SECL INDUSTRIES LIMITED,BATHINDA vs. DCIT, LUDHIANA

आदेश/ORDER Per Annapurna Gupta, Accountant Member

The present appeal has been filed by the assessee against the order of the Commissioner of Income Tax (Appeals)-5, Ludhiana (in short ‘CIT(A)’ dated 17.3.2017 passed u/s 250(6) of the Income Tax Act, 1961 (hereinafter referred to as ‘Act’).

2 . T h e a s s e s s e e h a s r a i s e d t h e f o l l o w i n g g r o u n d s o f a p p e a l :

“1. That the Ld. CIT(A), Bathinda erred on facts and law in confirming the addition of Rs.2,96,00,000/- made by the AO vide order u/s 143(3) dated 16.03.2015. 2. That the Ld. CIT(A), Bathinda erred on facts and law in confirming the action of the AO of making an

2 ITA No.798/Chd/2017 A.Y.2012-13

addition of Rs.2,96,00,000/- u/s 68 of the Income Tax Act, 1961 on account of share capital/premium received by the assessee. The explanation submitted during the course of assessment as well as appellate proceedings has been rejected without rebutting the same. 3. Notwithstanding the above grounds of appeal, the Ld. CIT(A), Bathinda has erred on facts and law in confirming the action of the AO of making an addition of Rs.2,96,00,000/- u/s 68 of the Income Tax Act, 1961 on account of share capital/premium received by the assessee while rejecting the contention of the assessee that the Proviso to section 68, putting the onus on the person in whose name credit is recorded in the books of the assessee company to offer an explanation about the nature and source of sum so credited, was brought on the statute w.e.f A.Y. 2013- 14 but the case of the assessee company related to A.Y. 2012-13. Hence the provisions of the amended section 68 did not apply to the case of the assessee company and, thus, the CIT (A) has ignored the binding judgment of Hon'ble Supreme in the case of Roshan Di Hatti as reported in 107 ITR 938. 4. That the Appellant craves leave to add or amend the grounds of appeal before the appeal is finally heard or disposed off.” 3 . T h e s o l e i s s u e i n t h e p r e s e n t a p p e a l r e l a t e s t o

a d d i t i o n m a d e o f s h a r e c a p i t a l i n t r o d u c e d i n t h e

a s s e s s e e c o m p a n y d u r i n g t h e y e a r a m o u n t i n g t o

R s . 2 9 6 l a c s , o n a c c o u n t o f t h e s a m e r e m a i n i n g

u n e x p l a i n e d .

is a private limited company engaged in the business of

works contractor. During assessment proceedings, on

examination of the accounts of the assessee, it was

noticed by the Assessing Officer (A.O.) that the assessee

has issued 29600 shares of Rs.10/- each at a premium of

Rs.990/- each and received huge amount, i.e

Rs.2,96,000/- as share application money and

3 ITA No.798/Chd/2017 A.Y.2012-13

Rs.2,96,00,000/- as share premium money from the

following companies:

Sr. Name Address No. of Nominal Total value No shares value of of shares shares (including premium) 1. Skyhigh Buildtech Pvt. 119, MJ Shopping 10750 107500 10750000 Ltd. Centre, 3, Veer Savarkar Block, Shakarpur, Delhi- 92 2. Anubhav Buildmart DA/4, 106, Dua 2000 20000 2000000 Private Limited Business Centre, Main Vikas Marg, Shakarpur, Delhi-92 3. Greenvalue 119, MJ Shopping 8300 83000 8300000 Agrofarms Pvt. Ltd. Centre, 3, Veer Savarkar Block, Shakarpur, Delhi- 92 4. Ankay Associates 106, Dua Business Centre, 1800 18000 1800000 Above Malhotra Jewellers, Private Limited Main Vikas Marg, Shakarpur, Delhi-92 Vishal Digital Studio A-22, Ground Floor Guru 5. 3000 30000 3000000 & Color Lab Pvt. Ltd. Nanak Pura, Laxmi Nagar, Delhi-92 6. Jyoti International 1000 10000 1000000 Rz-122, Shahdara Extension, Delhi-1 10022 7. Gopalan Agro C-17, Guru Nanakpura, 1000 10000 1000000 Farms Private Opposite Scope Tower, Limited Laxmi Nagar, Delhi-92 8. Samman Trading 107/77A, Lane No.78, 1750 17500 1750000 Private Limited East Azad Nagar, Krishna Nagar, Delhi-92 Total 29600 296000 29600000

these receipts. Further notices u/s 133(6) of the Income

Tax Act, 1961 were issued to these

companies asking them to confirm the investments made

and to file documents alongwith information about their

tax assessment, PAN and address of Assessing Officer with

whom the returns had been filed and copy of the income

tax acknowledgement for the A.Y.2012-13, Copies of

Computation of income, Profit & Loss Account & Balance

Sheet as on 31.03.2012, Copies of Bank Statement and

account number for relevant period (01.03.2011 to

4 ITA No.798/Chd/2017 A.Y.2012-13

30.04.2012) with narration of credit entries exceeding

Rs.20,000/-, in order to verify their identity,

creditworthiness and genuineness of the transaction.

