT [1958] 34 ITR 807 206 Taxman 254 (SC) • CIT vs. Nova • CIT V Korlay Trading Co. Promoters and Ltd. [1998] 230 ITR 820 Finlease (P) Ltd. (Cal.) • (Delhi HC) CIT V Precision Finance Ltd. (1994) 208 ITR 465 (cal.)  The assessee company has  In a detailed discussion in 7. Kaspers 2013-14 Section 68 Information Share not discharged its onus to assessment order AO has Technology capital/ prove genuineness and correctly held that amount Pvt Ltd share creditworthiness of of Rs. 16 crores in premium transactions.(Para 4.5.1, undisclosed income of the Assessee’s Rs. 16 Page 5 – AO’s order). appellant. (Para 4, Page 32 –  The assessee company has Appeal crores CIT(A)’s order)  AO has discussed in detail failed to produce the directors of the investor the reasons for addition of company and to prove the Rs. 16 crores.(Para 4, Page identity of the investor 32 – CIT(A)’s order)  The AO has discussed that company.(Para 4.6.1, Para 5- AO’s order). the appellant has failed to  The assessee has not done establish ICG of the any business activity during transaction. (Para 4, Page 32 the year under assessment – CIT(A)’s order).

 The submissions filed by the and not received any business income except appellant have been dividend income Rs. 6.65 considered and not found to lakhs and profit on sale of be tenable and the case trade & non-trade laws cited by the appellant investment of Rs 2.32 lakh are distinguishable in and Rs 15 thousand facts.(Para 4, Page 32 – respectively.(Para 2 Page 2, CIT(A)’s order)  Reply AO’s order). U/s 133(6) not  Both the investors to received (Para 4.2.3.1, Page whom 133(6) and 131 were 22).  Summons issued, nobody attended U/s 131 not summons. (Para 4.3, page 4 attended (Para 4.2.3.1, Page – AO’s order). 22)  Both  Company has not done any the parties have partially replied (four out of business but has generated seven ques), replies filed in income from dividend and same pattern, from same sale of investment in the post office, office in East instant year, previous Delhi, reply came from R.K. assessment year and two Puram, therefore subsequent years Ay 2013- genuineness is doubtful 14, AY 2012-13, AY 2014-15 (Para 4.1 & 4.4.1, Page 4- and AY 2015-16  No reason to interfere in the AO’s order)  The assessee has ignored order of the AO. CIT(A) has the valuation criteria of relied upon the finding of past performance for the AO that the assessee valuation of the has failed to prove the ICG company.(Para 4.6.3, Page of teh transactions. 5- AO’s order).  It is common sense that Case laws relied upon by the past performance should CIT(A) be given suitable weight age for valuation of • Navodaya Castle [56 company and its shares but taxmann.com 18 (SC)] same has been totally • CIT V Sophia Finance Ltd ignored in the instant case. 205 ITR 98 (Del.) (Para 4.6.3, Page 5- AO’s • N. R. Portfolio Pvt Ltd [87 order) DTR 162 (Del)]  The assessee has brought • Titan Securities Ltd. 357 nothing on record to justify ITR 184 (del)] its bright future prospect to • Globus Securities and increase profitability and Finance Pvt Ltd [224 ultimately increasing its Taxman 237 (Delhi)] valuation.(Para 4.6.3, page • Onassis Axles Private 5 – AO’s order. Limited [364 ITR 53  Difficult to digest why (Delhi)] investor invested in such a • Focus Exports Pvt Ltd company which has no [111 DTR 0012 (Del)] future for running any • Rathi Finlease Ltd (215 profit (Para 4.6.3, Sbu-Para CTR 429 MP) (b), page 6 – AO’s order) • Korlay Trading Co. (232  Prima facie appears that ITR 820 (Cal)) subscribers and assessee • SumatiDayal (214 ITR 801 company are well aware of (SC)) transactions (Para 4.6.3, • Power Drugs Ltd (245 CTR Sbu-Para (C), page 6 – AO’s 623 (P&H)) order) • Azeem Investment Pvt Ltd  The transaction entered (252 CTR 0217 (Del.)) into by the assessee is sham • Major Metals Ltd (359 ITR transaction, the credit of 450 (Bom))

• Independent Media Pvt funds in the form of share capital/ share premium Ltd (25 taxmann.com 276 being used for investing in (Delhi)) • Neelkanth Ispat Udyog other companies at premium.(Para 4.6.4 Sub- Pvt Ltd (81 DTR 0214) Point (3) Page 6/7 – AO’s • Frostair Pvt Ltd [92 DTR order). 393 (Del)]  Efforts made by assessee to • Rajani Hotels Ltd [79 DTR change the color of 185 (Mad)] transaction and not • MAF Acedemy Pvt Ltd justified it case in spite of [361 ITR 02858 (Delhi) opportunities(Para 4.6.4 Sub-Point (4) Page 6/7 – • Tarika Investment AO’s order). Properties Pvt Ltd [221  The case of the assessee for taxmann 0014 (Del)] the AY 2012-13 is also pending disposal in which • Empire Buildtech Pvt Ltd addition on same ground [366 ITR 110 (Delhi)] was made and the assessee has failed to discharge its • Kundan Investment Ltd onus because merely filing (263 ITR 626 (Cal)) some papers in support of transaction cannot be • Nova Promoters termed as genuine &Finlease (P) Ltd (342 ITR transaction.(Para 4.7.8 Page 169 (Del)) 11 – AO’s order) • Ultra Modern Exports Pvt Case laws relied upon by the A.O • McDowell & Co Ltd. [1985] Ltd [220 taxman 165 (Delhi)] 154 ITR 148 • CIT V Durga Prasad More 82 ITR 540 (SC) • Workmen of Associated Rubber Industry Ltd V Associated Rubber industry Ltd [1986] 157 ITR 77 (SC) • Bombay Oil Industries Ltd V DCIT [2000] 82 ITD 626 • CIT V Sree Meenakshi Mills Ltd 63 ITR 609 • CIT V Frostair (P) Ltd ITA No. 183 0f 2002 and 1638 of 2006 • CIT V Youth Construction (P) Ltd 44 taxmann 364 • Bombay Oil Industries Ltd V DCIT [2000] 82 ITD 626 • Mancherial cement V Income Tax Officer ITA No. 115/Hyd/2012 • Nipun Builders and Developers Pvt Ltd (Delhi HC) ITA No. 120/2012 • Nova Promoters &Finlease Ltd (P) Ltd [2012] 206 Taxman 207 • CIT V Precision Finance Pvt Ltd (1994) 208 ITR 405  No reason to interfere with 28. LandskyReal 2013-14 Section 68 Regarding share capital of Rs. 16 Estate Pvt Share crores: the AO on the issues and AO

 The assessee company has Ltd Capital - has already discussed in Rs. 16 not discharged its onus to detail(Page –, 27, Para - Assessee’s crores prove genuineness and 4.2.3.6 – CIT(A)’s Order). Appeal creditworthiness of  AO has discussed that the Advances transactions even after so received - many opportunities (Page – appellant has failed to Rs. 2.6 4, Para 4.11). discharge the onus cast  The assessee company has crores upon U/s 68 of the Act by failed to produce the failing to prove the ICG of directors of the investor the transactions(Page –, 27, company prove the identity Para - 4.2.3.6 – CIT(A)’s of the investor Order). company(Page – 4, Para 4.10).  The submissions filed by the  The assessee has not done appellant have been any business activity during considered and are not the year under assessment found tenable. The case and in subsequent laws cited by the appellant assessment years also. i.e, AY are distinguishable in 2014-15 & AY 2015-16(Page facts(Page –, 27, Para - – 4, Para 4.12). 4.2.3.6 – CIT(A)’s Order).  The assessee has ignored the valuation criteria of past  CIT(A) distinguished Lovely performance for valuation of Exports [216 CTR 195] and the company(Page – 4, Para Gourdin Herbals India Ltd 4.12). ITA No. 665/2009 dated Sep  The registered office of the 17, 2009 investor companies (Winfiled and Quadrel) are Case laws relied upon by the located in Dilshad Garden CIT(A) and West Vinod Nagar (situated in east Delhi) but • NR Portfolio Pvt Ltd [96 they have sent the part DTR 0281 (Delhi)] replies from RK Puram post • CIT V Nova Promoters office and pattern of both &Finlease (P) Ltd [ITA No. the replies are same. They 342 of 2011] may have been sent by a • GKN Driveshafts (India) common person. Therefore, Ltd. V ITO (259 ITR 19) (SC) genuineness is • Navodaya Castle [56 doubtful.(Page 3, Para 4.4, taxmann.com 18 (SC)] 4.5 – AO’s Order). (distinguishing Lovely  The assessee has failed to exports) prove the ICG of the • CIT V Sophia Finance Ltd transaction(Page – 9, Para 205 ITR 98 (Del.) (F.B.) 5.4 – AO’s Order). • Titan Securities Ltd [357  The assessee has brought ITR 184 (Del)] nothing on record to justify • MAF Academy Pvt Ltd [361 its bright future prospect to ITR 02858 (Delhi)] increase profitability and • Tarika Properties ultimately increasing its Investment Pvt Ltd [221 valuation(Page – 4, Para Taxman 0014 (Del) ] 4.12). • Nova  Transaction Promoters and between Finlease Pvt Ltd (2012) 342 assessee company and its ITR 169 (Delhi) investor is unusual in nature • Globus Securities and and character.  The money that comes to the Finance PVt Ltd [224 Taxman 237 (Delhi) ] bank account of entry • Focus Exports Pvt Ltd [111 operators seldom rests for a day and immediately finds its DTR 0012 (Del) ] • Rathi Finlease Ltd (215 CTR destination. The beneficiary

who gets such money does 429 MP) • Empire Buildtech Pvt Ltd not give back any dividend or share of profit or interest to [366 ITR 110 (Delhi)] • Onassis entry operators. (para 416, Axles Private page 7) Limited [364 ITR 53 (Delhi)]  Merely filing some papers in • Kundan Investment Ltd support of transaction cannot (263 ITR 626) (Cal) be termed as genuine • Korlay Trading Co. Ltd (232 transaction. (Page – 8, Para ITR 820 (Cal)) 4.21). • SumatiDayal (214 ITR 801 (SC)) Regarding advances of Rs 2.6 • Power Drugs Ltd. (245 CTR crores received from Cantabile 623 P&H) Minerals and Angel Cement: • Azeem Investment Pvt Ltd  The notices sent U/s 133(6) (252 CTR 0217 Del) to the parties who advanced • Major Metals Ltd (359 ITR money to the assessee 0450 (Bom)) during the year under • Independent Media Pvt Ltd consideration returned (25 taxmann.com 276 unserved. (Delhi))  Although their reply has been • Neelkanth Ispat Udyog Pvt sent from RK Puram post Ltd (81 DTR 0214) office (registered address is • Frostair Pvt Ltd [92 DTR in chawri bazar) on same 393 (Del)] pattern and at same time. • Rajani Hotels Ltd [79 DTR  This has created doubt 185 (Mad)] about their genuineness ( • Ultra Modern Exports [220 Page 9, Para 5 – AO’s Order) Taxman 165 (Delhi)]  Efforts made to serve summons but no such company exist at the given address( Page 9, Para 5.1 – AO’s Order)  Assessee failed to prove ICG of the transactions ( Page 9, Para 5.4 – AO’s Order)

Case laws relied upon by the A.O • McDowell & Co Ltd. [1985] 154 ITR 148 • Workmen of Associated Rubber Industry Ltd V Associated Rubber Industry [1986] 157 ITR 77 (SC) • CIT V Durga Prasad More 82 ITR 540 (SC) • Bombay Oil Industries Ltd V DCIT [2000] 82 ITD 626 • CIT V Sri Meenakshi Mills Ltd 63 ITR 609 • CIT V Frostair (P) Ltd ITA No. 183 0f 2002 and 1638 of 2006 • CIT V Youth Construction (P) Ltd 44 taxmann 364 • Bombay Oil Industries ltd V DCIT [2000] 82 ITD 626 • CIT V Precision Finance Pvt Ltd (1994) 208 ITR 405 • Bharati Pvt Ltd V CIT W.B. • (1978) 111 ITR 991 (Cal.) • Mancherial cement V Income

Tax Officer ITA No. 115/Hyd/2012 • Nipun Builders and Developers Pvt Ltd )Delhi HC) ITA No. 120/2012 • CIT V Nova Promoters &Finlease Pvt Ltd [2012] 206 Taxman 207 • Vaibhav Cotton Pvt Ltd, Indore V Assessee ITA No. 253/Ind/2010  Out of 10 parties to whom  9. Sintex 2012-13 Section 68 CIT(A) has made analysis Consumer Share notice U/s 133(6) were of the net worth of the Electronics capital/ issued, 7 returned unserved, investor companies, Pvt Ltd share reply received from 2 and which is running in premium one party did not reply. crores, enough to make Revenue’s (Page 5 – AO’s order) investment but has made  The returned income of M/s Appeal Rs. 78.228 no comment in its order crores Stance Consumer Electronics (Table at page 22 – and Immense Minerals is Rs CIT(A)’s order)  413 and Rs. 4,43,811/- and AO has not brought any their creditworthiness of adverse material to reject investment is highly the explanations and unlikely. Therefore, it is evidences submitted by treated as assessee’s own the appellant. concealed income. (Page 6 –  AO’s Order) It is not the case of Ld.  Because the assessee could AO that any person has not produce the principal given any statement or officer(s) of the investor made any allegation companies and notices sent against these companies U/s 133(6) returned or no (Page 23 – CIT(A)’s order). reply is received lead to a conclusion that the said  The reasons given by AO transaction is not genuine are generic in nature and and the assessee has not backed by any introduced his own money concrete evidence. (Page in the garb of share capital/ 23 – CIT(A)’s order) share application.(Page 6 – AO’s order)  No cash deposit in the  Notices issued to majority of bank accounts of investor the parties returned companies for making unserved except in case of investment in the three parties of which reply appellant company (Page was received from two 23 4– CIT(A)’s order). parties only(Table at Page 5 – AO’s order).  The appellant company  Out of the parties who has allotted shares for replied to notice sent U/ s the application money 133(6) their received by it (Page 24 – creditworthiness is highly CIT(A)’s order). unlikely basis their returned income of Rs 413/- and Rs.  Depositors have given 4,43,811/- and the amount confirmation, provided contributed by them was Rs. their income tax returns 8,70,00,000 each (Page 6 – entire amount received AO’s order). through normal banking  The assessee neither has channels (Page 23/24 – brand value nor it has any CIT(A)’s order). past performance history

 nor any future prospect not The appellant has any such asset which would established the ICG of the increase its profitability to transactions.(Page 27 – attract such huge CIT(A)’s order). premium.(Page 6 – AO’s  order) Onus cast upon the  In view of above share appellant with regard capital and share premium is duties enjoined by virtue being added back as its own of cash credit stands concealed income introduced fulfilled and discharged, in the form of share capital cannot be said that and share premium.(Page 6 – appellant failed to AO’s order) discharge creditworthiness and genuineness (Page 24 – CIT(A)’s order).

 No adverse inference is warranted or sustainable (Page 24 – CIT(A)’s order).