From the replies received, the A.O. found that the

creditworthiness of the investing companies, for making

such huge investments, had not been established since out

of the eight companies, four i.e. at S.No.1,2,4 &6 had

neither filed their bank statements nor their profit and

loss account, while the balance four company had not filed

their bank statement and their Profit and loss account was

found to reflect meager profits ,not sufficient for making

such huge investment in the assessee company. He

therefore held that in the absence of the bank accounts of

the investing companies, the genuineness of the investments

in shares at premium was not proved, as the credits

appearing in the bank, from where the money had come,

remained unexamined. The assessee was therefore asked to

produce the Directors of these companies to verify the

identity, genuineness and creditworthiness of the investors.

But the assessee failed to produce any of the Directors of the

investing companies. It was however submitted by the

assessee that the identity, genuineness and creditworthiness

of the companies stood proved as the transactions had been

made through banking channel and the account

number/name of the bank had been furnished alongwith

details of the investing companies, their nature of business,

their Copy of ITR, profit & loss account and balance sheet,

5 ITA No.798/Chd/2017 A.Y.2012-13

and also that no buy-back of shares had been made. It was

contended that the director of the company’s could not be

produced at such a short notice as they were busy in

business of the company being the end of the financial year.

The reply of the assessee was considered but found

unacceptable by the A.O. As per the A.O. even the well

reputed companies, at national level, in this field did not

command such a huge premium during the period under

consideration, and the assessee had failed to provide the

circumstances under which it had charged huge premium

from its alleged share purchasers and how it came into

contact with these companies for sale of shares to them at

such huge premium, when other companies in similar field,

were experiencing exodus in their capital. The A.O., based

on the above facts, concluded that the entire transaction

was only a design to introduce the assessee's own

unaccounted money in the shape of share capital and share

premium route through above mentioned investing

companies. For the above conclusion, the AO placed reliance

on various judicial decisions. The A.O. held that in the

facts & circumstances, the share capital/share premium

credited at Rs.2,96,00,000/- in the books of account of the

assessee remained unexplained and added the same to the

income of the assessee u/s 68 of the Income Tax Act, 1961.

L d . C I T ( A ) w h e r e t h e a s s e s s e e f i l e d d e t a i l e d

s u b m i s s i o n s i n w r i t i n g , r e p r o d u c e d a t p a r a 2 . 1 o f t h e

6 ITA No.798/Chd/2017 A.Y.2012-13

o r d e r , r e i t e r a t i n g h i s c o n t e n t i o n m a d e b e f o r e t h e A . O .

a n d r e l y i n g u p o n v a r i o u s j u d i c i a l d e c i s i o n s i n s u p p o r t

o f h i s c o n t e n t i o n t h a t t h e o n u s t o e x p l a i n t h e

g e n u i n e n e s s o f s h a r e c a p i t a l i n t r o d u c e d i n a s s e s s e e ’ s

c o m p a n y s t o o d d i s c h a r g e d . T h e w r i t t e n s u b m i s s i o n s

f i l e d b y t h e a s s e s s e e w e r e f o r w a r d e d t o t h e A . O . w h o

i n r e p l y t o t h e s a m e r e i t e r a t e d h i s c o n t e n t i o n m a d e i n

t h e a s s e s s m e n t o r d e r . T h e L d . C I T ( A ) a f t e r c o n s i d e r i n g

t h e c o n t e n t i o n s o f b o t h t h e p a r t i e s u p h e l d t h e o r d e r o f

t h e A . O .

7 . A g g r i e v e d b y t h e s a m e , t h e a s s e s s e e h a s c o m e u p

i n a p p e a l b e f o r e u s . D u r i n g t h e c o u r s e o f h e a r i n g

b e f o r e u s t h e L d . c o u n s e l f o r a s s e s s e e v e h e m e n t l y

a r g u e d t h a t t h e o n u s t o d e m o n s t r a t e t h e g e n u i n e n e s s

o f t h e t r a n s a c t i o n s t o o d d i s c h a r g e d b y t h e a s s e s s e e i n

t h e p r e s e n t c a s e . O u r a t t e n t i o n w a s d r a w n t o t h e

P a p e r B o o k f i l e d b e f o r e u s a n d t h e L d . c o u n s e l f o r

a s s e s s e e p o i n t e d o u t t h e r e f r o m t h a t a l l n e c e s s a r y

d o c u m e n t s t o p r o v e t h e i d e n t i t y , c r e d i t w o r t h i n e s s a n d

g e n u i n e n e s s o f t h e t r a n s a c t i o n h a d b e e n f i l e d i n t h e

c a s e o f a l l t h e i n v e s t o r s w h i c h w a s c o m p i l e d i n t h e

P a p e r B o o k f r o m p a g e - 1 t o p a g e - 1 1 0 . T a k i n g u s t h r o u g h

t h e P a p e r B o o k , t h e L d . c o u n s e l f o r a s s e s s e e p o i n t e d

o u t t h a t i n r e l a t i o n t o a l l t h e e i g h t i n v e s t o r s t h e

f o l l o w i n g d o c u m e n t s h a d b e e n f i l e d b e f o r e t h e l o w e r

a u t h o r i t i e s :

1 ) C o n f i r m a t i o n

7 ITA No.798/Chd/2017 A.Y.2012-13

2 ) A p p l i c a t i o n f o r i s s u e o f e q u i t y s h a r e s 3 ) D e t a i l s o f t h e c o m p a n y e x t r a c t e d f r o m t h e M a s t e r d a t a w i t h t h e R e g i s t r a r s o f C o m p a n i e s . 4 ) R e p l y f i l e d b y t h e i n v e s t o r c o n f i r m i n g t h e a l l o t m e n t o f s h a r e s t o i t b y t h e a s s e s s e e c o m p a n y i n r e s p o n s e t o n o t i c e i s s u e d b y t h e d e p a r t m e n t u / s 1 3 3 ( 6 ) o f t h e A c t . 5 . C o p y o f t h e a u d i t e d f i n a n c i a l s t a t e m e n t s . 8 . T h e L d . c o u n s e l f o r a s s e s s e e s t a t e d , t h e r e f o r e ,

t h a t i t w a s c l e a r l y e v i d e n t t h a t t h e a s s e s s e e h a d

e s t a b l i s h e d i d e n t i t y o f t h e i n v e s t o r s f r o m t h e

r e g i s t r a t i o n d a t a r e c o r d e d w i t h t h e R e g i s t r a r s o f

C o m p a n i e s , e s t a b l i s h e d t h e i r c r e d i t w o r t h i n e s s f r o m

t h e a u d i t e d f i n a n c i a l s t a t e m e n t s r e f l e c t i n g s u f f i c i e n t

r e s e r v e s a n d s u r p l u s e s i n t h e s a m e f o r m a k i n g t h e

i m p u g n e d i n v e s t m e n t s a n d t h e i r c o n f i r m a t i o n s

a f f i r m i n g t h e g e n u i n e n e s s o f t h e t r a n s a c t i o n . T h e L d .

c o u n s e l f o r a s s e s s e e t h e r e a f t e r s t a t e d t h a t t h e

a d d i t i o n h a d b e e n m a d e f o r t h e r e a s o n t h a t t h e

d i r e c t o r s c o u l d n o t b e p r o d u c e d b y t h e a s s e s s e e . T h e

L d . c o u n s e l f o r a s s e s s e e s t a t e d t h a t h a v i n g d i s c h a r g e d

i t s o n u s , t h i s c o u l d n o t b e t h e g r o u n d f o r m a k i n g

a d d i t i o n w i t h o u t f i n d i n g a n y i n f i r m i t y i n t h e

d o c u m e n t s s u b m i t t e d b y t h e a s s e s s e e . T h e L d . c o u n s e l

f o r a s s e s s e e r e l i e d u p o n v a r i o u s d e c i s i o n s i n s u p p o r t

o f h i s c o n t e n t i o n , c o p i e s o f w h i c h w e r e p l a c e d a t P a p e r

B o o k f i l e d b e f o r e u s . R e l i a n c e w a s a l s o p l a c e d o n t h e

d e c i s i o n o f t h e I . T . A . T . i n t h e c a s e o f M / s P o o j a

I n d u s t r i e s L t d . V s . I T O i n I T A N o . 1 0 1 6 / C h d / 2 0 1 ` 6

d a t e d 8 . 1 0 . 2 0 1 8 p o i n t i n g t h e r e f r o m t h a t i n i d e n t i c a l

8 ITA No.798/Chd/2017 A.Y.2012-13

f a c t s a n d c i r c u m s t a n c e s t h e I . T . A . T . h a d d e l e t e d t h e

a d d i t i o n m a d e o f u n e x p l a i n e d s h a r e c a p i t a l . I n v i e w o f

t h e a b o v e , t h e L d . c o u n s e l f o r a s s e s s e e p l e a d e d t h a t

t h e a d d i t i o n m a d e b e d e l e t e d .