 The shares issued as bonus shares have not brought any inflow of income which is nothing but the credit in the books of accounts of the company, therefore when no sum has been credited, addition cannot be made U/s 68 of the Act.(Page 28 – CIT(A)’s order). The amount of issue of bonus shares does not represent any fresh credit but only a transfer entry representing capitalization of reserves and surplus and is not hit by section 68 of the Act.(Page 28 – CIT(A)’s order)

Case laws relied upon by the CIT(A)

• CIT V Lovely Exports [2008] 216 CTR 195 (SC) • CIT V Orrisa Corporatiosn Pvt Ltd Pvt Ltd [(1986) 159 ITR 78 (SC)] • CIT V Oasis Hospitalities P. Ltd [(2011) 333 ITR 119(Delhi)] • CIT V Paras Cotton Co [(2007) 288 ITR 211 (Raj.)] • CIT V Kamdhenu Steel & Alloys Ltd & Others [(2012) 206 taxman 254 (Delhi)]

• CIT has made analysis of the judgment in the case of “Nova Promoters &Finlease (P) Ltd (342 ITR 169 (Del))” and has reached a conclusion that appellant through various documents submitted to establish ICG, it would constitute acceptable proof or acceptable explanation by the assessed. (Page 26 – CIT(A)’s order)



 The  10. Starlight 2012-13 Section 68 assessee failed to CIT(A) has made analysis Consumer Share discharge its onus. In such a of the net worth of the Electronics capital/ case the source and nature investor companies Pvt Ltd. share of transaction need to be which is fair enough to premium - proved beyond doubt.(Page make investment. Revenue’s Rs. 32.25 7 – AO’s order) Although CIT(A) has not  As the replies received so appeal crores commented upon the late after the assessee was same. (Page 31 Table – Other apprised about the same, CIT(A) order)  liabilities - there is a possibility that AO has not brought any Rs Rs. assessee itself has sent the adverse material to 30.18 replies in response to notice reject the explanations/ crores U/s 133(6), therefore it evidences filed by the shows the IG as dubious. appellant.  Total (Page 4 – AO’s order) It is not the case of AO  Basis the inspectors report addition - that any person has given Rs. 62.43 there is no such company, any statement or made crores no signboard, neighbor also allegation against these revealed that they are not companies.  aware about any such The reasons given by AO company. Incomplete replies are very generic and not received that too only after backed by any concrete assessee was apprised about evidence (Page – 31/43 – non-compliance to notice U/s CIT(A)’s order)  133(6) (Pag4 – CIT(A)’s order) No cash deposit in the  No compliance to the bank accounts of investor summons issued to the companies for making director U/s 131 dated investment in the February 26, 2015. assessee company (Page  Assessee offered no 31/32 – CIT(A)’s order)  explanation as to why the The appellant has investors chose to make furnished income tax investment in assessee’s returns, BS, bank company when there is no statement of scope for making an exit out shareholders and share application money and of investment. (Pafe 7 – AO’s order). Assessee company their source had been has neither shown satisfactorily explained remarkable performance nor (Page 46 – CIT(A)’s order)  has any strong asset base, Entire amount received therefore transaction cannot through normal banking be held as genuine. (Page 7 – channels, confirmation AO’s order). filed by parties, no proof  Merely that the transaction of evidence to suggest

was conducted through that amount actually proper banking channel does emanated from assessee not substantiate the company, shares allotted genuineness of for application money transaction.(Page 6 – AO’s received (Page 32/43 – order) Cit(A) order)  Since the payments were  Onus cast upon the transferred to other appellant with regard companies as and when they duties enjoined by virtue were received, the of cash credit stands creditworthiness of the fulfilled and discharged, investor does not in any way cannot be said that get established. The bank appellant failed to accounts of all the investors discharge are in same branch, no profit creditworthiness and making apparatus, no genuineness (Page 32/44 business. – CIT(A)’s order)  It seems it is just an  accommodation entry just to No adverse inference is evade tax. (page 5 – AO’s warranted or sustainable order). (Page 32/44 – CIT(A)’s  Amount has been received order). There is no denial through private placement, at any stage of which means contributors assessment proceedings were personally known to by any of the subscriber assessee. Since the existence of share capital of having of the investors could not be deposited money in the proved, there is no question appellant company (Page of taking cognizance of the 43 – CIT(A)’s order)  such non-existent person, The appellant has meaning thereby money established the ICG of actually belonged to the transactions.(Page 47 assessee itself and – CIT(A)’s order)  fraudulently routed through CIT has made analysis of bank account of investors. the judgment in the case (Page 6 – AO’s order) of “Nova Promoters  Regarding the other current &Finlease (P) Ltd (342 ITR liabilities, the assessee has 169 (Del))” and has failed to bring the directors reached a conclusion that of the eight companies from appellant through various whom money received documents submitted to shown as other liability, to establish ICG, it would explain the nature of the constitute acceptable current liabilities. (Page 12 – proof or acceptable AO’ order) explanation by the  As it can be seen from the BS assessed. (Page XX – and P&L account of the CIT(A)’s order) assessee that these are not trade liabilities.(Page 12 – Case laws relied upon by the AO’ order) CIT(A) • MOD Creation Pvt Ltd V Case laws relied upon by the A.O ITO [(2013) 354 ITR 282 Divine Leasing and Finance Ltd (Delhi)] (Delhi HC) • CIT V Kamdhenu Steel & • Mc Dowell & Co Ltd 154 ITR Alloys Ltd & Others 148 (SC) [(2012) 206 taxman 254 • Anand Woolen Mills Pvt Ltd V (Delhi)] CIT 174 ITR 477 (Delhi) • CIT V Gangeshwari • CIT V Sophia Finance Ltd Metals P. Ltd (1994) 205 ITR 98 (Delhi) • ITO V Neelkanth Finbuild • Nova Promoters &Finlease ITA No. 2821/Del/2009

• (P) Ltd (342 ITR 169 (Del)) ITO V NC Cables ITA No. • CIT V Nipun Builders & 4122/Del/2009 (ITAT Developers [2013] 350 ITR Delhi) • 407 (Del) CIT V Oasis Hospitalities • CIT V N.R. Portfolio PVt Ltd P. Ltd [(2011) 333 ITR (ITA No. 1018 & 1019 of 119 (Delhi)] • 2011) ITO V Rakam Money • Mittal Belting and Machinery Matters P Ltd Stors V CIT 253 ITR 341 2821/Del/2011 • CIT V Kariary Trading Co Ltd • ACIT V Kisco castings Pvt (1998) 232 ITR 820 Ltd 34 taxmann.com 37 • SumatiDayal V CIT 214 ITR • CIT V Fair Fivest Ltd 801 [2014] 44 taxmann.com • CIT V L. N. Dalmia 207 ITR 89 356 (Delhi) • • Sunil Sidhartha V CIT 156 ITR CIT V Expo Globe India 507 Ltd [2014] • CIT V Biju Patnaik 160 ITR (51Taxmann.com 208)(Delhi HC) 674 (SC) • Shankar Industries V CIT 114 • CIT V Lovely Exports [2008] 216 CTR 195 (SC) ITR 689 (Cal) • Dhanlakshmi Steel Re-rolling CIT(A) has differentiated the Mills V CIT 228 ITR 780 (AP) • Malabar Agricultural Co Ltd V following judgments: • Nova Promoters CIT 229 ITR 548 (Ker) • CIT V Precision Finance P. Ltd &Finlease P Ltd, • Mc Dowell & Co 208 ITR 465 (Cal) • • KNC Chandrashekhar V ACIT SumatiDayal • LN Dalmia 66 TTJ 355 (ITAT Bangalore) • • CIT V United Commercial and Sunil Siddhartha Bhai V CiT Industrial Co. Pvt Ltd 187 ITR • CIT Durga Prasad More 596 (Cal) • CIT V Durga Prasad More • ITO V K Jayaraman • (1971) 82 ITR 540 (SC) CIT V Divine Leasing • ITO V K. Jayaraman (1987) Finance • 168 ITR 757 (Mad.) Anand Woolen Mills Pvt • CIT V NeelkanthaIspat Udyog Ltd V CIT • CIT V Sophia Finance Ltd • CIT V Korlay Trading Co • Mittal Belting and Machinery Stores • CIT V Biju Patnail • Roshan Di Hatti V CIT • Shankar Industies V CIT • Malabar Agricultural Co Ltd V CIT • CIT V Precision Finance Pvt Ltd • CIT V United Commercial & Industrial Co Ltd • CIT V Nipun Builders • CIT V NR Portfolio   The 11. Stylish 2012-13 Section 68 The assessee failed to appellant has Constructio Share discharge its onus. In such established the ICG of the n Pvt Ltd capital/ a case the source and transactions.  The AO did not bring any share nature of transaction need Revenue’s premium - to be proved beyond finding on record to reject Appeal Rs. 30 doubt.(Page 6/10 – AO’s the explanations/ crores order) evidences submitted by appellant Neither any

 Other The replies to notice U/s person has given any liabilities - 133(6) were received after statement nor made any Rs 31.60 the fact they being un- allegation against the crores complied for a period of appellant company. (Page 10-15 days after they were 33 – CIT(A)’s order). Dissallowa issued, creates a doubt Reasons given by AO are nce U/s about their genuineness. generic in nature and not 14A r.w. (Page 3 – AO’s order). The backed by concrete rule 8D - replies were received after evidence (Page 33 – Rs. the fact of their non- CIT(A)’s order)  Entire amount has been 23,32,813 compliance was made [Rs. 5 lacs known to the AR.(Page 3 – through normal banking sustained AO’s order. There could be channels has not been by the a possibility that assessee disputed, repudiated or CIT(A)] himself has sent the challenged in any replies, as the replies manner(Page 33 – CIT(A)’s received that too only order). Parties involved after assessee was have confirmed of having informed about same. This made their deposits in the shows IG as dubious (Page appellant company. (Page 3 – AO’s order) 33 – CIT(A)’s order). No evidence to prove that  money actually emanated Inspectors report reveal from appellant company. that none of the Any conclusion can be companies existed at sustained only if backed by given address. It is a concrete evidence. (Page residential society. (Pag3 – 33/34/43/44 – CIT(A)’s AO’s order). Identity could order) not be proved since  Appellant has allotted investors did not exist at shares for share the given address, application money therefore it is assessee’s received by it (Page 34 – own money(Para (a), Page CIT(A)’s order). 4/5 – AO’s order)  CIT(A) quoted that the Ld.  AO has relied upon the No explanation offered as judgment of Divine leasing to why these companies but failed to bring forth on agreed to invest in record any positive assessees’ company when evidence that shareholders there is no scope for were either benamidars/ making an exit out of the fictitious. (Page 40 – investment (Page 5 – AO’s CIT(A)’s order) order). The assessee  The judgment of Stellar company neither has not Investment clearly lays shown any remarkable down that the provision of performance nor has any Section 68 would be assets, therefore applicable only when transaction cannot be shares have been issued in genuine (Page 6 – AO’s the name of non-existing order) persons, which is not the situation in the instant  Assessee failed to bring case (Page 40 – CIT(A)’s directors of the investors order) (page 10 – AO’s order).  Documents submitted The subscribers did not establish that money have creditworthiness as came from depositor’s money in their bank account and nowhere accounts seldom rests for connected with appellant a day and finds its company (Page 45 – destination, no profit CIT(A)’s order). No cash making apparatus, no

business activity (Page 4 – deposits into bank AO’s order) accounts of the investors for purchase of shares  (Page 33 – CIT(A)’s order). Merely that the  No circumstances to transaction was suggest that transactions conducted through proper are not genuine and that banking channel does not onus cast upon it has not substantiate the been discharged. (Page 30 genuineness of – CIT(A)’s order). CIT(A) has transaction. made analysis of the  creditworthiness of Since the payments were investors. No comments transferred to other made but figures showing companies as and when handsome they were received, the creditworthiness (Page 33 creditworthiness of the – CIT(A)’s order) investor does not in any  The provisions of section way get established. 68 would be applicable The assessee company has only when shares have not explained the nature been issued in the name of other liabilities. It is of non-existing person seen that above liabilities which is not the situation are not trade liabilities. in the instant case. The facts in regard to  No adverse inference other liabilities are same drawn by Ld. AO with as that of share capital reference to funds which has been discussed received by appellant at length and in view of company. (Page 33 – case laws discussed above CITR(A)’s order). (Page 12 – AO’s order)  No denial by any of the subscribers of the Regarding section 14A, the appellant company's share assessee has not filed calculation capital that they did not sheet for disallowance made invest their money into it. along with computation of  The AO has failed to bring income. In view of provisions of any credible evidence on section 14A r.w.r. 8D record to neutralize the disallowance is Rs. 25,56,473/-. evidences filed by the Therefore balance is added to appellant. Therefore, income of assessee. (Page 13 – addition cannot be AO’s order) sustained. (Page 47 – CIT(A) order). The Case laws relied upon by the A.O appellant has established the ICG of the transaction. • CIT V Divine Divine Leasing Finance Ltd Regarding addition U/s 14A • CIT V McDowell & Co The appellant company filed its 154 ITR 148 return after making • M/s Anand Woolen disallowance U/s 14A on Mills V CIT 174 ITR 477 account of expenses (Delhi) attributable to earning exempt • Nova Promoters income. (Page 56 – CIT(A)’s &Finlease (P) Ltd (342 order). CIT(A) basis the case ITR 169 (Del)) laws restricted the • CIT V Nipun Builders & disallowance to the amount of Developers [2013] 350 Rs 5,00,000 for the sake of ITR 407 (Del) substantive justice,as it cannot • CIT V N.R. Portfolio PVt exceed the amount of exempt Ltd (ITA No. 1018 & income which in the instant 1019 of 2011) case is Rs. 9,94,717 and • Mittal Belting and

Machinery Stores V CIT deleting the addition of Rs. 253 ITR 341 23,32,813 made by the AO. • CIT V Kariary Trading Co Case laws relied upon by the Ltd (1998) 232 ITR 820 • CIT(A) SumatiDayal V CIT 214 • ITR 801 MOD Creation Pvt Ltd V • ITO [(2013) 354 ITR 282 CIT V L. N. Dalmia 207 (Delhi)] ITR 89 • • CIT V Kamdhenu Steel & Sunil Sidharatha V CIT Alloys Ltd & Others 156 ITR 507 (SC) • [(2012) 206 taxman 254 CIT V Biju Patnaik 160 (Delhi)] ITR 674 (SC) • • CIT V Oasis Hospitalities P. Roshan Di Hatti V CIT Ltd [(2011) 333 ITR 107 ITR 938 (SC) 119(Delhi)] • Shankar Industries V • ITO V Rakam Money CIT 114 ITR 689 (Cal.) • Matters P Ltd Dhanlakshmi Steel Re- 2821/Del/2011 rolling Mills V CIT 228 • ACIT V Kisco castings Pvt ITR 780 (AP) Ltd 34 taxmann.com 37 • Malabar Agricultural • CIT V Fivest Ltd [2014] 44 Co. V CIT 229 ITR 548 taxmann.com 356 (Delhi) (Ker) • • CIT V Gangeshwari Metals CIT V Precision Finance Pvt Ltd (2013) Ltd 208 ITR 465 (cal) • (30Taxmann.com328) K. N. C. • CIT V Lovely Exports Chandrashekhar V ACIT [2008] 216 CTR 195 (SC) 66 TTJ 355 (ITAT • ITO V Neelkanth Finbuild Bangalore) • Ltd. ITA No. 2821/ Del/ CIT V united 2009 Commercial and • ITO V NC Cables Ltd. ITA Industrial Company Pvt. No. 4122/Del/2009, ITAT Ltd. 187 ITR 596 (Cal.) • Delhi CIT V Durga Prasad • CIT V Expo Globe India Ltd More (1971) 82 ITR 540 [2014] 51 taxmann.com (SC) • 208 (Delhi HC) ITO V K. Jayaraman (Mad.) (1987) 168 ITR Differentiated Roshan Di Hatti, 757 Mittal Belting and Machinery Stores, Sophia Finance Ltd, McDowell & Co Ltd.Nova Promoters, Azadi BachaoAndolan(SC), Vodafone iNternationa l Holdings BV V Union of India(SC, SumatiDaya V CIT, lCIT V ,LN Dalmia, Sunil Sidhartha Bhai V CIT, CIT V Durga Prasad More,ITO V K Jayaraman (Page 36 to 43)