9 . T h e L d . D R , o n t h e o t h e r h a n d , h e a v i l y r e l i e d

u p o n t h e o r d e r o f t h e C I T ( A ) . H e d r e w o u r a t t e n t i o n t o

t h e f i n d i n g s o f t h e C I T ( A ) a t p a g e s 2 5 t o 2 9 a s u n d e r :

“The facts of the case, the basis of addition made by the AO and the arguments of the AR during the appellate proceedings had been considered. The AR during the course of appellate proceedings submitted that the investing companies complied with the letters sent by the A.O. and only few of them did not send the P&L Account and Bank Account. The AR had repeated the arguments that the assessee submitted information of all the companies and the payments had been routed through banking channel. Thus as per AR, the identity, capacity and genuineness of all the creditors stood established. The AR had relied upon case laws in favour of the appellant. It was further submitted that there is no material on record to establish that the assessee had introduced its own unaccounted money in the guise of share application money through the aforesaid companies. As per AR all the subscribers were existing assessees and the documents relating to this had been filed before the A.O. It is important to note that during the course of the assessment proceedings, the Assessing Officer had asked the assessee to produce the Directors of the subscriber companies who had allegedly given cheques as share application money, to give evidence regarding the genuineness of the transaction and their creditworthiness. As per the A.O. information was called u/s 133(6) and in response complete and full information reply was not received from all the investors/companies to whom notices were sent. Further it is important here that even those companies who had responded to the A.O. and filed their ITR, P&L account etc., did not file their Bank Account Statement from where the cheques were issued. The A.O. had mentioned that this could had revealed the real design behind the arrangement. Further the limited information filed shows that those companies did not have sufficient income or source of their own to make such a huge investment

9 ITA No.798/Chd/2017 A.Y.2012-13

with the assessee. Their creditworthiness was thus not established. Merely because the payments were made by cheques and received by cheque do not render the transaction ingenuine. Given the circumstances, it was quite apparent that the paper documents filed by the assessee were sham and the paper evidence had been created although these were not genuine transactions. The other companies had not filed even these limited information in response to notices issued to them u/s 133(6). Thus their existence/identity remains doubtful. Most importantly the assessee when asked to produce the Directors of the investing companies by the A.O., failed to produce them. This is fatal to the case of the assessee. The three criteria of identity, creditworthiness and genuineness of the transactions had to be established separately. Further, according to Section 68, the primary burden is on the assessee to satisfactorily explain the credit entries in the books of accounts of the previous year. If the explanation given by the assessee is not satisfactory or the source offered by the assessee is not genuine, the amount is to be taken as the income of the assessee. The explanation regarding the nature and source of credit should be satisfactory in the opinion of the assessing authority and Section 68 sets up a presumption against the assessee whenever unexplained credits are found in the books of the assessee. The initial burden is on the assessee to refute the presumption raised and the burden shifts only when the assessee establishes the authenticity of the transactions. Section 68 applies equally to share application money received by the assessee and the burden is on the assessee to prove the nature and source thereof to the satisfaction of the Assessing Officer regarding the three ingredients i.e. proof regarding identity of the share applicants, their creditworthiness to purchase the shares and the genuineness of the transaction as a whole, as held in CIT vs. Youth Construction P. Ltd. 2013 357 ITR 197 (Del). The burden of proving the source of a cash credit is on the assessee and the Assessing Officer is not required to prove the source. Mere furnishing of particulars is not enough, mere payment by account payee by cheque is not sacrosanct as held in Hindustan Tea Trading Co. Ltd. vs CIT 2003 [ 263 ITR 289, 297 (Cal)]. Where there is unexplained cash-credit, it is open to the Assessing Officer to hold that it is income of the assessee and no further burden lies on the Assessing Officer to show that the income is from any particular source as held in CIT vs. Devi Prasad Viswanath Prasad 1969 72 ITR 194 (SC).

10 ITA No.798/Chd/2017 A.Y.2012-13

11 ITA No.798/Chd/2017 A.Y.2012-13

formalities of filing the returns etc., but no real business/activities are carried out by these companies. The bank accounts are opened and operated only to launder money and provide accommodation entries. It is an accepted principle of jurisprudence that in certain exceptional cases the court is entitled to lift the veil of corporate entity and to pay regard to the economic realities behind the legal facade. The court has power to disregard the corporate entity if it used for tax evasion or to circumvent tax obligation or to perpetrate fraud as held in Juggilal Kamlapat v. CIT, (1969) 73 ITR 702 (SC); Union of India v. Playworld Electronics Pvt. Ltd. (1990) 184 ITR 308, 317 (SC); CIT v. Sri Meenakshi Mills Ltd., (1967) 63 ITR 609, 616 (SC) etc. Further the legislature can forge a sledge-hammer capable of cracking open the corporate shell; and it can, if it chooses, demand that the courts ignore all the conceptions and principles which are at the root of company law [Bank Voor Handel enScheepvart N.V. v. Slatford, (1953) 1QB 248]. The facts and circumstances of the case, as mentioned above, clearly suggest that the revenue cannot take or accept such make believe transaction, as presented by the assessees. Truth or genuineness of such transactions must prevail over the smoke screen, created by way of premeditated series of steps taken by the assessees with a view to imparting a colour of genuineness and character of real investment as share application/share premium amount Needless to say that one has to look at the whole transactions and a series o, steps taken to accomplish such share transactions, in an integrated manner; with a view to ascertaining the true nature and character of the money received. These paper companies do not carry out any real business and hence the amounts shown to have been received from them cannot be said to be real investments by those companies. The assessee has not been able to produce any of the Directors to explain the source of the funds and mere filing of IT Returns/PAN etc., does not establish the credit worthiness of the companies and genuineness of the transactions. In the present case also if the investors were genuine then there should not have been any difficulty in producing the Directors. The fact that the share capital monies, have come through account payee cheques is, at best, neutral. Compliance with the statutory norms and requirements is only one aspect but in the present case the facts mentioned by the AO expose the camouflage adopted by the assessee and established that the funds received by the assessee were 'accommodation entries' only. The courts have

12 ITA No.798/Chd/2017 A.Y.2012-13

held that the revenue authorities cannot ignore the economic realities and the market situations. The menace of floating paper companies and through them laundering the black money has been wide spread as reported in the news paper recently. Even the Central Government has acknowledged the existence of such shell companies and their use by the people for routing their unaccounted income by way of accommodation entries. Therefore, the Appellate Authorities also cannot turn a blind eye to such realities. As brought out on record by the AO, the assessee has shown receipt of huge amount as share application money/share premium amounts from those entities who have shown only small amounts as income and paid nominal taxes for filing the returns just to give a colour of genuineness to their existence. In reality these companies do not carry out any real business and most importantly it is beyond comprehension as to why they will purchase the shares of the assessee at such a huge premium. In view of the /facts and circumstances, the Assessing Officer was justified in making the addition u/s 68 after granting adequate opportunity to the assessee and after duly rebutting the submissions of the assessee. The AR in the rejoinder to A.O. report has mentioned about amendment in section 68, which although is effective w.e.f. 1.04.2013 and not applicable for A.Y. 2012-13 but goes against the assessee, since the legislature has acknowledge the practice of taking accommodation entries and therefore, with a view to curb the same, had amended the provisions of Section 68 to make it more stringent. The amended provisions are applicable to the private limited companies like the assessee. Therefore, under the facts and circumstances of the case, the arguments of the AR are not found acceptable and the action of the A.O. in making the addition of Rs. Rs.2,96,00,000/-, treating the share application/share premium money as assessee's own unaccounted funds, is found sustainable. The A.O. had duly mentioned the facts and the legal position in support of the additions made on the issue and hence the addition on this issue is confirmed. 1 0 . D r a w i n g o u r a t t e n t i o n t o t h e s a m e , h e s t a t e d t h a t

i n v i e w o f t h e c a t e g o r i c a l f i n d i n g o f t h e L d . C I T ( A ) t h a t

t h e a s s e s s e e h a d f a i l e d t o d i s c h a r g e d i t s o n u s o f

e s t a b l i s h i n g g e n u i n e n e s s o f t h e t r a n s a c t i o n s i n c e

13 ITA No.798/Chd/2017 A.Y.2012-13

c o p i e s o f b a n k s t a t e m e n t s w e r e n o t f i l e d t o p r o v e t h e

c r e d i t w o r t h i n e s s o f t h e i n v e s t o r s a n d i n a f e w c a s e s

e v e n t h e P r o f i t & L o s s A c c o u n t w a s n o t f i l e d , t h e

a d d i t i o n m a d e h a d b e e n r i g h t l y u p h e l d .