CIT(A) for deciding the ground related to disallowance U/s 14A has relied upon the case laws: • CIT V Holcim India Pvt Ltd [(2015) 57 taxmann.com 28 (Delhi)] • CIT V Lakhani Marketing [(2014) 49 taxmann.com 257 (P&H)] • CIT V Shivam Motors Pvt Ltd [(2015) 55

taxmann.com 262 (Allahabad)  The  The 12. Sukhna Real 2012-13 Section 68 assessee failed to appellant has Estate Pvt discharge its onus. In such a established the ICG of the Ltd case the source and nature transaction. Share of transaction need to be capital/  The AO did not bring any Revenue’s proved beyond doubt. (Page share Appeal 7 – AO’s order). premium - finding on record which Rs. Rs. would indicate the  Basis the inspector’s report 80.634 shareholders were either crores none of the parties benamidar/ (investor) existed at the fictitious.(Page 29/39 – given address (Page 2 – AO’s CIT(A)’s order) order)  Notice U/s 133(6) returned  Not the case of AO that undelivered with remarks any person has given any “none existed”(Page 3 – AO’s statement or made any order) allegation against these  Verification of bank companies (Page 29 – statement revealed that CIT(A) order). companies received funds back to back (Page 3 – AO’s  Reasons recorded by AO order) are generic in nature and  After few days of local not backed by concrete enquiry, confirmation of all evidences (Page 29 – parties received through CIT(A)’s order). speed post in the office of AO.(Page 2 – AO’s order)  No cash deposits in the bank accounts of investors  Summons U/s 131 remain (29/30 – CIT(A)’s order). un-complied ”(Page 3 – AO’s order)  In the instant case, there  Assessee offered no are no circumstances even explanation about as to why to suggest that these investors agreed to transactions are not invest when there is no genuine and that the onus scope for making an exit out cast upon it has not been of investment. (Page 5- AO’s discharged. (Page 27 – order) CIT(A)’s order).  Also not explained that why shares were not allotted and  Investor companies are share application money assessed to Tax (Page 27 – returned (page 5 – AO’s CIT(A)’s order) order)  The provisions of section  The entire approach of 68 would be applicable assessee for shying away only when shares have from filing requisite been issued in the name of documents and the non-existing person which necessary details strongly is not the situation in the suggests that entries are instant case. accommodation entries ((Page 5- AO’s order)  No denial by any of the  Intent of assessee to avoid subscribers of the furnishing the details and appellant company's share then take spacious plea that capital that they did not addition made without invest their money into it. making direct enquiries from persons who advanced  The AO did not bring any money. (Page 6 – AO’s documentary evidence to

order). establish the live link/nexus between the  Since the assessee was well material available with the department and the aware of the fact of bogus amount received by the credits in its books, it has appellant. chosen not to subject itself investigation/ enquiry  Entire amount received conducted by the department. through normal banking channels (Page 30 –  Merely that the transaction CIT(A)’s order). was conducted through  Parties proper banking channel does involved have not substantiate the confirmed of having genuineness of transaction. deposited their money in the appellant company  Since the payments were (Page 30 – CIT(A)’s order) transferred to other  No iota of evidence to companies as and when they were received, the prove that money creditworthiness of the emanated from coffers of investor does not in any way appellant company. Any gets established. The conclusion can be assessee has failed to sustained only if backed by produce the directors of the concrete evidence (Page 30 investor companies. – CIT(A)’s order)

 Provisions of section 68 Case laws relied upon by the A.O not applicable in case of • CIT V Divine DivineLeasing bonus shares (Page 30 – CIT(A)’s order). The shares Finance Ltd • Nova Promoters &Finlease issued as bonus shares have not brought any (P) Ltd (342 ITR 169 (Del)) income which is nothing • CIT V Nipun Builders & but the credit in the books Developers [2013] 350 ITR of accounts of the 407 (Del) company, therefore when • CIT V N.R. Portfolio PVt Ltd no sum has been credited, (ITA No. 1018 & 1019 of addition cannot be made 2011) U/s 68 of the Act.The • Kale Khan Mohammad Hanif amount of issue of bonus V CIT [1963] 50 ITR 1 (SC) shares does not represent • CIT V Oasis Hospitalities 333 any fresh credit but only a ITR 119 (Delhi) 2011 transfer entry representing • Roshan Di Hatti [1977] 107 capitalization of reserves ITR (SC) and surplus and is not hit • CIT V Kariary Trading Co Ltd by section 68 of the Act. (1998) 232 ITR 820 • SumatiDayal V CIT 214 ITR  Differentiated Roshan Di 801 Hatti, Mittal Belting and • CIT V R. N. Dalmia 207 ITR 89 Machinery Stores, Sophia Finance Ltd, McDowell & Co Ltd

Case laws relied upon by the CIT(A)

• MOD Creatiosn Pvt Ltd V ITO [(2013) 354 ITR 282 (Delhi)] • CIT V Kamdhenu Steel &

Alloys Ltd & Others [(2012) 206 taxman 254 (Delhi)] • CIT V Oasis Hospitalities P. Ltd [(2011) 333 ITR 119 (Delhi)] • ITO V Rakam Money Matters P Ltd 2821/Del/2011 • ACIT V Kisco castings Pvt Ltd 34 taxmann.com 37 • CIT V Fivest Ltd [2014] 44 taxmann.com 356 (Delhi) • CIT V Oasis Hospitalities Pvt Ltd (333 ITR 119 Delhi) • CIT V Lovely Exports [2008] 216 CTR 195 (SC)  As per inspector’s report no  CIT(A) has made analysis of 13. Sukhna 2012-13 Section 68 Steel Pvt Ltd company existed at such creditworthiness, for address,no directors were making investment (Page Share Revenue’s found, premises don’t 29/30, Table – CIT(A)’s capital/ appeal belong to investor order) share company (Page 2, Table – premium-  No AO’s order) Rs. 26.168 adverse material crores brought by AO to reject the  Verification of bank explanations and statement revealed that evidences (Page 30 – investor companies CIT(A)’s order). (includes received funds back to back Rs.  Neither any person has arrangement. 16,80,000 Creditworthiness could not on given any statement nor be found satisfactory with account of made an allegation against respect to huge amount of issue of the company (Page 30 – funds arrangement (Page 2 bonus CIT(A)’s order). – AO’s order) shares)  No cash deposits in the  Assessee failed to explain bank accounts of investors why these companies (Page 30 – CIT(A)’s order). agreed to invest in unlisted companies when there is no  Reasons given by AO are scope for making an exit out generic and not backed by of investment (Page 6 – any concrete evidence AO’s order) (Page 30 – CIT(A)’s order)  The assessee intentionally  Entire amount received avoided furnishing through banking channels, documents to take a plea investors confirmed, no that addition has made U/s evidence to prove funds 68 without making actually emanated from inquiries. A clear period of coffers of appellant two months allowed to company, no concrete assessee to furnish evidence against appellant documents. It suggested company (Page 30/31 – that these are nothing but CIT(A)’s order) accommodation entries (Page 2 – AO’s order).  Section 68 not applicable on bonus issue, it does not  Merely Pan and address represent fresh credit were furnished, but no one (Page 31 – CIT(A)’s order). was found at the address. The amount of issue of Bank statement not

submitted properly bonus shares does not showing available balance. represent any fresh credit NO explanation submitted but only a transfer entry by assessee to explain representing capitalization future cash flow, basis of of reserves and surplus and share premium calculation is not hit by section 68 of and no. of shares to be the Act.(Page 42 – CIT(A)’s issued (Page 8, Table – AO’s order) order)  The appellant has  The assessee has failed to established the ICG of the produce the directors of transactions.(Page 41 – the investor companies. CIT(A)’s order)

 The assessee failed to Case laws relied upon by the discharge its onus. In such a CIT(A) case the source and nature of transaction need to be • MOD Creation Pvt Ltd V proved beyond doubt. ITO [(2013) 354 ITR 282 (Pagse – 7, AO’s order). (Delhi)] • CIT V Kamdhenu Steel & Case laws relied upon by the A.O Alloys Ltd & Others [(2012) 206 taxman 254 (Delhi)] • Nova Promoters &Finlease • CIT V Gangeshwari Metals (P) Ltd (342 ITR 169 (Del)) Pvt Ltd (2013) 30 taxmann.com 328 • CIT V Oasis Hospitalities P. • CIT V Nipun Builders & Ltd [(2011) 333 ITR 119 Developers [2013] 350 ITR (Delhi)] 407 (Del) • ITO V NC Cables Ltd. ITA • CIT V N.R. Portfolio PVt Ltd No. 4122/Del/2209 • ITO V Rakam Money (ITA No. 1018 & 1019 of Matters P Ltd 2011) 2821/Del/2011 • ACIT V Kisco castings Pvt • Kale Khan Mohammad Hanif Ltd 34 taxmann.com 37 V CIT [1963] 50 ITR 1 (SC) • CIT V Fair Finvest Ltd [2014] 44 taxmann.com • CIT V Oasis Hospitalities 333 356 (Delhi) ITR 119 (Delhi) 2011 • CIT V Oasis Hospitalities Pvt Ltd (333 ITR 119 Delhi) • Roshan Di Hatti [1977] 107 • CIT V Lovely Exports [2008] ITR (SC) 216 CTR 195 (SC) • CIT V Expo Globe India Ltd. • CIT V Kariary Trading Co Ltd [2014] 51 taxmann.com (1998) 232 ITR 820 208 (Delhi) • SumatiDayal V CIT 214 ITR Differentiated the following 801 judgments: • CIT V Nova Promoters • CIT V R. N. Dalmia 207 ITR 89 &Finlease (P) Ltd [(2012) 342 ITR 169 (Delhi)] • Roshan Di Hatti V CIT [(1977) 107 ITR 938 (SC)] • CIT V Nipun Builders & Developers [(2013) 350 ITR 407 (Del)]  As per inspector’s report  Appellant has discharged 14. Sunlight 2012-13 Share Tour & capital/ none of the parties existed onus u/s 68

 No Travels Pvt share at the given address. (Page adverse inference Ltd premium 2- AO’s order). drawn by AO in case of investor companies with  Summons issued to parties Revenue’s reference to funds Rs. Appeal received by appellant 52.0168 u/s 131 remained company crores uncomplied.  AO has not brought on  Upon verification of bank record any adverse material to reject the (SC & statement of parties, it was explanations and premium found that the investor evidences submitted by RS. 40 companies had received the appellant. crores and funds and transferred back  Not the case of the AO bonus to back. that any person has given shares Rs. any statement or made  From 12,01,68,0 the financial allegations against the 00) statements, company. creditworthiness of parties  There is no cash deposits could not be found in the bank accounts of satisfactory wrt huge the parties from whom amounts of funds made share capital/ premium has avaliable to the assessee. been received.  Entire amount received  Despite being many through banking channels, opportunities provided to depositors have confirmed assessee, no compliance to of having deposited SCN issued. money in the company, no evidence that funds  No explanation by the received emanated from assessee as to why these coffers of the assessee. parties which are related to  Assessee has allotted the assessee agreed to shares for the share invest in assessee which is application money unlisted and thus there is received. no scope to exit out of the  With regard to bonus investment. shares the provisions of section 68 are not  Person should have some applicable since the sign of identification other amount in question does than merely on paper. not represent fresh credit These signs could be place in the books of account. of work, staff members,  Assessee established ICG, actual transaction, addition wrt share capital recognition in eye of public, and share premium and sign board etc. Actual bonus issue deleted. identity and business does not get proved by these CIT(A) has differentiated the passive documents when following case laws: infact no actual or passive A. CIT vs. Nova Promoters – business is beingcarried on. page 31 B. Roshan Di Hatti (SC) -pg 32  Assessee failed to produce C. CIT vs. Nipun Builders & person to verify claim, Developers failed to prove nature and source of transaction. CIT(A) has relied upon the following case laws:  The assessee failed to • M/s. MOD Creations discharge its onus. In such a Pvt. Ltd. V ITO 354 case the source and nature ITR 282 (Del) of transaction need to be • CIT Vs. Kamdhenu proved beyond doubt. Steel & Alloys Ltd.

Case laws relied upon by the A.O (Del) 206 taxmann 254 (Del) • • Nipun CIT Vs. Gangeshwari Builders & Metals Pvt. Ltd. Developers • Nova Promoters &Finlease (2013) 30 • Kamal Motors V CIT 131 taxman.com 328 • CIT vs. Oasis taxman 155 (Raj) • CIT V Oasis Hospitalities 333 Hospitalities 333 ITR 119 (2011) Del ITR 119 (Delhi) 2011 • • CIT ITO vs. Neelkanth V Ruby Traders Finbuild Ltd. &exporters Ltd. (2004) 263 • ITO vs. NC Cables Ltd. ITR 300 (Cal.) • M/s Rajshree Synthetics (P) (Del ITAT) • ITO vs. Rakam Money Ltd V CIT (2003) 131 Matters P. Ltd. (Del Taxmann 391 (Raj)  CIT V Sophia Finance Ltd ItAT) • ACIT vs. Kisco Castings Pvt. Ltd. (Chd) • CIT vs. Fair Finvest Pvt. Ltd. (Del HC) • CIT Vs. Expo Globe India Ltd. (Del HC)  CIT Vs. Lovely Exports (SC)

 Out of 8 companies, notice  15. Superstar 2012-13 Section 68 CIT(A) has made analysis of Agency Pvt U/s 133(6) could not be the creditworthiness of Ltd served on 6 companies due the investors and observed Share to no such company at the that no adverse inference capital/ Revenue’s given address, 2 companies has been drawn by Ld. AO share Appeal did not reply. (Page 4, table – with reference to funds premium AO’s order) received by appellant  On an analysis of bank company. (Page 29 – Rs. 42.25 statements of investor CIT(A)’s order) crores companies, it was seen that  investor companies have CIT(A) has observed that received funds and addition has been made by (SC= 3.85 transferred back to back. AO on ground that replies cr  Summons issued u/s 131 U/s 133(6) were Share remained uncompiled. incomplete, no compliance premium  The assessee failed to was made U/s 131 and the = 38.40 cr) discharge its onus. In such a inspector’s report that no case the source and nature such companies exist (Page of transaction need to be 29 – CIT(A)’s order). AO did proved beyond doubt.(Page not bring any adverse 8 – AO’s order). material to reject the explanations and  Since the assessee was well evidences submitted by aware of the fact of bogus appellant (Page 29 – credits in its books, it has CIT(A)’s order) chosen not to subject itself  investigation/ enquiry Neither any person has conducted by the given any statement nor department.(Page 8 – AO’s made any allegation order) against these companies (Page 29 – CIT(A)’s order)  The assessee offered no  explanation as to why these Reasons given by AO are parties agreed to invest in very generic and not an unlisted company when backed by any concrete there is no scope for making evidence (Page 29 –

an exit out of CIT(A)’s order) investment.(Page 6 – AO’s  order) No cash deposit in the bank account of investors  Not explained why share (Page 29 – CIT(A)’s application money was order)Transaction took returned to parties and place through normal shares were not banking channel (Page 29 allotted.(Page 6 – AO’s order) – CIT(A)’s order)

 The intent of the assessee is  Parties involved positively to avoid furnishing details confirmed (Page 29 – and then take plea that CIT(A)’s order) addition has been made  without making inquiries No iota of evidence to from person’s who advanced prove that money actually money .(Page 6 – AO’s emanated from coffers of order). appellant company (Page 29 – CIT(A)’s order).  A clear period of two Appellant allotted shares months allowed to assessee for amount received (Page to furnish details but it did 29 – CIT(A)’s order) not submit (Page 6 – AO’s  order). The assessee has The appellant has failed to produce the established the ICG of the directors of the investor transactions. (Page 40 – companies. (Page 8 – AO’s CIT(A) order). order) Case laws relied upon by the Case laws relied upon by the A.O CIT(A) • Nova Promoters &Finlease • MOD Creations Pvt Ltd V (P) Ltd (342 ITR 169 (Del)) ITO [(2013) 354 ITR 282 (Delhi)] • CIT V Nipun Builders & CIT V Kamdhenu Steel & Alloys Ltd & Others Developers [2013] 350 ITR [(2012) 206 taxman 254 407 (Del) (Delhi)] • CIT V Gangeshwari Metals • Kale Khan Mohammad Hanif Pvt Ltd (2013) 30 V CIT [1963] 50 ITR 1 (SC) taxmann.com 328 • ITO V NC Cable ITA • CIT V Oasis Hospitalities 333 No. 4122/Del/2009, ITAT ITR 119 (Delhi) 2011 Delhi Bench • ITO V Neelkanth Finbuild • Roshan Di Hatti [1977] 107 Ltd ITA No. ITR (SC) 2821/Del/2009 • CIT V Oasis Hospitalities P. Ltd [(2011) 333 ITR 119 (Delhi)] • ITO V Rakam Money Matters P Ltd 2821/Del/2011 • ACIT V Kisco castings Pvt Ltd 34 taxmann.com 37 • CIT V Fair Finvest Ltd [2014] 44 taxmann.com 356 (Delhi) • CIT V Oasis Hospitalities Pvt Ltd (333 ITR 119

Delhi) • CIT V Lovely Exports [2008] 216 CTR 195 (SC)

Differentiated the following case laws: • CIT V Nova Promoters &Finlease (P) Ltd [(2012) 342 ITR 169 (Delhi)] • Roshan Di Hatti • Nipun Builders & Developers