1 1 . W e h a v e h e a r d t h e r i v a l c o n t e n t i o n s a n d p e r u s e d

t h e o r d e r s o f t h e a u t h o r i t i e s b e l o w . W e h a v e a l s o g o n e

t h r o u g h t h e c o n t e n t s o f t h e P a p e r B o o k f i l e d b e f o r e u s .

1 2 . T h e i s s u e t o b e a d j u d i c a t e d i s w h e t h e r t h e

t r a n s a c t i o n o f s h a r e c a p i t a l o f R s . 2 9 6 l a c s i n t r o d u c e d

d u r i n g t h e y e a r i n t h e a s s e s s e e c o m p a n y s t o o d

e x p l a i n e d .

1 3 . T h e u n d i s p u t e d f a c t s , a s c u l l e d o u t f r o m t h e

o r d e r s o f t h e a u t h o r i t i e s b e l o w a n d t h e a r g u m e n t s

m a d e b e f o r e u s b y b o t h t h e p a r t i e s a l o n g w i t h t h e

d o c u m e n t s r e f e r r e d t o b e f o r e u s a r e t h a t , t h e f o l l o w i n g

d o c u m e n t s o f t h e i n v e s t o r c o m p a n i e s w e r e f i l e d b y

t h e a s s e s s e e i n t h e c a s e o f a l l t h e i n v e s t o r s , t o p r o v e

t h e i r g e n u i n e n e s s :

• C o n f i r m a t i o n s • A p p l i c a t i o n f o r i s s u e o f e q u i t y s h a r e s • D e t a i l s o f t h e c o m p a n y e x t r a c t e d f r o m t h e M a s t e r d a t a w i t h t h e R e g i s t r a r s o f C o m p a n i e s . • R e p l y f i l e d b y t h e i n v e s t o r c o n f i r m i n g t h e a l l o t m e n t o f s h a r e s t o i t b y t h e a s s e s s e e c o m p a n y i n r e s p o n s e t o n o t i c e i s s u e d b y t h e d e p a r t m e n t u / s 1 3 3 ( 6 ) o f t h e A c t . • 5 . C o p y o f t h e a u d i t e d f i n a n c i a l s t a t e m e n t s .

14 ITA No.798/Chd/2017 A.Y.2012-13

1 4 . N o b a n k a c c o u n t s o f t h e i n v e s t o r c o m p a n y ’ s w e r e

f i l e d r e f l e c t i n g t h e i n v e s t m e n t m a d e . N o B a l a n c e S h e e t

& P r o f i t & L o s s A c c o u n t w a s f i l e d i n t h e c a s e o f M / s

J y o t i I n t e r n a t i o n a l & M / s G r e e n V a l u e A g r o F a r m s L t d .

W h i l e i n t h e c a s e o f M / s S a m m a n A n k a y A s s o c i a t e s

L i m i t e d , M / s A n u b h a v B u i l d m a r t P r i v a t e L i m i t e d &

M / s S k y h i g h B u i l d t e c h P r i v a t e L i m i t e d , W e h a v e n o t e d

f r o m t h e d o c u m e n t s f i l e d b e f o r e u s i n t h e f o r m o f

p a p e r b o o k c o n t a i n i n g 1 1 0 p a g e s , t h e c o p y o f a l l e g e d l y

a u d i t e d f i n a n c i a l s t a t e m e n t s w e r e u n s i g n e d , b e a r i n g

n e i t h e r s i g n a t u r e s o f t h e d i r e c t o r s n o r t h e a u d i t o r s .

A l s o e v e n t h e f i n a n c i a l s t a t e m e n t s f i l e d d i d n o t r e f l e c t

s u f f i c i e n t p r o f i t s . T h e f a c t u a l f i n d i n g s o f t h e A . O i n

t h i s r e g a r d a s r e p r o d u c e d a t p a g e 1 0 o f t h e C I T ( A ) ’ s

o r d e r a r e a s u n d e r :

“Even the companies who have sent their P&L accounts i.e. M/s Samman Trading Pvt. Ltd and M/s Vishal Digital Studio & Colors Lab Pvt. Ltd., their P&L accounts show that they have meager profits of Rs.23,887/-& Rs.7,349/- (for the financial year ending on 31.03.2012 ,and 31.03.2011) and Rs.5770/- & Rs.5771/- (for the financial year ending on 31.03.2011 and 31.03.2010), the tax paid is Rs.7421/-, Rs.2360/- for the assessment year 2011-12 and 2012-13 and Rs.NIL, Rs. 17837- for the assessment year 2011-12 and 2010-11 respectively. In another two cases i.e. M/s Gopalan Agro Farms Pvt. Ltd. and M/s Greenvalue Agrofarms Pvt. Ltd. shown their profits of Rs.2915/~ & Rs.16254/- (for the financial year ending on 31.03.2013 and 31.03.2012) and Rs.2156/- & Rs.5436/- (for the financial year ending on 31.03.2011 and 31.03.2010), the tax paid is Rs.901/- & Rs.7538/- for the assessment year 2013-14 and 2012-13 and Rs.NIL & Rs. 1680/- for the assessment year 2011-12 and 2010-11 by the respective companies. No copy of bank accounts has been sent by these companies.”

1 5 . T h e a b o v e f a c t u a l f i n d i n g s h a v e r e m a i n e d

u n c o n t r o v e r t e d b e f o r e u s . F u r t h e r , d e s p i t e t h e A . O .

15 ITA No.798/Chd/2017 A.Y.2012-13

n o t i n g t h a t t h e r e w a s n o j u s t i f i c a t i o n g i v e n b y t h e

a s s e s s e e f o r t h e h u g e s h a r e p r e m i u m , t h e a s s e s s e e

f a i l e d t o j u s t i f y t h e s a m e b e f o r e t h e C I T ( A ) a n d e v e n

b e f o r e u s . A l s o e v e n t h e D i r e c t o r s o f t h e i n v e s t o r

c o m p a n i e s w e r e n o t p r o d u c e d f o r v e r i f i c a t i o n , e i t h e r

b e f o r e t h e A O o r e v e n t h e C I T ( A )

1 6 . C o n s i d e r i n g t h e a b o v e f a c t s , w e h a v e n o d o u b t i n

h o l d i n g t h a t t h e a s s e s s e e h a d m i s e r a b l y f a i l e d t o

d i s c h a r g e i t s o n u s o f p r o v i n g t h e g e n u i n e n e s s o f t h e

s h a r e c a p i t a l r e c e i v e d d u r i n g t h e y e a r o f 2 9 6 l a c s .

M e r e l y f i l i n g c o n f i r m a t i o n f r o m t h e i n v e s t o r s o r

d o c u m e n t s p r o v i n g t h e i r e x i s t e n c e a n d i d e n t i t y i s n o t

s u f f i c i e n t t o p r o v e t h e g e n u i n e n e s s o f t h e t r a n s a c t i o n .

T h e a s s e s s e e a l s o h a d t o d e m o n s t r a t e t h e

c r e d i t w o r t h i n e s s o f t h e i n v e s t o r s , w h i c h i t m i s e r a b l y

f a i l e d s i n c e n e i t h e r t h e b a n k s t a t e m e n t s o f t h e

i n v e s t o r s w e r e f i l e d n o r t h e i r a u d i t e d f i n a n c i a l s i n a

f e w c a s e s a n d i n t h o s e c a s e w h e r e t h e f i n a n c i a l s w e r e

f i l e d , t h e y d i d n o t r e f l e c t s u f f i c i e n t p r o f i t s f o r m a k i n g

t h e i n v e s t m e n t . A d d e d t o i t i s t h e f a c t t h a t n o

j u s t i f i c a t i o n a t a l l w a s g i v e n o f t h e h u g e s h a r e

p r e m i u m o f R s . 9 9 0 / - p e r s h a r e , d e s p i t e t h e A . O .

h a v i n g q u e s t i o n e d i t . A l s o e v e n t h e d i r e c t o r s w e r e n o t

p r o d u c e d f o r v e r i f i c a t i o n .