 In 16. Supreme 2012-13 Section 68 some cases the Placement confirmation received in Pvt Ltd response to notice U/s  Addition made by AO on Share 133(6) along with bank capital/ ground that replies to Revenue’s statement shows that share notice U/s 133(6) are Appeal assessee has received the premium incomplete, no compliance amount and back to back to summons U/s 131 and transferred the amount to the investor’s report that Rs. 72.43 other parties (Page 3 – AO’s companies did not exist at crores order) the address (Page 29 – AO’s order). (includes  As per the inspector’s bonus of report no such party  The AO did not bring any 12.43 cr) existed at the given adverse material to reject address (Page ¾, table- the explanations and AO’s order) evidences submitted by the appellant (Page 29 –  Assessee offered no AO’s order). explanation as to why the  Neither any person has companies agreed to invest in an unlisted company given any statement nor when there is no scope for made any allegation making an exit out of against these companies investment (Page 7 – AO’s (Page 29 – CIT(A)’s order) order)  Reasons given by AO are  It has not explained why very generic and not share application money backed by any concrete was returned and shares evidence (Page 29 – were not allotted (Page 7 – CIT(A)’s order). AO’s order)  No cash deposit in the  The approach of assessee bank account of investors from shying away from (Page 29 – CIT(A)’s order) filing necessary documents suggest that these are  Transaction took place nothing but through normal banking accommodation entries channel (Page 29 – CIT(A)’s (Page 7 – AO’s order) order). Parties involved positively confirmed (Page  The entire intent is to avoid 29 – CIT(A)’s order) furnishing details and then take a plea that additions  No iota of evidence to made without conducting prove that money actually inquiries from persons from emanated from coffers of

whom amount received appellant company (Page (Page 7 – AO’s order) 29 – CIT(A)’s order).Appellant allotted  A clear period of two shares for amount received (Page 29 – CIT(A)’s order) months allowed to assessee but still it did not furnish  The the details (Page 7 – AO’s appellant has order). Assessee failed to established the ICG of the produce the persons to transactions. (Page 40 – verify the claim (Page 9 – CIT(A) order) AO’s order)  Source satisfactorily  The assessee failed to explained. The ratio of discharge its onus. In such a judgments is squarely case the source and nature applicable to the case of of transaction need to be assessee (Page 39 – CIT(A) proved beyond doubt.(Page order) 9 – AO’s order).  The Since the assessee was well appellant has aware of the fact of bogus established the ICG of the credits in its books, it has transactions.(Page 39 – chosen not to subject itself CIT(A) order). investigation/ enquiry conducted by the  In case of bonus issue department.(Page 9 – AO’s provisions of section 68 order) are not applicable since the amount in question Case laws relied upon by the A.O does not represent a fresh credit (Page 29 – CIT(A)’s • Nova Promoters &Finlease order). The amount of (P) Ltd (342 ITR 169 (Del)) issue of bonus shares does not represent any fresh • CIT credit but only a transfer V Nipun Builders entry representing &Developers [2013] 350 ITR capitalization of reserves 407 (Del) ans surplus and is not hit by section 68 of the • Kale Khan Mohammad Act.(Page 40 – CIT(A) Hanif V CIT [1963] 50 ITR 1 order) (SC) Case laws relied upon by the • CIT V Oasis Hospitalities 333 CIT(A) ITR 119 (Delhi) 2011 • MOD Creation Pvt Ltd V ITO [(2013) 354 ITR 282 • Roshan Di Hatti [1977] 107 (Delhi)] ITR (SC) • CIT V Kamdhenu Steel &Alloys Ltd & Others [(2012) 206 taxman 254 (Delhi) • CIT V Gangeshwari Metals Pvt Ltd (2013) 30 taxmann.com 328 • ITO V NC Cable ITA No. 4122/Del/2009, ITAT Delhi Bench • CIT V Oasis Hospitalities P. Ltd [(2011) 333 ITR 119 (Delhi)] • ITO V Rakam Money Matters P Ltd 2821/Del/2011

• ACIT V Kisco castings Pvt Ltd 34 taxmann.com 37 • CIT V Fair Fivest Ltd [2014] 44 taxmann.com 356 (Delhi) • CIT V Expo Globe India Ltd [2014] 51 taxmann.com 208 (Delhi) • ITO V Neelkanth Finbuild Ltd ITA No. 2821/Del/2009 • CIT V Lovely Exports [2008] 216 CTR 195 (SC)

Differentiated the following case laws: • Nova Promoters &Finlease (P) Ltd (342 ITR 169 (Del)) • Roshan Di Hatti [1977] 107 ITR (SC)

• CIT V Nipun Builders & Developers [2013] 350 ITR 407 (Del)  Assessee failed to prove ICG  That the appellant has 17. Sur Buildcon 2012-13 Section 68 Pvt Ltd Share of transactions with the completely discharged its capital investor companies.(Page 8 – onus cast upon it U/s 68 Revenue’s and share AO’s order) with necessary supporting  Notices sent U/s 133(6) Appeal premium documents.(Page 27 – Rs. 98.494 returned undelivered with CIT(A)’s order).  The appellant has proved crores remarks “none existed”.  Basis the inspectors report, the ICG of the (includes all the five investors, no transactions. No reason to 17,09,40,0 company was found at the suggest that the 00/- on address, no directors were transactions are not account of found, person staying there genuine.(Page 27 – bonus denied saying that this CIT(A)’s order).  The investor companies issue) address does not belongs to the investor in question. are assessed to tax and (Table, page 4/5 – AO’s orders have been passed order) U/s 143(3) of the  Investor companies received Act.(Page 28 – Table – funds back to back CIT(A)’s order)  The AO did not bring any arrangement (Page 4- AO’s order) adverse material on  Summons issued U/s 131 record to reject the remain un-complied (Page 4- explanations submitted by AO’s order). the appellant.  Assessee  Rather it’s not the case of has willfully desisted from furnishing any AO that any person has details/ particulars/ given any statement or documents/ to prove made any allegation genuineness of the amount against these companies. received from parties (Page (Page 32 – CIT(A)’s order).  The reasons given by AO 5- AO’s order).  Assessee offered no are generic in nature and explanation about as to why no backed by any these investors agreed to concrete evidence.(Page invest when there is no 32 – CIT(A)’s order)  Various parties involved scope for making an exit out

of investment. (Page 6- AO’s has positively confirmed/ order). affirmed the fact of having  It has not been explained deposited their money why share application into appellant company money was returned to (Page 33 – CIT(A)’s order).  The entire amount has these parties and shares not allotted.(Page 6- AO’s order) been received through  AO did not find merit in the normal banking channels contention of the assessee which transaction has not that the decision of share been disputed, repudiated premium is the discretion of or challenged in any the board of directors of the manner (Page 32 – CIT(A)’s company. order).  That the investor did not  No evidence to prove that provide the complete bank funds received generated statement enabling the AO from appellant company. to verify source of source. Any conclusion can be  That the compliance made sustained only if backed by by the investor companies is concrete evidence (Page not found satisfactory. 33 – CIT(a)’s order)  Provisions of section 68 Case laws relied upon by the A.O are not applicable on • Nova Promoters &Finlease bonus shares, as the no (P) Ltd, Delhi high court amount is received in case • Nipun Builders & Developers of bonus shares (Page 33 – CIT(a)’s order) Pvt Ltd, ITA No. 120/2012  Appellant company • Kale Khan Mohammad Hanif has allotted shares for the V CIT [1963] 50 ITR 1 (SC) • Roshan Di Hatti V CIT [1977] share capital and share application money 107 ITR (SC) • CIT V Oasis Hospitalities Pvt received by it (Page 33 – CIT(A)’s order). Ltd 333 ITR 119 (Delhi)  There was no cash deposit (2011) into the bank accounts of the companies from whom share capital/ share application money received.(Page 32 – CIT(A)’s order).

Differentiated the following case laws: • Nova Promoters &Finlease (P) Ltd (342 ITR 169 (Del)) • Roshan Di Hatti [1977] 107 ITR (SC)

• CIT V Nipun Builders & Developers [2013] 350 ITR 407 (Del)

Relied upon the following case laws: • MOD Creation Pvt Ltd V ITO [(2013) 354 ITR 282 (Delhi)] • CIT V Kamdhenu Steel &Alloys Ltd & Others [(2012) 206 taxman 254 (Delhi)

• CIT V Gangeshwari Metals Pvt Ltd (2013) 30 taxmann.com 328 • ITO V NC Cable ITA No. 4122/Del/2009, ITAT Delhi Bench • CIT V Oasis Hospitalities P. Ltd [(2011) 333 ITR 119 (Delhi)] • ITO V Rakam Money Matters P Ltd 2821/Del/2011 • ACIT V Kisco castings Pvt Ltd 34 taxmann.com 37 • CIT V Fair Fivest Ltd [2014] 44 taxmann.com 356 (Delhi) • CIT V Expo Globe India Ltd [2014] 51 taxmann.com 208 (Delhi) • ITO V Neelkanth Finbuild Ltd ITA No. 2821/Del/2009 • CIT V Lovely Exports [2008] 216 CTR 195 (SC)  On perusal of reply filed by 18. Globus Real 2013-14 Section 68 CIT(A) decided the appeal ex- Infra Pvt Ltd Share the assessee it was noted parte (Formerly applicatio that parties who have given  Notice for hearing dated Sur Buildcon n Money - amount don’t have much Pvt Ltd) Rs. 5.6 creditworthiness to advance April 11, 2017 served via crores such huge share capital speed post dated March Assessee’s (Page- 2, Para – 2 – AO’s 27, 2013. No compliance Appeal Unsecure Order) made by appellant, appeal decided on basis of facts d loans -  It is duty of the assessee Rs. 2.95 on record. ( Page – 3, Para crores 4 –– CIT(A)’s Order) primarily to establish  The appellant was asked to creditworthiness of persons establish source of source who have given credit and of share capital and loans genuineness of transaction, due to movement of funds merely filing PAN, ITR, BS between different dors not absolve assessee companies and also due from its responsibility of to insertion of proviso in discharging onus (Page- 5, section 68 effective for Para – III – AO’s Order). year under consideration (Page – 4, Para – 7 –  Investors/ lenders have CIT(A)’s Order) hardly any business to  Share applicant generate income to extend companies and lender such huge amount (Page – companies have same 11, Para (i) – AO’s Order). address in Delhi except Regarding the source of KBN Infra which has source assessee’s story that Mumbai address (Page – amount has travelled from 4, Para – 7 – CIT(A)’s one company to another and Order) none of the company has its  KBN Infra, NRA Iron & steel own source, rather acting as and Vistrat Real Estate a conduit and in process have common director original source of money namely Shailendra Singh does not get explained, is Bhadoria. (Page – 4, Para neither tenable under law of – 7 – CIT(A)’s Order) probability nor acceptable

 No reason why appellant under judicial canons (Page – 13 – Ao’s order). could not produce principal officers/  Introduction of amount in directors of companies when entire money came books of accounts do not from same group and qualify test of human appellant also belonged to probability as it failed to same group (Page – 4, explain the source of Para – 7 – CIT(A)’s Order). investment and its purpose  The pattern of money of making the same (Page – movement raises 13 – AO’s order) suspicion of  There accommodation entries is a chain of (Page – 4, Para – 7 – companies from which the CIT(A)’s Order) fund flows from one  The Ld. CIT(A) also applied company to another without the amendment made to establishing the actual section 68 for the sum source of investment. It is a credited as unsecured clear case of tax avoidance loan also(Page – 4, Para – under garb of tax planning 7 – CIT(A)’s Order). (Page – 16/17 – AO’s order) Case laws relied upon by the  Despite bringing it to CIT(A): knowledge of assessee that • Nakoda Fashion Pvt Ltd, summons have not been ITA No. 1716/AHD/2012, complied with and it is duty ITAT Ahmedabad Bench of assessee to explain source [Relying Upon N. Tarika of source to authenticate Properties Investment claim and purpose of making (2014) 51 taxmann.com advances, assessee failed to 387 (SC), Empire Biotech P discharge its onus to Ltd 361 ITR 258 (Del)] establish source of source • Nova Promoters and (Page – 13 – Ao’s order). Finlease Pvt Ltd 342 ITR Summons issued U/s 131 169 (Del. HC) remained un-complied (Page 13 – AO’s Order)

 Investors have common practice like paper companies who raise loan from companies who in turn have no income generating capacity or established source (Page – 11, Para (i) – AO’s Order)The assessee failed to prove the source of source.  The assessee failed to discharge its onus cast upon it U/s 68 to prove genuineness of transactions and creditworthiness of person who has given credit to the assessee.  The amount introduced by the assessee under the garb of share capital and unsecured loan is the undisclosed income of the assessee within the meaning of section 68 (page 16 of the

A.O’s order)

Case laws relied upon by the A.O: • Kale Khan Mohd. Hanif V CIT (SC) 50 ITR 1, • CIT V N. R. portfolio Pvt Ltd 206 (2014) ITA No. 204/2002 • CITR V Nipun Builders and Developers (2013) 350 ITR 407 (Del.) • Shankar Ghosh V ITO [1985] 23 TTJ (Cal.) 20, • Roshan Di Hatti V CIT [1977] 107 ITR (SC) • CIT V DurghaParsad More (1971) 82 ITR 540 (SC) • CIT V Durga Prasad More (1971) 82 ITR 540 (SC) • SumatiDayal V CIT (1995) 214 ITR 801 (SC) • A Rajendran & Others V ACIT (2006) 204 CTR (Mad) 9 • Hacienda Farms (P) Ltd V CIT (2011) 239 CTR (Del) 212 • Major Metals Ltd V UOI and Ors. (2012) 251 CTR (Bom) 385 • Pradeep Kumar Loyalka V ITO (1997) 59 TTJ (Pat)(TM) 655 • ACIT V Sampat Raj Ranka (2001) 73 TTJ (Jd) 642 • Mc Dowell Ltd. V CTO (1985) 154 ITR 148 (SC) • CIT V Youth Construction Pvt Ltd 44 taxmann 364 • Wood Polymer Ltd. Bengal Hotels Limited, 40 Company Cases 597 • Campbell V Inland Revenue Commissioners (1), Stamp J. • CIT V Precision Finance Pvt Ltd (1994) 208 ITR 405 (Cal) • Bharati Pvt Ltd W.B. V CIT WB (1978) 111 ITR 991  Little  CIT(A) has made analysis 19 Track 2012-13 Section 68 compliance or no Casting Share compliance made to notices of Reserves & Surplus India Pvt Capital & issued U/s 142(1) (Page1, position of all the Ltd. Share Para 4- AOs’ Order. Details investors. All have been premium filed letter dated July 10, found to have adequate Revenue’s Rs. 31 2014 and July 25, 2014 and investment apart from Appeal crores August 26, 2014 and Dec 15, appellant company and 2014 (Page – 2, Para – 4.4, having decent reserves Section 4.5 – AO’s Order) (Page 19-20, Para 5 to 5.2  To 69C Rs. avoid to prove the

7.75 lakhs genuineness and the CIT(A)’s order) U/s 69Con creditworthiness of investor  The account of companies, assessee amendment made alleged intentionally avoiding U/s 68 for proving the unexplain furnishing details on time source of source is not the ed and producing directors of mandate of law for the commissi investor companies by year under appeal. The on seeking adjournments time amendment to section 68 expenses and again and not attending w.e.f., 01/04/2013 cannot hearings (Page – 7, Para 5.12 be held or interpreted to – AO’a order). be retrospective in nature  Assessee failed to bring (Page – 21, Para 7 – difference in rate of shares CIT(A)’s order). issued to four companies (Page – 7, Para 6.2 – AO’a  AO failed to disprove order) identity, creditworthiness  The assessee failed to justify and genuineness of reasons for major transaction (Page – 22, development between the Para 8 – CIT(A)’s order). night of 23rd and 24th which led to price increase from 10  AO has brought nothing to 200 per share (Page – 7, on record to establish that Para 6.2 – AO’a order). the applicant routed its  No prudent investor would own money in the form of invest in such a company share application(Page – without any income; except 22, Para 8 – CIT(A)’s order) when both the parties are hand in glove (Page – 7, Para  The addition made 6.3 – AO’s order) separately on account of  It is modus-operandi of entry commission payment of operators to make few Rs. 7.75 lakh is also transactions at high and few deleted. (Page – 22, Para 8 at low price(Page – 8, Para – CIT(A)’s order) 6.4.2 – AO’s order).  Assessee has not brought anything on record to support that any dividend has been declared by it (Page – 9, Para 6.6 – AO’s order)  Perusal of bank statement of investors reveal that they are receiving huge amounts from various other companies and transferring funds to other companies, not doing business activity ((Page – 9, Para 6.7 – AO’s order).  One thing is common that whole of the sale proceeds are used for buying shares of other companies and at the end there is no income earned even after transaction of hundred of crores (Page 9, Para 6.7 – AO’s order).  Bank statement show similar pattern, receipts of huge amount of money without

interest, no proportionate expense booked, in turn providing huge amounts to various companies without interest (Page 9, Para 6.7 – AO’s order)  The assessee failed to prove the genuineness of transactions and creditworthiness of the investor companies.(Page 10, Para 6.10 – AO’s order).  Further accommodation entries have been taken on payment of certain amount of money, estimated to 25 paisa per Rs. 100. On accommodation entry od Rs. 31 crores, assessee paid Rs. 7.75 lakhs, since No details and source of this payment has been shown, held to be paid out of undisclosed sources (Page10, Para 7 – AO’s order)

issued 131 and 133(6) in case of certain investors.  That neither the Assessee nor the investor companies ore ultimate beneficiaries but there is routing of funds from Bhushan Steel Ltd. and/or Bhushan energy Ltd. (specifically held so in 3 cases vie. Jawahar Credit & Holdings Pvt. Ltd. (A.Y. 2012-13}, Jingle Bells Aluminium Pvt. Ltd. (A.Y. 2012-13) and Kasper Information Technology Pvt. Ltd. (A. Y. 2012-13)  That nothing is mentioned in the assessment order regarding any statement of any person providing entry to the Assessee.  That there is no denial at any stage of assessment proceedings by any of the subscribers of share capital of having deposited money in the Assessee Company.  That replies to notices issued u/s 133(6} were received from several investor companies.  That no material has been brought on record by the A.O to conclusively prove that the share capital originated from Assessee Company.  The documents submitted conclusively establish that the money came from the investor's/depositor’s account and nowhere connected with the Assessee Company.  That there is no cash deposit in the bank accounts of the parties from whom share capital/ loan is received.  That the entire amount was received through normal

banking channels.  That the depositors have also confirmed of having deposited money in the company which confirmations also reveal source of funds, particulars of bank accounts through which payments have been received and income tax particulars.  That the Assessee has allotted shares for share application monies received.  That there is no mandate of law to look into the source of source for the A. Ys prior to A. Y. 2013-14.  That the Assessee cannot be fastened with liability u/s 68 unless a causal connection between the cash deposit in the bank account of the investor (if any) and the Assessee is established.  That where complete particulars of the share applications are furnished to the A.O and the A.O has not conducted any enquiry into the same or has no material in his possession to show that those particulars are false, then no addition can be mode in the hands of the company.  That the Investor companies are having adequate reserves make investments.  That the source of funds by the investor companies in the Assessee in its share capital stands explained  That the investor companies are all assessed to tax in their respective jurisdictions.

 That the judgment of Stellar is applicable only where shares are issued in the names of non-existing persons, which is not the situation in the instant case.  That without proof of having introduced untaxed money by promoters or dubious antecedents, adverse view cannot be taken.  That the provisions of Section 68 are not applicable for bonus shares since the amount in question does not represent any fresh credit but only a transfer entry representing capitalization of reserves and surplus and is not hit by Section 68.

Arguments on behalf of the Assessee

capital/premium or loan and advances have been repeatedly treated as unaccounted/undisclosed fund of multiple companies assessed on individual basis which has resulted into multiple addition into same stream of funds in the hands of multiple assessee’s including all the assessees herein. By way of an example, he has cited many such instances viz.,:-

 In the case of Track Casting (India) Pvt Ltd. (at SI. No. 19 of Annexure 1), an addition of Rs. 31 crores has been u/s 68 made on account of funds received from various parties in the form of share capital, where the A.O. has treated such share capital as representing the unaccounted funds of M/s. Track Casting (India) Pvt. Ltd. for A.Y. 2012-13,  Further, in the case of Sukhna Steel Pvt. Ltd. (A.Y. 2012- 13) (i.e., Assessee at SI. No. 13 in the said chart), out of total additions of Rs. 21.168 crores made u/s 68 in the said case, an addition of Rs. 19.60 crores has been made on account of funds received as share capital from Track Casting (India) Pvt. Ltd, treating the same as representing the unaccounted funds of Sukhna Steel Pvt. Ltd.  Thus, the sum of Rs. 31 crores has first been treated as undisclosed funds belonging to M/s. Track Casting (India) Pvt. Ltd. Thereafter, Rs. 19.60 crores sourced out of the said funds of Rs. 31 crores, when paid by Track Casting (India) Pvt. Ltd. to M/s. Sukhna Steel Pvt. ltd. has once again been treated as representing the unaccounted funds belonging to M/s. Sukhna Steel Pvt, Ltd.

 Again, a sum of Rs. 10 crores out of the said funds of Rs. 31 crores, has been received by M/s. Track Casting (India) Pvt. Ltd. (at SI. No. 19) in the form of share capital from M/s. Jawahar Credit & Holdings Pvt Ltd. (at Si. No. 4). The said sum of Rs. 10 crores has been paid by Jawahar Credit Holding Pvt. Ltd. to M/s. Track Casting (India) Pvt. Ltd. out of the share capital of Rs. 73.50 crores received by the former company from various parties. The said share capital of Rs. 73.50 crores has also been added u/s 68 in the hands of Jawahar Credit & Holdings Pvt. Ltd. by treating the same as unaccounted funds belonging the M/s. Jawahar Credit & Holdings Pvt. Ltd. The chain continues in a similar fashion.  Thus, the same funds routed via M/s. Jawahar Credit & Holdings Pvt. Ltd. to M/s. Track Casting (India) Pvt. Ltd. and subsequently to M/s. Sukhna Steel Pvt. Ltd, have been treated as belonging to and representing the undisclosed funds of all the three group entities at the same point in time.  Again, Rs, 13.50 crores invested by M/s. Jawahar Credit & Holdings Pvt, Ltd. out of its share capital of Rs. 73.50 crores (w.r.t which additions u/s 68 have already been made in the hands of Jawahar Credit & Holdings Pvt. Ltd.) into M/s. Super Star Agency Pvt Ltd. (at SI. No. IS) has also been added u/s 68 in the hands of the latter company, once again treating the same as representing the undisclosed funds belonging to the latter.

Thus there is a complete lack of parity and understanding by the Revenue with respect to actual ownership of the impugned funds because same stream of funds have been added in the hands of multiple assessees.

loan and advances have been originated from the unaccounted money of the assessee companies or any other group companies who have subscribed to the shares or made investment. In fact, if at all there is circular transaction, then it amongst these very companies who are connected with the Bhushan group and the entire amount are accounted for in the books of Bhushan Energy Ltd. They are not the ultimate beneficiaries. This fact is clearly visible and demonstrable from the balance sheet of the assessee companies which clearly demonstrate that the entire share capital/share premium received by the assessee from its own group companies have been invested/advanced to other group companies. On these facts it cannot be held that the credit appears in the books of account are unaccounted or undisclosed income of the assessee.

ii. There is no fake or bogus entry in the entire chain which has been used as a camouflage by any of the group companies (including the Assessees herein) to put through their own unaccounted funds. iii. That there are no cash deposits in the entire chain and the credits are ultimately sourced out of the accounted funds of BEL; iv. That the Assessees herein are placed at different levels of the chain wherein one group company serves as an investor/lender in the next group company in the chain that goes so on and so forth, v. That the Assessees have merely acted as conduit mechanism for investing funds of BEL into other group companies and the said funds have ultimately gone back to BEL. vi. The same stream of accounted funds of BEL flowing through these Group Companies have been repeatedly treated as the unaccounted/undisclosed funds of multiple group companies (assessed on an individual basis) resulting in multiple additions of the same stream of accounted funds of BEL in the hands of several Assessees; vii. That there is no influx of any unaccounted funds/income belonging to the Assessee companies in the chain as incorrectly alleged by the A.Os. Therefore, the nature and source of the impugned credits

stand fully explained in the cases of all the Assessee- Companies herein ruling out the applicability of the rigors of section 68.

 That the basic requirement to justify the identity, creditworthiness and genuineness of the impugned transactions has been prima facie established by the Assessee.  That neither the Assessee nor the investors are the ultimate beneficiary of the transactions but there is routing of funds from Bhushan Steel Ltd. (through its subsidiary company, BEL). The funds received are given to other companies as soon as they are received.  That accordingly, the additions made by the A.O are outside the ambit of section u/s 68 as the Assessee has merely provided facility to route the impugned transactions.

(i) Names, addresses and PAN details of the parties, (ii) Confirmation of parties

(iii) Bank Statements (iv) Income Tax Returns of the parties for the impugned A.Y. (v) Assessment orders of the parties. (vi) Audited Accounts of the parties of the year under consideration.

A. The identities of the investors/lenders are established from multiple facts and evidences on record viz.

i. The investors/subscribers are companies duly incorporated under the provisions of the Companies Act, 1956 having separate legal entities and the status of "Artificial Legal Persons". The statutory records available with the Registrar of Companies clearly point to the companies being in existence. ii. The identity and existence of the companies are also substantiated by the following documents filed before the lower authorities. (a) Confirmations received from the parties. (b) Details of PAN - which conclusively prove that the said shareholder companies are all existing income-tax assessees.

(c) Copies of ITR Acknowledgment of the parties for the relevant assessment years. (d) Assessment Orders of the parties for the relevant assessment years. B. As far as the genuineness of the transactions is concerned, the Assessees filed the bank statements of the investors/lender companies which prove conclusively that the Assessees had received the impugned funds from the said investors/lenders and it came from the coffers of the said parties. The impugned sums were received through authorized banking channels which prove the genuineness of the transactions. The investors/lenders have also duly confirmed the fact of their having deposited money in the Assessee Company in the form of share capital and corroborated their confirmations with copies of Income-tax Returns, bank statements etc.

C. Further, the creditworthiness of the investors/lenders is dearly established from the fact that share capital/premium/loans etc. was received by the Assessee company by way of account payee cheques through normal banking channels and also from the copies of the bank statements of the investor/lender companies showing adequate availability of funds for the impugned investments. The balance sheets of the investors/lenders also show significant net worth fair enough to make the investments. The confirmations of the investors/lenders are also on record. Thus, where the funds have flown

through normal banking channels and have been duly disclosed in the regular books of account of both the parties and the transactions have been confirmed by the respective parties and not repudiated in any manner, the creditworthiness of the parties is proved beyond doubt

PB-20 further corroborate/strengthen the Assessees’ averment that the impugned funds do not represent income from undisclosed source of any of the Assessees herein.

Name of Names of Quantum of Year in Section Quantum of Nature of Addition Whether Pendency Assessee Investors/ addition made by which under addition in the in the case of addition was of appeal Lenders the A.O u/s 68 addition u/s which hands of Investors/ Investors/ Lenders confirmed/ in the w.r.t funds 68 was assessment Lenders deleted by case of received from the made in the was C.I.T(A) in the Investors/ investors/lenders hands of completed case of Lenders Investors/ in the case Investors/ Lenders of Lenders Investors/ Lenders Angel 1. A.Y. 2012-13:- Cement Pvt.Ltd. A) Share Capital fully Paid Up Sintex Rs. 1,00,00,000 A.Y.2012-13 143(3) 1)Rs. 78,22,80,000 Share Capital deleted ITAT Consumer (Assessee Electronics herein at Pvt.Ltd. Sl. No. 9 of the captioned matters in the index supra) A.Y.2012-13 147 1)Rs. 3,90,00,000 Advance Rececived NA C.I.T(A) 2) Rs. 3,90,000 Commission Expense ( 3.9 Cr @ 1%) Venus Rs. 30,00,00,000 A.Y.2012-13 147 1) Rs. 10,00,00,000 Unexplained Credit NA C.I.T(A) Recruiter Pvt.Ltd. 2) Rs. 30,00,000 Commission Expense( 10Cr @3%) Supreme Rs. 15,00,00,000 A.Y.2012-13 143(3) Rs. 72,43,00,000 Share Capital deleted ITAT Placement (Assessee Services herein at Pvt.Ltd. Sl. No. 16)

Janitor Rs. 15,00,00,000 A.Y.2012-13 147 Rs. 36,00,00,000 Share Capital NA C.I.T(A) Infrastruct converted partly to ure Pvt.Ltd. fully B) Share Capital Partly Paid Up:- Sintex Rs. 2,00,00,000 A.Y.2012-13 143(3) RS. 78,22,80,000 Share Capital deleted ITAT Consumer (Assessee Electronics herein at Pvt.Ltd. Sl. No. 9) A.Y.2012-13 147 1)Rs. 3,90,00,000 Advance Rececived NA C.I.T(A) 2) Rs. 3,90,000 Commission Expense ( 3.9 Cr @ 1%) Delight A.Y. 2012-13:- Resorts Pvt.Ltd. Advance Received Reinforce Rs. 5,50,00,000 A.Y.2012-13 147 Rs. 4,50,00,000 Current Liabilities - NA C.I.T(A) Recruiter Unexplained credit Pvt.Ltd. u/s 68

Marvelous Rs. (5,70,00,000) A.Y.2012-13 147 Rs. 2,58,86,811 Commission Income NA C.I.T(A) Cement Pvt Ltd Jingle Bells A.Y. 2012-13:- Aluminium Pvt.Ltd. Share Capital:- Rose Rs 12,00,00,000 A.Y. 2012-13 147 Rs. 72,00,00,000 Share Capital NA C.I.T(A) Capital Services Pvt.Ltd. CLASSIC Rs. 12,00,00,000 A.Y. 2012-13 147 Rs. 1,04,00,000 Commission Income( NA C.I.T(A) TRANPORT Rs 52 Cr @2% ) ATION PRIVATE LIMITED PITTIE Rs. 12,00,00,000 A.Y. 2012-13 147 Rs. 20,00,00,000 Unexplained Money NA C.I.T(A) STRIPS U/s 69A PRIVATE LIMITED BSN Capital Rs. 12,00,00,000 A.Y. 2012-13 147 Rs. 72,50,00,000 Share Capital NA C.I.T(A) Services Pvt.Ltd.