1 7 . W e a r e n o t i n a g r e e m e n t w i t h t h e L d . C o u n s e l f o r

t h e a s s e s s e e t h a t t h e B a l a n c e s h e e t s h o w i n g s u f f i c i e n t

r e s e r v e a n d s u r p l u s w a s e v i d e n c e e n o u g h f o r p r o v i n g

16 ITA No.798/Chd/2017 A.Y.2012-13

t h e c r e d i t w o r t h i n e s s o f t h e i n v e s t o r s , m o r e

p a r t i c u l a r l y w h e n t h e b a n k s t a t e m e n t s w e r e n o t f i l e d

i n a l l t h e c a s e s . I n t h e a b s e n c e o f t h e s a m e , t h e f a c t

t h a t t h e i n v e s t m e n t s w e r e m a d e f r o m t h e r e s e r v e s a n d

s u r p l u s r e m a i n e d u n e s t a b l i s h e d . I t c o u l d b e t h e c a s e

t h a t t h e r e w a s c a s h d e p o s i t s i n t h e b a n k b e f o r e

m a k i n g t h e i n v e s t m e n t s w h i c h w o u l d h a v e r a i s e d

s u s p i c i o n a n d p r o m p t e d f u r t h e r e n q u i r y . W e a l s o d o

n o t f i n d a n y m e r i t i n t h e c o n t e n t i o n o f t h e L d . C o u n s e l

f o r t h e a s s e s s e e t h a t i t w a s n o t r e q u i r e d t o p r o v e t h e

s o u r c e o f t h e s o u r c e , s i n c e i n t h e p r e s e n t c a s e , a s w e

h a v e h e l d a b o v e t h e a s s e s s e e h a s n o t e s t a b l i s h e d t h e

c r e d i t w o r t h i n e s s o f t h e s o u r c e i t s e l f w h i c h i s a

p r i m a r y r e q u i r e m e n t . T h e r e l i a n c e p l a c e d b y t h e

L d . C o u n s e l f o r t h e a s s e s s e e o n t h e d e c i s i o n o f t h e

I T A T i n t h e c a s e o f P o o j a I n d u s t r i e s ( s u p r a ) i s

m i s p l a c e d s i n c e t h e s a i d d e c i s i o n i s d i s t i n g u i s h a b l e o n

f a c t s . I n t h a t c a s e , w e f i n d , t h e r e i s a c l e a r f i n d i n g o f

f a c t t h a t t h e a s s e s s e e h a d p l a c e d a l l d o c u m e n t s o n

r e c o r d i n d i s c h a r g e o f i t s o n u s o f p r o v i n g t h e

g e n u i n e n e s s o f t h e t r a n s a c t i o n , i n c l u d i n g t h e b a n k

s t a t e m e n t a n d f i n a n c i a l s t a t e m e n t s o f t h e i n v e s t o r s . I n

t h i s b a c k g r o u n d t h e I T A T h e l d t h a t t h e a d d i t i o n c o u l d

n o t h a v e b e e n m a d e b y t h e R e v e n u e a u t h o r i t i e s b y

m e r e l y r e l y i n g o n t h e s t a t e m e n t o f t h i r d p a r t i e s , w h o

h a d a l l e g e d l y s t a t e d t o h a v e g i v e n a c c o m m o d a t i o n

e n t r i e s , w i t h o u t e v e n g i v i n g a c o p y o f t h e s a i d

17 ITA No.798/Chd/2017 A.Y.2012-13

s t a t e m e n t t o t h e a s s e s s e e a n d w i t h o u t a f f o r d i n g o p p o r t u n i t y t o t h e a s s e s s e e t o c r o s s - e x a m i n e t h e m .

1 8 . C o n s i d e r i n g a l l t h e a b o v e f a c t s a n d c i r c u m s t a n c e s , w e h a v e n o h e s i t a t i o n i n u p h o l d i n g t h e o r d e r o f t h e C I T ( A ) t h a t t h e s h a r e c a p i t a l o f R s . 2 9 6 l a c s r e m a i n e d u n e x p l a i n e d .

1 9 . I n v i e w o f t h e a b o v e , t h e a d d i t i o n m a d e o f R s . 2 . 9 6 c r o r e s i s u p h e l d .

2 0 . In the result, the appeal of the assessee is dismissed.

Order pronounced in the Open Court.

Sd/- Sd/- संजय गग� अ�नपूणा� गु�ता (ANNAPURNA GUPTA) (SANJAY GARG) �याय�क सद�य/Judicial Member लेखा सद�य/Accountant Member �दनांक /Dated: 29th March, 2019 *रती* आदेश क� ��त�ल�प अ�े�षत/ Copy of the order forwarded to : 1. अपीलाथ�/ The Appellant 2. ��यथ�/ The Respondent 3. आयकर आयु�त/ CIT 4. आयकर आयु�त (अपील)/ The CIT(A) 5. �वभागीय ��त�न�ध, आयकर अपील�य आ�धकरण, च�डीगढ़/ DR, ITAT, CHANDIGARH 6. गाड� फाईल/ Guard File

pआदेशानुसार/ By order, सहायक पंजीकार/ Assistant Registrar