Kasper 1. A.Y. 2012-13:- Informatio n Technology Pvt.Ltd. A) Share Capital fully Paid Up:- Quadrel Rs. 1,00,00,000 A.Y. 2012-13 147 Rs. 73,70,07,363 Share Capital & NA C.I.T(A) Infrastruct Unexplained Credit ure Pvt.Ltd. Boost Rs. 20,00,00,000 A.Y. 2012-13 147 RS. 4,04,000 Commission Income( NA C.I.T(A) Minerals & debit & credit Mining Rs8.08 Cr @ 0.5%) Pvt.Ltd. Houston Rs. 20,00,00,000 A.Y. 2012-13 147 RS. 92,00,000 Commission Income NA C.I.T(A) Buildwell ( Share Capital Rs 46 Pvt.Ltd. Cr @ 2%)

B) Share Capital Partly Paid Up:- Quadrel Rs. 2,00,00,000 A.Y. 2012-13 147 Rs. 73,70,07,363 Share Capital & NA C.I.T(A) Infrastruct Unexplained Credit ure Pvt.Ltd. Kasper 2. A.Y. 2013-14:- Informatio n Technology Pvt.Ltd. A) Share Capital converted into Partly Paid Up to Fully paid up Landsky Rs. 8,00,00,000 A.Y. 2013-14 143(3) Rs. 18,60,00,000 Share Capital confirmed ITAT Real Estate (Assessee Pvt.Ltd. herein at Sl. No. 8) Sintex 1. A.Y. 2012-13:- Consumer Electronics Pvt.Ltd. A) Share Capital:- Jingle Bells Rs. 4,55,70,000 A.Y.2012-13 143(3) Rs. 62,00,00,000 Share Capital Fresh ITAT Aluminium (bonus) Addition on (Assessee Pvt.Ltd. account of herein at alleged Sl. No. 5) commission income

Angel Rs. 4,37,10,000 A.Y.2012-13 143(3) Rs. 120,70,00,000 Share Capital Deleted ITAT Cement (bonus) (Assessee Pvt.Ltd. herein at Sl. No. 1) Frozen Iron Rs. 9,00,00,000 A.Y.2012-13 147 Rs. 1,00,00,000 Alleged NA C.I.T(A) & Steel Accomodations Pvt.Ltd. Entries Reinforce Rs. 9,00,00,000 A.Y.2012-13 147 Rs. 4,50,00,000 Current Liabilities - NA C.I.T(A) Recruiter Unexplained credit Pvt.Ltd. u/s 68 STARLIGHT 1. A.Y. 2012-13:- CONSUME R ELECTRONI C PRIVATE LIMITED A) Share Capital Fully piad up GLOBUS Rs. 15,00,00,000 A.Y. 2012-13 143(3) Rs. 98,49,40,000 Share capital Deleted ITAT REALINFRA (Assessee PVT LTD herein at Sl. No. 17) TREMEND Rs. 15,00,00,000 A.Y. 2012-13 147 Rs. 25,00,00,000 Share Capital NA C.I.T(A) OUS MINING & MINERALS PRIVATE LIMITED B) Share Capital Partly Paid Up SUPER Rs. 75,00,000 A.Y. 2012-13 143(3) Rs. 42,25,00,000 Share Capital Deleted ITAT STAR (Assessee AGENCY herein at PRIVATE Sl. No. 15) LIMITED

Stylish 1. A.Y. 2012-13:- Constructi on Pvt.Ltd. B) Other Current Liabilites Marvelous Rs 5,70,00,000 A.Y.2012-13 147 Rs. 2,58,86,811 Commission Income NA C.I.T(A) Cement Pvt.Ltd. Matchless Rs. 5,00,000 A.Y.2012-13 147 Rs. 4,63,00,000 Other current NA C.I.T(A) Infrastruct liabilities ure Pvt.Ltd. Venus Rs. 6,00,00,000 A.Y.2012-13 147 1) Rs. 10,00,00,000 Unexplained Credit NA C.I.T(A) Recruiter Pvt.Ltd. 2) Rs. 30,00,000 Commission Expense( 10Cr @3%)

Sukhna A.Y. 2012-13:- Real Estate Pvt.Ltd.. A) Share Capital:- Delight Rs.8,68,80,000 A.Y.2012-13 143(3) 1. Rs. 10,00,00,000 Share Capital Deleted ITAT Resorts (Bonus) (Assessee 2. RS. 66,56,47,519 Advance Received Pvt.Ltd. herein at Sl. No. 2) 3. RS. 5,22,890 Unverifiable Expenses Sunlight Rs. 2,89,60,000 A.Y.2012-13 143(3) Rs. 52,01,68,000 Share Capital ITAT Tour & (Bonus) (Assessee Travel herein at Pvt.Ltd. Sl. No. 14) Navayuga Rs. 36,20,000 A.Y.2012-13 147 Rs. 15,00,00,000 Share Capital NA C.I.T(A) Consultanc (Bonus) y Pvt.Ltd Angel Rs. 30,00,00,000 A.Y.2012-13 143(3) Rs. 52,01,68,000 Share Capital ITAT Cement (Assessee Pvt.Ltd. herein at Sl. No. 1) Sukhna A.Y. 2012-13:- Steel Pvt Ltd A) Share Capital TRACK Rs. 19,60,00,000 A.Y.2012-13 143(3) 1) Rs. 31,00,00,000 Share capital deleted ITAT CASTING (Assessee (INDIA) herein at PRIVATE Sl. No. 19) LIMITED 2) Rs.7,75,000 Commission deleted ITAT TREMEND Rs. 40,00,000 A.Y. 2012-13 147 Rs. 25,00,00,000 Share Capital NA C.I.T(A) OUS MINING & MINERALS PRIVATE LIMITED JAWAHAR Rs.1,58,000 A.Y. 2012-13 143(3) Rs. 73,50,00,000 Share Capital Fresh ITAT CREDIT & (BONUS) Addition on (Assessee HOLDINGS account of herein at PRIVATE alleged Sl. No. 4) LIMITED commission income

Sunlight A.Y. 2012-13:- Tour & Travel Pvt.Ltd. A) Share Capital:-

Sukhna Rs. 5,46,84,000 A.Y.2012-13 143(3) Rs. 80,63,40,000 Share Capital Deleted ITAT Real Estate (bonus) (Assessee Pvt.Ltd. herein at Sl. No. 12) Navayuga Rs. 5,46,84,000 A.Y.2012-13 147 Rs. 15,00,00,000 Share Capital NA C.I.T(A) Consultanc (bonus) y Pvt.Ltd Delight Rs. 1,08,00,000 A.Y.2012-13 143(3) 1. Rs. 10,00,00,000 Share Capital Deleted ITAT Resorts (bonus) (Assessee 2. RS. 66,56,47,519 Advance Received Pvt.Ltd. herein at Sl. No. 2) 3. RS. 5,22,890 Unverifiable Expenses Janitor Rs. 20,00,00,000 A.Y.2012-13 147 Rs. 36,00,00,000 Share Capital NA C.I.T(A) Infrastruct converted partly to ure Pvt.Ltd. fully

SUPER A.Y. 2012-13:- STAR AGENCY PRIVATE LIMITED A) Share Capital Fully paid up: BNR Rs. 5,00,00,000 A.Y. 2012-13 153C r.w.s Rs. 1,00,00,000 Sale of share NA C.I.T(A) INFOTECH 153A PRIVATE LIMITED JAWAHAR Rs. 13,50,00,000 A.Y. 2012-13 143(3) Rs. 73,50,00,000 Share Capital Addition u/s ITAT CREDIT & 68 deleted - (Assessee HOLDINGS Fresh herein at PRIVATE Addition on Sl. No. 4) LIMITED account of alleged commission income

SAVROLI Rs. 6,50,00,000 A.Y. 2012-13 147 Rs. 80,00,00,000 Share Capital NA C.I.T(A) FINVEST LIMITED B) Share Capital Partly Paid Up STARLIGHT (b) Rs. 75,00,000 A.Y. 2012-13 143(3) 1) Rs. 32,25,00,000 Share Capital Deleted ITAT CONSUME (Assessee R herein at ELECTRONI Sl. No. 10) C PRIVATE LIMITED 143(3) 2) Rs. 30,18,00,000 Current Liabilites Deleted ITAT Supreme 2. A.Y. 2012-13:- Placement Services Pvt.Ltd. A) Share Capital fully Paid Up:- Stylish Rs. 4,82,19,600 A.Y. 2012-13 143(3) 1. Rs. 30,00,00,000 Share Capital: deleted ITAT Constructio (bonus) (Assessee n Pvt.Ltd. herein at Sl. No. 11) 2. Rs. 31,60,00,000 Other Current Liabilites

Globus Realinfra 2. A.Y. 2012-13:- Pvt ltd ( Formerly Known As A) Share Capital Sur fully Paid Up:- Buildcon Pvt Ltd) TREMEND Rs. 3,40,40,000 A.Y. 2012-13 147 Rs. 25,00,00,000 Share Capital NA C.I.T(A) OUS (bonus) MINING & MINERALS PRIVATE LIMITED JAWAHAR Rs. 25,00,00,000 A.Y. 2012-13 143(3) Rs. 73,50,00,000 Share Capital Addition u/s ITAT CREDIT & 68 deleted - (Assessee HOLDINGS Fresh herein at PRIVATE Addition on Sl. No. 4) LIMITED account of alleged commission income

BNR Rs. 15,00,00,000 A.Y. 2012-13 153C r.w.s Rs. 1,00,00,000 Sale of share NA C.I.T(A) INFOTECH 153A PRIVATE LIMITED SUKHNA Rs. 2,00,00,000 A.Y. 2012-13 143(3) Rs. 26,16,80,000 Share Capital deleted ITAT STEEL (Assessee PRIVATE herein at LIMITED Sl. No. 13) B) Share Capital Partly Paid Up:- TREMEND Rs. 35,00,000 A.Y. 2012-13 147 Rs. 25,00,00,000 Share Capital NA C.I.T(A) OUS MINING & MINERALS PRIVATE LIMITED TRACK 1. A.Y. 2012-13:- CASTING INDIA PRIVATE LIMITED A) Share Capital: JAWAHAR Rs. 10,00,00,000 A.Y. 2012-13 143(3) Rs. 73,50,00,000 Share Capital Addition u/s ITAT CREDIT & 68 deleted - (Assessee HOLDINGS Fresh herein at PRIVATE Addition on Sl. No. 4) LIMITED account of alleged commission income

Department cannot blow hot and cold for making similar additions in the hands of the investor/lender company u/s.68 on the same amount and then again treating it to be bogus credit entry or unaccounted money of the assessee company.

bank accounts of the investors/lenders to make the impugned investments/loans to the Assessee(s) herein. Since the Assessee(s) herein filed cogent documentary evidences duly discharging their onus of establishing the necessary ingredients of section 68 which remained unrefuted/ uncontroverted by the A.Q(s), and hence no liability u/s 68 could be legally fastened upon the Assessee(s) unless the A.O(s) brought on record tangible material/evidence to prove that the amounts, which had been received by the investors/lenders from their sub-investors/sub-lenders were actually received by such sub-investors/sub-lenders from the Assessee(s) herein and that the same represented unaccounted funds of the Assessee(s) herein from unexplained sources.

(i) In order to establish the receipt of cash credit as required under section 68, the assesses must satisfy three important conditions, namely, (a) identity of the creditor/investor, (b) genuineness of the transaction,

and (c) financial capability of the person giving the cash credit to the assesses, i.e., the creditworthiness of the creditor/investor. (ii) The burden of the assessees to prove the genuineness of the transactions as well as the creditworthiness of the creditor must remain confined to the transactions, which have taken place between the assessee and the creditor/investor. (iii) The creditor's/investor’s creditworthiness has to be judged, vis-a-vis, the transactions, which have taken place between the assessee and the creditor/investor, and it is not the business of the assessee to find out the source of money of his creditor/investor or of the genuineness of the transaction, which took place between the creditor/investor and sub-creditor and/or creditworthiness of the sub-creditors. (iv) It is not the burden of the assessee to prove that the money advanced/invested by the creditor/investor is properly taxed. (v) Once the assessee establishes that the assessee has received the impugned amount from the creditor/investor by way of cheques, the assessee must be taken to have proved that the creditors/investors had the creditworthiness to advance the loans/share capital. Thereafter, the burden shifts to the A.O. to prove the contrary.

(vi) On failure on the part of the creditors/investors to show that their sub-creditors and creditworthiness to advance the said amounts to the assessee, these amounts as a corollary, cannot under the law, be treated as the assessee's income from the undisclosed sources, when there is neither direct nor circumstantial evidence on record that the said loan amounts/share capital actually belongs to, or are owned by, the assessee. (vii) In order to fasten liability on the assessee, the A.0 is required to show that the amounts, which have come to the hands of the creditors/investors from the hands of the sub-creditors, are actually received by the sub- creditors from the assessee.

investors. For the cases pertaining to the period prior to A.Y. 2013-14, it was not the Assessee’s business to find out or prove the source of funds of the investors/lenders. Since the Assesses filed the bank statements of the parties conclusively proving that the impugned sums were received through normal banking channels from the bank accounts of the parties, the burden of proving the genuineness of the transactions between the Assessees and the parties and the creditworthiness of the parties to invest in the share capital of the Assessee Companies stood discharged. Once the Assessees established the identity of the parties, the genuineness of the transactions and the creditworthiness of the parties to invest in the share capital of or advance loans to the Assessee Companies, the burden shifted to the Revenue to prove the contrary. The Ld. A.O has failed to discharge the secondary onus of demolishing/disproving the genuineness of the documentary evidences filed by the Assessees. As held In the cases cited above, before fastening any liability upon the Assessees u/s 68, the A.Os were required to show by bringing on record tangible material that the amounts received as share capital/loans from the investors/lenders actually emanated from the coffers of the Assessees or represented the undisclosed income of the Assessees.

share subscription cannot be held to be retrospective which has been held by Hon’ble Bombay High Court in the case of CIT vs. M/s. Gagandeep Infrastructure Pvt. Ltd. (2017) 80 taxmann.com 272 (Bombay) wherein it was observed and held as under:

“…(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 2013-14 onwards 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'1. 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 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 (Pj 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 Cl. T(A) and the Tribunal, the proposed question of law does not give rise to any substantial question of law.”

Name of A.Y & Quantum of Names of the Investor/lender Documents furnished before PB the additions u/s 68 companies the lower authorities with Reference Assessee respect to the (ITAT) investors/lenders Delight A.Y. 2014-15: Resorts Pvt. Advance Received- Rs. Ltd. 37.70 crores: PB-3B (i) Rs. 3.70 crores (i) Bhisham Energy Ltd. (i) Confirmation/ ITR/ Bank Pgs. 1-14 statement/ Audited (ii) Rs. 34 crores (ii) Janitor Infrastructure Pvt. Accounts Pgs. 15-30 Ltd. (ii) Confirmation/ ITR/ Bank statement/ Audited Accounts/ Asst. Order Kasper A.Y. 2013-14 Information Share Capital – Rs. 16 PB-7B Technology crores Pvt. Ltd. (i) Rs. 8 crores (i) Landsky Real Estate Pvt. Ltd. (i) Confirmation/ ITR/ Bank Pgs. 1-24 statement/ Audited (ii) Rs. 8 crores (ii) Quadrel Infrastructure Pvt. Accounts/ Asst. Order 143(3) Pgs. 25-39 Ltd. (ii) Confirmation/ ITR/ Bank statement/ Audited Accounts/ Asst. Order 143(3) Landsky A.Y. 2013-14 Real Estates A. Share Capital – 16 PB-8B Pvt. Ltd. crores (i) Rs. 8 crores (i) Winfields Iron & Steel Pvt. (i) Confirmation/ ITR/ Bank Pgs. 1-15 Ltd. statement/ Audited (ii) Rs. 8 crores Accounts/ Asst. Order 143(3) Pgs. 16-29 (ii) Quadrel Infrastructure Pvt. (ii) Confirmation/ ITR/ Bank B. Current Liabilities – Ltd. statement/ Audited Other payables Accounts/ Asst. Order 143(3) (i) Rs. 1.30 crores Pgs. 30-43 (ii) Rs. 1.30 crores (i) Cantabile Minerals & (i) Confirmation/ ITR/ Bank Pgs. 44-58 Minings Pvt. Ltd. statement/ Audited (ii) Angel Cement Pvt. Ltd. Accounts (ii) Confirmation/ ITR/ Bank statement/ Audited Accounts

Globus Real A.Y. 2013-14 Infra Pvt. A. Share Capital – 5.60 PB-18B Ltd. (earlier crores: known as (i) Rs. 1.20 crores (i) KBN Infrastructure Pvt. Ltd. (i) Confirmation/ ITR/ Bank Pgs. 1-21 Sur Buildcon statement/ Audited Pvt. Ltd.) (ii) Rs. 1.40 crores (ii) Tremendous Mining & Accounts/Asst. Order Pgs. 22-42 Minerals Pvt. Ltd. (ii) Confirmation/ ITR/ Bank (iii) Rs. 80 lacs (iii) NRA Iron & Steel Pvt. Ltd. statement/ Audited Pgs. 43-62 Accounts (iv) Rs. 1 crore (iv) Vistrat Real Estate Pvt. Ltd. (iii) Confirmation/ ITR/ Bank Pgs. 63-84 statement/ Audited (v) Rs. 1.20 crores (v) UNA Power Pvt. Ltd. Accounts Pgs. 85-102 (iv) Confirmation/ ITR/ Bank B. Unsecured Loan – Rs. statement/ Audited 2.955 crore Accounts (i) Rs. 1.165 crores (v) Confirmation/ ITR/ Bank (i) Vistrat Real Estate Pvt. Ltd. statement/ Audited Pgs. 63, 67-

Accounts/ Asst Order 79, 80-84, (ii) Rs. 80 lacs 103-105 (ii) Adamine Construction Pvt. Pgs. 106-124 (iii) Rs. 99 lacs Ltd. (i) Confirmation/ ITR/ Bank Pgs. 125-143 (iii) Super Star Agency Pvt. Ltd. statement/ Audited Accounts (ii) Confirmation/ ITR/ Bank statement/ Audited Accounts (iii) Confirmation/ ITR/ Bank statement/ Audited Accounts

(i) The Assessees herein have furnished detailed documentary evidences duly discharging their onus of establishing the identity and creditworthiness of the investors and the genuineness of the transactions.

(ii) The Department has failed to bring on record any adverse material to reject/disprove the explanations and evidences submitted by the Assessees except harping upon the non-service of notices issued u/s 133(6) in few cases which as judicially opined is not sufficient reason in itself to invoke section 68.

(iii) The addresses of most of the investors/lenders had undergone a change resulting in the non-service of notice. The A.O has failed to inquire into the said fact.

(iv) The subscribers to the share capital or lenders (as the case may be) are duly incorporated bodies and are assessed to tax. They do exist and the details of their

names, PAN and ITR acknowledgment, bank statements and assessment orders have been duly filed with the Ld. A.O. (v) Several investor/lender companies are also Assessees herein which once again proves their identity and existence. (vi) The investments made by the investors/lenders in the Assessee companies have been duly confirmed by the investors/lenders and their confirmations have been placed on record. (vii) The subscribers to the share capitals did subscribe to the share capital of the Assessee-companies and shares were duly allotted to them in most of the cases. (viii) There is no denial at any stage of the assessment proceedings by any of the investors/lenders of having deposited money in the Assessee-Companies. (ix) The impugned amounts have been received through undisputed banking channels. (x) There is no cash deposit in the bank account of the parties from whom the impugned amounts by way of share capital/ share premium/loans have been received. (xi) The documents submitted by the Assessee(s) establish that the money came from the investor’s/lender’s account and is nowhere connected with the Assessee companies.

(xii) There is no proof or evidence to suggest that the impugned sums actually emanated from the coffers of the Assessee companies or represented the undisclosed incomes of the Assessee companies. (xiii) The A.Os have not brought on record or confronted the Assessees with any such money trail or calculation or derivation to show that the impugned share capital/ loans & advances (as the case may be) received by the Assessees represented the unaccounted money of the Assessees routed into their business in the form of share capital/loans & advances. (xiv) The assessments of several investor/lender companies stand completed u/s 143(3) of the Act wherein the source of funds with the investor/lender companies and the investments made in the Assessee company(ies) have been accepted by the Department. Kindly see the details of assessments of the investor companies tabulated in Annexure 1 to this submission. The assessment orders of the investor companies were filed before the revenue authorities and form a part of the departmental records. Thus, in light of the judgment of the coordinate bench of the Hon’ble ITAT, Delhi in the case of Vidya Prakashan Mandir Pvt. Ltd. vs. PCIT (supra), it cannot be held that the nature and source of credit from the investor/subscribing companies are not proved. (xv) In the cases of other investor/lender companies (kindly refer to the summary of the assessment details of

the investors/lenders in Annexure 1) wherein additions have been made in their hands u/s 68 in assessments framed u/s 143(3)/147 in their respective cases on account of share capital/loans received by such companies treating the same as belonging to and representing the undisclosed income of such companies, the same funds (or part thereof) when received by the Assessees herein as share capital/loans from such companies cannot be once again added in the hands of the Assessee companies u/s 68 by treating the same as belonging to and representing the undisclosed/unaccounted funds of the Assessee companies at the same point in time (as has happened in the instant case). Thus, there is no clarity in the stand of the Department w.r.t. the alleged ownership of the impugned funds. (xvi) The reasons given by the A.Os in making the impugned additions are generic in nature and not backed by any concrete evidence.

market trend, the action of the A.O was not tenable unless the A.O had brought on record some material to show that confirmation and other evidence placed by the Assessee was not genuine, he could not have simply discarded the documents produced by the Assessee. Since the provisions of sec 56(2)(viib) of the Act is introduced w.e.f from 01.04.2013 cannot be applied retrospectively. Reliance was placed on decision of Hon'ble Bombay High Court in the case of CIT Vs Green Infra Limited ITA No. 1162 of 2014 Dt: 16.01.2017 and CIT vs. M/s. Gagandeep Infrastructure Pvt. Ltd. (PB 95-98) MANU/MH/1274/2017 : (2017) 394 ITR 680 (Bom). Similarly, in the case of CIT vs. Anshika Consultants Pvt. Ltd. (2015) 93 CCH 16 (Del HC), the Hon’ble Jurisdictional High Court opined that the fact that the assessee company charged higher premium or not, should not have been subject matter of the enquiry—Instead, issue must involve amount invested by share applicants were from legitimate sources or not. Reference is further craved to the judgment of the Hon’ble Madhya Pradesh High Court in the case of Pr. CIT (1), Indore v. Chain House International (P) Ltd. [2018] 98 taxmann.com 47/ [2019] 408 ITR 561 (MP) wherein the Hon’ble High Court ruled that once the genuineness, creditworthiness and identity of investors are established, no addition could be made as cash credit on the ground that shares were issued at excess premium.

increase in share capital arising on account of issue of bonus shares. He submitted that it is involved in the following cases:-

Sl. Name of the A.Y Total Addition u/s 68 Confirmation Ground No. of the PB - page No. Assessee & nature Addition u/s on account of (C) or Deletion Department’s reference of addition made 68 (share issue of bonus (D) by the C.I.T Appeal challenging (Balance by the Ld. A.O capital/share shares (A) of the the deletion of Sheet premium plus addition u/s 68 addition u/s 68 on showing bonus shares) on account of account of bonus bonus bonus issue issue issue) Sukhna Real 1. 2012-13 Estates Pvt. Ltd. PB-12A, Share Capital 80,63,40,000 20,63,40,000 D Revenue’s Appeal page 11 (including bonus Ground No. 2 shares of Rs. 20,63,40,000) – section 68 2. Sukhna Steel Pvt. 2012-13 Ltd. 26,16,80,000 16,80,00,000 D Revenue’s Appeal PB-13A, Share capital Ground No. 1 page 12 (including bonus shares of 16.80 lacs)– section 68 3. Globus Realinfra 2012-13 Pvt. Ltd. (Sur D Revenue’s Appeal PB-17A, Buildcon) 98,49,40,000 17,09,40,000 Ground No. 1 page 12 Share Capital (including bonus shares of Rs. 17,09,40,000/–) - sec 68 4. Sintex Consumer 2012-13 Electronics Pvt. Ltd. D The deletion of PB-9A, Share Capital 78,22,80,000 18,22,80,000 addition u/s 68 to page 10 (including bonus the extent of bonus shares of 18.228 issue has not been crores) – section 68 contested by the Department.

Supreme 6. 2012-13 Placement Services The deletion of PB-16A, Pvt. Ltd. 72,43,00,000 12,43,00,000 D addition u/s 68 to page 10 the extent of bonus Share capital (including bonus issue has not been shares of Rs. 12.43 contested by the Department. crores) – section 68

income of the Appellant Company on account of alleged charges received by the Appellant Company @ 2% for providing facility to route the impugned transaction of Rs. 73,50,00,000/- purely on the basis of surmises and conjectures although the same is not backed by any substantive or tangible evidence on record. 2. That the Ld. C.I.T.(A)-05, New Delhi acted beyond jurisdiction in enhancing income of the Appellant u/s 251(1)(a) of the Income-tax Act, 1961 (the ‘Act’) by introducing and assessing new source of income to the extent of Rs. 1,47,00,000/- beyond the record (i.e. the return of income and assessment order) and outside the subject matter of assessment appealed against. 3. That the Ld. C.I.T(A)-05, New Delhi erred in making fresh addition of Rs. 1,47,00,000/- and thus enhancing the income of the Appellant to the said extent without issuing a prior show cause notice as mandated u/s. 251(2) of the Act for providing a reasonable opportunity to the Appellant of showing cause against such enhancement, thus resulting in gross violation of principles of natural justice.

provided facility to route the funds from Bhushan Steel Ltd. in lieu for an estimated commission income of 2%. Thus, the Ld. C.I.T(A) has implied a role reversal of the Assessees herein – whereas the A.Os have alleged that the Assessees herein are the recipients of accommodation entries, the Ld. C.I.T(A) has treated them as entry providers/ jamakharchi companies’, providing facility to route transactions in lieu of commission income. The orders of the Ld. C.I.T(A) in the said three cases to the extent the same assess fresh sources of income (being the alleged commission income @ 2% for providing facility to route funds) have been challenged by the Assessees above named in their respective appeals filed before this Hon’ble ITAT.

Name of the A.Y Findings of the Ld. C.I.T (A) Assessee Jawahar Credit & 2012-13 “7.8 As stated earlier, there is no worth/reserves of the appellant Holding (P) Ltd. company nor any business carried out, the investor companies and other persons are also not carrying out any visible business activity, therefore, this is nothing but routing of its funds by the Bhushan Steel Ltd. and its related parties where neither the investors and other persons nor the appellant company are ultimate beneficiary. The funds received were given to the other companies, as soon as it is received and the assets in the balance sheet is shown in the form of investment in shares for the share application money and premium thereon received. The appellant has also not given any cogent reasoning for the fund flow shown by the A.O in his report. 7.9 Therefore, looking to the facts and circumstances of this case where basic requirement to justify the identity, creditworthiness and genuineness of transaction has been prima facie established but looking to the fact and analysis as narrated above, these transactions are found to be routing finances of M/s. Bhushan Steel Ltd. and other persons, through appellant company and it is just paper company where appellant is not the ultimate beneficiary because it has further passed on those funds to various companies as

shown in the flow chart. 7.10 In view of above, it is to be stated that as per the practice and also seen in various cases, the said person (in this case appellant) charges the amount to provide such entries which is generally 2% of the total transactions. Therefore, considering that the appellant has been providing the facility to route these financial transactions, the 2% of the total amount is treated as undisclosed income of the appellant, not shown in its return of income. This comes to Rs. 1,47,00,000/-. 7.11 Since the details have been duly provided with respect to the referred companies and the additions are out of the ambit of provisions of section 68 of the Act due to the reason that these investor companies are held to be just a paper company or conduit in the case of other investors for providing entries and routing the finances, therefore, the addition to the extent of Rs. 1,47,00,000/- is sustained for charges received in providing such entries, not disclosed by the appellant. For the balance amount, the appellant gets a relief.”

Jingle Bells 2012-13 “7.9 As stated earlier, there is no worth/reserve of the appellant Aluminium Pvt. company nor any business carried out, the investor companies are Ltd. also not carrying out any visible business activity, therefore, this is nothing but routing of its funds by the Bhushan Steel Ltd. where neither the seven investor companies nor the appellant company are ultimate beneficiary. The funds received were given to other companies, as soon as it is received and the assets in the balance sheet is shown in the form of investment in shares for the share application money and premium thereon received. The appellant has also not given any cogent reasoning for the fund flow shown by the A.O in his report. 7.10 Therefore, looking to the facts and circumstances of this case where basic requirement to justify the identity, creditworthiness and genuineness of the transaction has been prima facie established but looking to the fact and analysis as narrated above, these transactions are found to be for routing finances of M/s. Bhushan Steel Ltd., through these companies and therefore these companies are just paper companies where appellant is not the ultimate beneficiary because it has further passed on those funds to five companies as shown in the flow chart. 7.11 In view of above, it is to be stated that as per the practice and also seen in various cases, the said person (in this case appellant) charges the amount to provide such entries which is generally 2% of the total transactions. Therefore, considering that the appellant has been providing the facility to route these financial transactions, the 2% of the total amount is treated as undisclosed income of the appellant, not shown in its return of income. This comes to Rs. 1,24,00,000/-. 7.12 Since the details have been duly provided with respect to the referred companies and the additions are out of the ambit of provisions of section 68 of the Act due to the reason that these investor companies are held to be just a paper company or conduit in the case of other investors for providing entries and routing the finances, therefore, the addition to the extent of Rs. 1,24,00,000/- is sustained for charges received in providing such entries, not disclosed by the appellant. For the balance amount, the appellant

gets a relief.”

Kasper 2012-13 “7.8 As stated earlier, there is no worth/reserve of the appellant Information company nor any business carried out, the investor companies are Technology (P) also not carrying out any visible business activity, therefore, this is Ltd. nothing but routing of its funds by the Bhushan Steel Ltd. where neither the seven investor companies nor the appellant company are ultimate beneficiary. The funds received were given to other companies, as soon as it is received and the assets in the balance sheet is shown in the form of investment in shares for the share application money and premium thereon received, which is evident from the chart reproduced earlier. The appellant has also not given any cogent reasoning for the fund flow. 7.9 Therefore, looking to the facts and circumstances of this case where basic requirement to justify the identity, creditworthiness and genuineness of the transaction has been prima facie established but looking to the fact and analysis as narrated above, these transactions are found to be for routing finances of M/s. Bhushan Steel Ltd., through these companies and therefore these companies are just paper companies where appellant is not the ultimate beneficiary because it has further passed on those funds to five companies as shown in the chart above. 7.10 In view of above, it is to be stated that as per the market practice and also seen in various cases, the said person (in this case appellant) charges the amount to provide such entries which is generally 2% of the total transactions. Therefore, considering that the appellant has been providing the facility to route these financial transactions, the 2% of the total amount is treated as undisclosed income of the appellant, not shown in its return of income. This comes to Rs. 92,00,000/-. 7.11 Since the details have been duly provided with respect to the referred companies and the additions are out of the ambit of provisions of section 68 of the Act due to the reason that these investor companies are held to be just a paper company or conduit in the case of other investors for providing entries and routing the finances, therefore, the addition to the extent of Rs. 92,00,000/- is sustained for charges received in providing such entries, not disclosed by the appellant. For the balance amount, the appellant gets a relief.”

additions made by the respective A.Os u/s 68 of the Act, the Ld. C.I.T (A) has proceeded to introduce and assess a new source of income being the alleged undisclosed commission income of 2% allegedly earned by the respective Assessees for providing a fluid mechanism for the transfer of funds from one company to another. The alleged commission incomes as estimated by the Ld. C.I.T (A) in the aforesaid cases do not constitute the subject matter of assessments i.e. the same have neither been offered by the Assessees in their respective returns of income nor is there any whisper regarding the taxability of the alleged source of income in the assessment orders passed by the Ld. A.Os. Thus, the addition made by the Ld. C.I.T (A) by introducing new source of income in the form of alleged undisclosed commission income is beyond the power and authority of the Ld. C.I.T (A) as it neither arose from the assessment order nor was it raised at anytime during the assessment or appellate proceedings. Further, no show-cause notice was issued to the Assessees before fastening such fresh liability on the Assessee companies thus resulting in gross violation of principles of natural justice.

(i) CIT Vs. Shapoorji Pallonji, (1962) 44 ITR 891 (SC) (ii) CIT Vs. Rai Bahadur Hardutroy Motilal Chamaria (1967) 66 ITR 443 (SC) (iii) CIT Vs. Union Tyres (1999) 240 ITR 556 (Del) (iv) CIT Vs. National Company Ltd. (1993) 199 ITR 445 (Cal) (v) CIT Vs. Associated Garment Makers (1992) 197 ITR 350 (Raj) (vi) Sterling Vs. ITO (1975) 99 ITR 236 (Kar) (vii) Hari Mohan Sharma v. ACIT, Circle 63(1), New Delhi [2019] 110 taxmann.com 119 (Delhi-Trib).

reported in 37 ITR 151, he urged that the impugned additions on account of alleged commission income are unsustainable in the eyes of law and as such may kindly be deleted.

Legal & Professional Charges Rs. 4,790/- E.D.P Charges Rs. 1,00,000/- Rates & Taxes [Rs. 5,36,706/- less Rs. 5,28,702/-(being Rs. 8,004/- deferred revenue expenses added back in the computation of income)] Bank Charges Rs. 2,744/- Director’s Sitting Fees Rs. 10,000/- Rent Rs. 78,000/- Audit Fees Rs. 16,854/- Printing & Stationery Rs. 300/- Local Conveyance Rs. 2,135/- Staff Welfare Rs. 833/- TOTAL Rs. 2,23,660/-

The Assessee is engaged in the business of supply of manpower which forms the pre-dominant part of its business activity. As would be evident from the Profit & Loss Account of the Assessee, the receipts from service charges on account of supply of manpower amounts to Rs. 3,63,28,155/- as against which the receipts from dividend (exempt u/s 10) amounts only to Rs. 9,94,717/- for A.Y. 2012-13. It was stated that, almost all the expenses incurred are directly relatable to the activity of providing manpower services and no part of the expenses is relatable, either directly or indirectly, to the earning of dividend income which as clearly evident from the financial statements of the Assessee- company constitutes a miniscule part of the total activity of the Assessee-company. However, to be on a safe side, the Assessee-company made a suo-moto disallowance of the total indirect expenses debited in its Profit & Loss Account for the impugned A.Y. 2012-13. It was stated that apart from the indirect expenses enlisted above, all the remaining expenses debited in the P&L A/c are directly

related to the business of supply of manpower and have no nexus whatsoever, either directly or indirectly to the earning of dividend income by the Assessee-company.

income from which does not or shall not form part of the total income. Total Rs. 25,56,473/-

9,94,717/-. While holding as above, the Ld. A.O however, failed to record any satisfaction to the effect that having regard to the accounts of the Assessee, he was not satisfied with the correctness of the claim of the Assessee in respect of expenditure incurred in relation to exempt income.

Construction Pvt. Ltd. (A.Y. 2012-13), which has been urged by the Department in the following cases:

Name of the A.Y. & ITA No. Ground of Appeal urged Assessee Angel 2012-13, ITA Ground No. 2: Cement Pvt. No. That the Ld. C.I.T(A) erred in Ltd. 4691/Del/2016 admitting additional evidence under Rule 46A without giving opportunity to the A.O. Delight 2012-13, ITA Ground No. 3 Resorts Pvt. No. That the Ld. C.I.T(A) erred in Ltd. 5974/Del/2017 accepting the evidences filed during the appellate proceedings without obtaining comments of the A.O in remand proceedings, thereby violating Rule 46A of the IT Rules, 1962 Stylish 2012-13, ITA Ground No 4 Construction No. That the Ld. C.I.T(A) erred in Pvt. Ltd. 5744/Del/2016 accepting additional evidence under Rule 46A without giving any opportunity to the A.O in respect of evidences of shareholders assessment proceedings & supporting documents.

Department that additional evidences were filed by the aforesaid Assessee(s) in course of the appellate proceedings before the Ld. C.I.T(A)(s) is devoid of any merit and as such, the Departmental appeal in this respect deserves to be dismissed.

Arguments on behalf of the Revenue:

to other companies and they were acting like a conduit which normal happens in accommodation entries.

DECISION

that in all the appeals the similar facts are permeating and issues involved are interlinked and inextricably interconnected. The major issue pertains to addition u/s.68 in the form of share capital/share premium and loan and advances; and in assessees’ appeal, addition have been made on account of alleged undisclosed commission income which has been added by the ld. CIT(A) exercising his power of enhancement u/s.251(1)(a). The grounds in all the appeals have already been summarized above in the foregoing tables and since same material facts and issue are permeating through; therefore, we are giving our consolidated decision which would apply mutatis mutandis in all the appeals where similar issues are involved.

 That the Assessee introduced its unaccounted/undisclosed funds in its books of account in the form of share capital and/or loan & advances.  That the onus is on the Assesses to prove the identity and creditworthiness of the investors/creditors and the genuineness of the transactions.  That in several cases, the summons addressed to investors remained uncomplied with. The notices issued u/s. 133(6) remained uncomplied with or unserved with remarks 'does

not exist', 'left', 'address not found'.  That the Assessee failed to produce directors of investor companies.  That the amounts were received through private placements. Since the contributors were personally known to the Assessee, the Assessee must be aware of the whereabouts. The corporate veil needs to be lifted.  That the Assessee failed to submit documents related to credits in the books.  That simply furnishing PAN or Assessment particulars/address was not enough.  That there was insufficient balance in bank accounts; that cheques issued to Assessee were cleared by way of receipt of transfer entry from another associate concern.  That the creditworthiness of investors was not established due to the reason that all the investor companies have nominal/meager income. That most of the Investor companies have no profit-making apparatus, no business activity.  That insofar as the advances and loans were concerned, no interest was paid, the purpose of advance was missing, huge fund transactions implied dummy transactions.  That the anus u/s. 68 cannot be said to be discharged merely because the transaction is done through banking channels or account payee instruments.  That in case of certain Assessees, speed post was booked from Delhi but the registered office of the investors was in

Punjab & Chandigarh. It shows that the assessee itself filed replies to notices sent u/s 133(6).  That the registered offices of investor companies in some cases are located in different cities but are having their bank accounts operated from Delhi just to facilitate the Assessee.  That the subscriber companies did not have creditworthiness as money seldom rests for o day in their accounts, finds its destination immediately;  That Assessee Company, in most cases, has no business profit, negative CPS, major miscellaneous income nothing to do with business objectives of Assessee Company, no brand value, no past performance history, no future prospect-so as to attract such high premium.  Thai the Assessee offered no explanation as to why the companies agreed to invest in unlisted company where there was no scope for making an exit out of investments.  That the investor and Assessee Company are nothing but a creation of paper companies.  That the person should have some sign of identification other than merely on paper These signs could be place of work, staff members, actual transaction, recognition in eye of public, sign board, etc. Actual identity and business does not get proved by these passive documents when in fact no actual or passive business is being carried on.  That the Assessee has not brought anything on record to support that any dividend has been declared by it,  That a perusal of the bank statements of the investor

companies reveal that they are receiving huge amounts from various other companies and transferring funds to other companies. 57. In so far as the finding of the ld. CIT (A) while deleting the addition u/s.68 are also by and large and similar which can be broadly be summarized as under:

 That the basic requirement to justify identity, creditworthiness and genuineness of the transactions in the case of the Assessee are prima facie established. Relevant documents were furnished by the Assessee. The Assessee filed copies of confirmation, bank statements, P&L A/c, Balance Sheet, Assessment Orders of the investors/lenders to establish source of funds in the hands of investor/lender companies.  That the A.O has not brought any adverse material to reject the explanations and evidences submitted by the Assessee except alleging the non-compliance of notices issued 131 and 133(6) in case of certain investors.  That neither the Assessee nor the investor companies are ultimate beneficiaries but there is routing of funds from Bhushan Steel Ltd. and/or Bhushan Energy Ltd. [specifically held so in 3 cases viz. Jawahar Credit & Holdings Pvt. Ltd. (A.Y. 2012-13), Jingle Bells Aluminium Pvt. Ltd. (A.Y. 2012-13) and Kasper Information Technology Pvt. Ltd. (A.Y. 2012-13)]  That nothing is mentioned in the assessment order regarding any statement of any person providing entry to the Assessee.  That there is no denial at any stage of assessment proceedings by any of the subscribers of share capital of having deposited money in the Assessee company.

 That replies to notices issued u/s 133(6) were received from several investor companies.  That no material has been brought on record by the A.O to conclusively prove that the share capital originated from Assessee Company.  The documents submitted conclusively establish that the money came from the investor’s/depositor’s account and nowhere connected with the Assessee Company.  That there is no cash deposit in the bank accounts of the parties from whom share capital/ loan is received.  That the entire amount was received through normal banking channels.  That the depositors have also confirmed of having deposited money in the company which confirmations also reveal source of funds, particulars of bank accounts through which payments have been received and income tax particulars.  That the Assessee has allotted shares for share application monies received.  That there is no mandate of law to look into the source of source for the A.Ys prior to A.Y. 2013-14.  That the Assessee cannot be fastened with liability u/s 68 unless a causal connection between the cash deposit in the bank account of the investor (if any) and the Assessee is established.  That where complete particulars of the share applications are furnished to the A.O and the A.O has not conducted any enquiry into the same or has no material in his possession to show that those particulars are false, then no addition can be made in the hands of the company.

 That the Investor companies are having adequate reserves to make investments.  That the source of funds by the investor companies in the Assessee in its share capital stands explained.  That the investor companies are all assessed to tax in their respective jurisdictions.  That the judgment of Stellar is applicable only where shares are issued in the names of non-existing persons, which is not the situation in the instant case.  That without proof of having introduced untaxed money by promoters or dubious antecedents, adverse view cannot be taken.  That the provisions of section 68 are not applicable for bonus shares since the amount in question does not represent any fresh credit but only a transfer entry representing capitalization of reserves and surplus and is not hit by section 68.  That the Assessee failed to establish the identity & creditworthiness of the investors/lenders and the genuineness of the transactions.  That few investors/lenders did not reply to notices u/s 133(6) or attend summons u/s 131.  That few share applicants and lender companies have same address and common directors.  That there was no reason why the appellant could not produce principal officers/directors of companies when the entire money came from the same group and the appellant also belonged to the same group. The pattern of money movement raised suspicion of accommodation entries, page 4, para 7 of C.I.T(A)’s order in the case of Globus Realinfra Pvt. Ltd. (A.Y. 2013-14).

“68. Cash credits.--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.”

Subsequently, the treatment of share capital amount under section 68 of the Act was amended by Finance Act, 2012, w.e.f. 1-4-2013 to insert the following:

“Provided that where the assessee is a company (not being a company in which the public are substantially interested), and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee-company shall be deemed to be not satisfactory, unless a) the person, being a resident in whose name such credit is recorded in the books of such company also offers an explanation about the nature and source of such sum so credited; and b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory: Provided further that nothing contained in the first proviso shall apply if the person, in whose name the sum referred to therein is recorded, is a venture capital fund or a venture capital company referred to in clause (23FB) of section 10.”

whereby the funds which has been accounted in the books of Bhushan Energy Ltd. have been routed through group companies and finally have been rerouted back into the books of the Bhushan Energy Ltd. The entire chain and link involves actual movement of accounted fund of BEL in the form of share capital and or loan advances into the assessee- company herein and subsequent reintroduction of such funds into regular account of BEL to augment its capital base.

balances sheets, duly accounted for and the source from such funds have come. All the Subscribers/ Lenders are corporate entities having separate legal identity who are regularly assessed to tax and complying with all statutory requirements. One very important fact here in this case are that in all the cases Subscribers/ Lenders Companies for the relevant assessment year scrutiny assessments have been done u/s 143(3) or the cases have been reopened u/s.147 and thereafter assessments have been completed wherein in some cases exactly on the same amount additions have been made. Thus, in many instances there are double additions on the same amount. Ergo in view of these facts and evidences, the identity of the investors’ stands established.

however the Revenue from the operations did not justify such an investment. First of all, what is required to be seen is whether the lender/investor companies had sufficient funds available with them in the books/ balance sheets and it is not necessary that loan or advances or shares are subscribed, should be out of taxable income only. Either it could be from borrowed funds or from the investments standing in their balance sheet. If the Assessing Officer doubted the source of the fund of the investor companies, then Assessing Officer was required to at least conduct prima facie inquiry from these investors to rebut the assessee’s explanation about the source of the funds in the hands of the investor companies. Hon’ble Delhi High Court in the case of CIT vs. Vrindavan Farms (P) Ltd., ITA No. 71, 72, 84/2015, vide judgment and order dated 12.08.2015, wherein one of the ground raised by the revenue was that creditworthiness is not proved, because lender companies had shown low income in their Income Tax Return. The Court found that the entire details of share applicants were made available to the Assessing Officer, including PAN, confirmations, bank statements, their balance sheets and profit & loss accounts and certificates of incorporation, etc. Assessing Officer had not undertaken any inquiry or investigation of the veracity of above documents. Hence Tribunal has rightly held that without doubting the document, the Assessing Officer cannot make the addition only on presumption that low return of income is sufficient to doubt the creditworthiness of the share holders. The Assessee by producing the above documents has discharged its initial onus of showing the genuineness and creditworthiness of the share holders. Same ratio will apply here also. Further, even for the sake of repetition, one very peculiar fact as incorporated above is that, in most of the

cases of the investor company’s assessments have been made u/s.143(3) or u/s 147, wherein either their source of fund have been accepted or certain additions have been made based on scrutiny examination. It is not a case where there is any cogent finding in those cases that it is unaccounted money of the assessee companies which has been routed through them or it is their unaccounted money which has been invested in the assessee company. In absence of any such finding or material, no adverse inference can be drawn in the case of the assessee companies. Thus, the identity and the creditworthiness of the investor/subscriber company stands fully established and so also the genuineness of the transaction.

records and sources of funds have been duly explained, on which no adverse material has been brought to rebut the same by the Assessing Officer. Thus, in our opinion this factor on the facts of the present case is not so detrimental.

for rotation of money, but nowhere can it be said that any of the entities have routed their own unaccounted money. This is the precise reason that in most of the cases Ld. CIT Appeals have deleted the addition; and in 3 cases, he has held that they must have received some commission for such rotation of funds, albeit such observation may not have legal and factual legs to stand.

orders. What ld. CIT (A) is trying to do is, introducing a new source of income and that to be based on some hypothetical presumption. No show cause notice has been issued to the assessee. Ld. CIT (A) before fastening such presumptive addition in the hands of the assessee company. This is in gross violation of the provisions of the Act but also the principles of natural justice. The Act provides that before enhancing any income Ld. CIT (A) is required to give opportunity to the assessee. These additions have neither been disclosed in the return of income nor have been considered by the Assessing Officer in the assessment order and therefore, making such addition of new source of income is beyond the scope of enhancement by the ld. CIT (A). Hon’ble Jurisdictional High in the case of CIT vs. Union Tyres, (1999) 240 ITR 556 (Del) has observed and held as under:

“The first appellate authority is invested with very wide powers under s. 251(1)(a) and once an assessment order is brought before the authority, his competence is not restricted to examining only those aspects of the assessment about which the assessee makes a grievance and ranges over the whole assessment to correct the A.O not only with regard to a matter raised by the assessee in appeal but also with regard to any other matter which has been considered by the A.O and determined in the course of assessment. However, there is a solitary but significant limitation to the power of revision, viz. that it is not open to the AAC to introduce in the assessment a new source of income and the assessment has to be confined to those items of income which were the subject-matter of original assessment. Applying the above well settled principles of law to the facts of the instant case, the Tribunal was justified in holding that in calling for a remand report on the four points the AAC had exceeded his jurisdiction. While computing the total business income of the

assessee, the A.O had estimated the sales at an enhanced figure and had applied a higher rate of gross profit. Thus, the only matter dealt with by the A.O in the assessment order was the estimation of profits and gain of the business of the assessee. None of the four points raised in remand report had any bearing on the question of estimation of either the sales or the gross profit rate. It is evident that the AAC had his doubts about the capacity of the assessee to raise finances for the purchase of goods and show a huge turnover in the very first year of his business. In other words, the enquiry ordered by the AAC was to satisfy himself about the source of investment by the assessee. It is axiomatic that failure to prove the sources of investment will result in addition in the hands of the assessee under a different provision of law and will not have much relevance in the estimation of sales and gross profit rate adopted by the A.O. Any addition on account of unexplained investment would constitute a new source of income which was not the subject-matter of assessment before the A.O and, therefore, it was not open to the first appellate authority to direct the A.O to conduct enquiry on the said four points”.—CIT vs. Shapoorji Pallonji Mistry (1962) 44 ITR 891 (SC) : TC 7R.576 and CIT vs. Rai Bahadur Hardutroy Motilal Chamaria (1967) 66 ITR 443 (SC) : TC 7R.590 applied. [paras 11 & 12]”

(i) That the C.I.T.(A) has no jurisdiction to travel beyond the subject matter of the assessment or beyond the record, i.e. the return of income and the assessment order; and his power of enhancement relates only to that income which has been subjected to the process of assessment.

(ii) That the process of assessment includes not only taxing an income but also holding that a particular income is not taxable. (iii) That, therefore, the C.I.T.(A) can tax the income which the A.O had, expressly or by clear implication, considered and held to be not taxable – irrespective of the question whether the income falls under a head with regard to which an appeal has or has not been preferred. However, the C.I.T.(A) cannot tax an item of income, the taxability of which had not been considered at all by the A.O.

the provision of Section 14A read with Rule 8D to Rs.5 lacs. As stated above, the assessee company had made suo-moto disallowance of Rs.2,23,660/- which can be said to be expenses attributable for earning of exempt income. This was computed by the assessee by aggregating the total direct expenses debited in its profit and loss account as per the figures given in the earlier part of the order. The dividend income received by the assessee is only Rs.9,94,717/- and therefore such an attribution for providing man power services, etc. can be said to be reasonable basis. The Assessing Officer without recording any subjective satisfaction having regard to the accounts of the assessee or the nature of expenses debited has mechanically applied Rule 8D which is not the mandate of the law in view of Section 14A(2). Thus, there was no reason for making any addition over and above the suo moto disallowance made by the assessee. However, the ld. CIT (A) has found it reasonable to restrict the disallowance u/s.14A to Rs.5 lacs, which in our opinion is fully justified and therefore, we hold that the balance addition of Rs.18,32,813/- has rightly been deleted by the ld. CIT(A).

devoid of any merits and same is dismissed.

Above decision was announced on conclusion of Virtual Hearing in the presence of both the parties on 18th March, 2021.

Sd/- Sd/- [PRASHANT MAHARISHI] [AMIT SHUKLA] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 18th March, 2021 PKK: