DCIT, NEW DELHI vs. M/S. GARG ACRYLICS LTD., NEW DELHI

BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER 4713/Del/2015 Assessment Years: 2011-12 & 2012-13 DCIT, Vs Garg Acrylics Ltd., Circle-10(1), 209, M.G. House, New Delhi. Wazirpur Industrial Area, New Delhi. PAN: AAACG3332N (Appellant) (Respondent) Assessee by : Shri Gautam Jain, Advocate & Shri Ashwini Kumar, CA Revenue by : Shri A.K. Mishra, Sr. DR Date of Hearing : 23.09.2020 Date of Pronouncement : 27.10.2020 ORDER PER R.K. PANDA, AM: filed by the Revenue is directed against the order dated 30th September, 2014 of the CIT(A)-15, New Delhi relating to assessment years 2011-12. ITA No.4713/Del/2015 filed by the Revenue is directed against the order dated 15th May, 2015 of the CIT(A)-4, New Delhi relating to assessment years 2012-13.

ITA No.4713/Del/2015 2. Since common issues are involved in both these appeals, therefore, for the sake of convenience, these were heard together and are being disposed of by this common order. (A.Y. 2011-12) 3. Facts of the case, in brief, are that the assessee is a company engaged in the business of manufacturing and trading of yarn and manufacturing and trading of garments. It filed its return of income on 29th September, 2011 declaring the total income of Rs.31,41,11,880/-. During the course of assessment proceedings, the AO noted that the assessee company has introduced share capital and received the share application money of Rs.20,17,00,000/- from the following companies:- Sl. Assessment Particulars Amount of share No. | application money received 1. Himachal Yarns Formerly Himachal Steel Udyog 7,07,10,000/- Ltd., PAN : AABCH0451J 2. Brijeshwari Textiles Pvt. Ltd 3,00,00,000/- Pan.: AACCB7479K 3. Balmukhi Textiles Pvt. Ltd. Pan 300,00,000/- AACCB7477K 4. Shiva Spin Fab Pvt. Ltd. Pan. AAKCS6521K 400,00,000/- 5, GAL Cottex Pvt. Ltd., PAN AABCS8023C 2,03,70,000/- 6. Shubam Yarns Pvt. Ltd., Pan, AAGCS8023C * 1,06,20,000/- 20,17,00,000/- 16,00,00,000/ 80000 equity shares allotted during the year @ 2000/- Outstanding share application money as at 31.03.2011 4,17,00,000/-

4. He observed that the assessee company has issued shares to the above noted six companies for a huge premium of Rs.1,990/- per share. From the balance sheet filed by the assessee, the AO noted that the earning per share of the company as on 31.03.2010 was Rs.226.73 which is as under:-

Year Ended 31.03.2011 Year ended 31.03.2010 Profit after tax for the year Rs.26,81,17,058/- Rs. 11,02,83,438/- Weighted average no. of equity shares Rs. 5,17,5,534/- Rs,4,86,411/- Basic & Diluted Earning per share Rs.518.02 Rs. 226.73 5. Since the shares were issued at a huge premium, it created doubts in the mind of the AO. Therefore, to verify the identity and credit worthiness of the share applicants and genuineness of the transaction, the AO asked the assessee to prove the three ingredients within the meaning of Section 68 of the IT Act. The assessee, in its submissions filed various details such as copy of the income-tax return, bank statements of the share applicants, their confirmations, etc. From the various details furnished by the assessee, the AO noted that these companies are not having capacity to deposit such huge amounts as share application money and that too at a premium of Rs.1,990/- per share. He further noted that all the above six companies are directly or indirectly operated by the promoters of the assessee company. He examined the details and noted that the following are the directors and shareholders in the assessee company:- Name Address : Sanjiv Garg S/o Sh. Dharam Pal 1. 61-A, Sant Nagar. Civil lines. Ludhiana Garg Sh . Rajiv Garg S/o Sh Dharam Pal 2. Garg 61-A, Sant Nagar. Civil lines. Ludhiana 3. Sh. Ujjwal Garg , S/o Sanjiv Garg 61-A, Sant Nagar. Civil lines. Ludhiana 4. Sh. Pradeep Makkar, S/o Sh Tilak 31, Avtar Nagar (Threeke), Opp. Santaj Palace, Raj Makkar Near Octroi Post, Frozpur Road, Ludhiana.

5. Sh. Vijay Sinhania, S/o Sh Sewak B-XIX, 810, Singhania College, Near Prince Lal Singhania Hostel, Civil Lines, Ludhiana. Sh. Dharam Pal Gupta S/ o Sh. Sohan 43-K, Sarabha Nagar, Ludhiana 6. Lal Gupta

7.1 Thus, the AO determined the total income at Rs.71,82,51,229/-.

Year Ended 31.03.2012 Year ended 31.03.2011 Profit after tax for the year Rs.2,95,61,231/- Rs.26,81,1 7,058 Weighted average no. of equity shares Rs. 5,99,945/- Rs. 5,17,534/- Basic & Diluted Earning Per Share Rs. 49.27 Rs. 518.07

12.1 It was pointed out that so far as assessment year 2011-12 is concerned, the assessee was never asked to produce the directors of the six companies as mentioned in para 2 of the assessment order. It was argued that once the assessee has submitted all the requisite details as called for by the AO, the onus shifts to the AO to prove to the contrary. He never carried out independent enquiry and should have confronted the assessee with the result of such enquiry which he failed to do. It was further submitted that once the AO holds that all these companies are related to the promoters of the assessee company, he could not have held that none of the employees or the MD of the company don’t know the subscriber companies. It was strongly argued that the AO has passed the order without application of mind and, therefore, the addition made u/s 68 was without any reasoning or basis.

12.2 So far as the observation of the AO that the assessee company had earning capacity of Rs.226.73 per share, whereas it has charged huge premium of Rs.1990/- per share is concerned, it was submitted that it was the prerogative of the Board of Directors of the company to decide the amount of the premium. The details of working of the earning from share was given before the CIT(A) according to which it came to Rs.3,812/-. It was accordingly argued that the charging of the premium of Rs.1,990/- per share was fully justified. It was argued that since the assessee has duly substantiated the identity and credit worthiness of the investor companies and the genuineness of the transaction, therefore, the addition of Rs.20.17 crore made by the AO is uncalled for.

12.3 So far as assessment year 2012-13 is concerned, it was submitted that the assessee had filed all details such as confirmations, bank statements, balance sheets, PAN details, income-tax return copy etc., to substantiate the identity, creditworthiness and genuineness of the share applicants. It was submitted that the assessee had justified the basis of charging of such share premium. It was argued that the assessee being an unlisted company, the networth has to be determined as per the Companies Act, 1956 and Rule 11UF of the Income-tax Rules, 1962 according to which the average of book value and EPS based share value comes to Rs.3,812/-. As regards the allegation of the AO that the assessee company had earning capacity of Rs.49.27 per share only whereas it has charged premium of Rs.2490 per share is concerned, it was argued that it is the prerogative of the Board of Directors to decide the amount of premium. As regards the capacity of the share applicants, it was argued that all applicants are corporate entities and their net worth is based on balance sheet alone is relevant criteria for judging the creditworthiness. It was argued that income of current year cannot be the basis for considering the creditworthiness of the investor companies.

12.4 It was argued that where the AO himself has held that all these companies are related to the promoters of the assessee company, however, he held that two of such group companies are bogus and made addition u/s 68 in respect of all eight companies.

12.5 So far as M/s Apoorva Leasing Finance and Investment Company Ltd. is concerned, which is neither a group company nor an associate company, it was argued that the assessee was never confronted with the result of any enquiry showing that the said company does not exist.

12.6 As regards the allegation of the AO that these share applicant companies are only entry providers is concerned, he submitted that once it is established by the AO that these are group companies having common directors, the AO cannot say that these are bogus entry provider companies. It was argued that the assessee was asked to produce the principal officers of these companies which the assessee had complied but the AO chose not to record their statements. He has never asked to produce the shareholders of these companies. It was submitted that in the past and subsequent years, the AO himself has accepted such share capital and share premium in the order passed u/s 143(3) in respect of some of these companies, namely, M/s Himachal Yarns Ltd., M/s Gal Cottex (P) Ltd. and M/s Shubam Yarns (P) Ltd. It was accordingly argued that the addition made by the AO u/s 68 has to be deleted.

12.7 So far as the addition of Rs.20,24,39,341/- made by the AO for A.Y. 2011-12 by holding the transaction of purchase and sale made by the assessee with M/s SEL Manufacturing Company Ltd. as bogus is concerned, it was submitted that no adverse evidences were gathered either during the course of search in the premises of M/s SEL Manufacturing Company Ltd. or during the course of survey u/s 133A of the Act at the premises of the assessee company. It was submitted that only on the basis of statement of Mr. Sanjiv Garg, MD, recorded during the course of survey the AO held that the assessee was involved in issuing bogus sales and purchase bills which was never stated by Mr. Garg in his statement. It was submitted that during the current year the assessee company had a turnover of Rs.600/- crore which includes both manufacturing and trading activity. It was argued that the assessee had also traded in yarn worth Rs.110/- crore which includes the purchases made from M/s SEL Manufacturing Co. Ltd. of Rs.29.16 crore. Similarly, out of the total sales of Rs.131/- crores, the sales made to SEL Manufacturing Co. Ltd. amounted to Rs.44 crores only. It was argued that the adverse view taken by the AO with regard to the transaction with SEL Manufacturing Co. Ltd. is not correct and was not based on any adverse findings. It was argued that the transaction with M/s SEL Manufacturing Co. Ltd. was duly recorded in the books of account which was relied upon by the AO and found to be authentic since the AO has neither rejected the books nor has passed the order u/s 144 of the Act. It was submitted that M/s SEL Manufacturing Co. Ltd. is a listed company which is registered with the Excise Department and accordingly all sales made by that company were duly recorded in the records of the Excise Department. The assessee filed the Excise Duty return and VAT-20 return in which the total turnover of Rs.600/- crore was shown. It was argued that the records of sales and purchase were duly maintained and no adverse finding was given with regard to the trading activity of the assessee company in the last five years. Further, all inward and outward goods were duly supported by the transportation receipts wherever the goods were transferred to the assessee company or to the buyer. Sample copy of the sale invoices of SEL Manufacturing Co. Ltd. in respect of sales made to the assessee company along with the balance sheet and audited accounts of the company were filed before the CIT(A) to support the plea that such purchase were genuine. Computerised stock register which was claimed to be regularly maintained by the assessee was also filed. It was accordingly argued that in absence of any adverse evidence in the possession of the AO, he could not have held that purchases/sales of the assessee with SEL Manufacturing Co. Ltd. were bogus.

12.8 Based on the arguments advanced by the assessee, the ld.CIT(A) deleted both the additions.

ITA No.4713/Del/2015 15. So far as assessment year 2012-13 is concerned, the ld.CIT(A) deleted the addition by observing as under:- “6.3 The Ground No.2 of the appeal is against the action of the AO of making addition in respect of share application money of Rs.28.98 Crores received by the appellant from 8 Investor companies (including 7 group/associate companies) as unexplained cash credit u/s 68. It is seen that out of such 8 investor companies, seven companies belong to Himachal Yarn Ltd. and its associate Group Shiva group, based in Ludhiana and only one company M/s Apoorva Leasing Finance and Investment Company Ltd., based at New Delhi is an outside company in which none of the promoters of Himachal Yarn Group and Shiva group are interested. This fact has been acknowledged by the Ld. AO at several places in the assessment order to buttress the argument that the onus on the appellant company was much heavier compared to any other case. History of investigation 6.3.2 It is seen that the Ld. AO had first asked the appellant to substantiate bonafide of the share application money received by the appellant, by issue of a questionnaire dated 27.5.2014 (served upon the appellant on 26.8.2014) vide Item No.

This requirement was again made at the time of the hearing held on 2.3.2015. In response, the appellant produced Mr. Sanjeev Garg (from Ludhiana) before the AO on 11.3.2015. Mr Sanjeev Garg was the Principal Officer in the case of Pushpa Yarns Ltd. and along with his family members had controlling stakes in Garg Fincap Ltd., Shubam Yarns Pvt. Ltd., GAL Cottex Pvt. Ltd. and Pushpa Yarns Pvt. Ltd. However, on that hearing, Mr Sanjeev Garg was not examined by the Ld. AO with regard the aforesaid share application money received from Garg Fincap Ltd., Shubam Yarns Pvt. Ltd., GAL Cottex Pvt. Ltd. and Pushpa Yarns Pvt. Ltd. The AO asked the appellant to furnish pending details as per hearing dated 2.3.2015. In the hearing dated 2.3.2015, the Ld AO had asked the appellant to 'furnish remaining details and also to produce the principal officer of 8 companies and cash creditors for examination namely; M/s Gal Coltex and M.s Shubham Yarns (P) Ltd. and Deep Toold (p) Ltd. I find that no inquiries were carried out by the AO at the time of personal disposition of Mr Sanjeev Garg on 11.3.2015 regarding the share application money or the unsecured loans received from M/s Gal Coltex and M.s Shubham Yarns (P) Ltd. and Deep Tools (P) Ltd, as no statement was recorded nor there is mention of further enquiry on the note sheets. 6.3.4 On 13.3.2015, the appellant produced Mr Pradeep Makkar, the Principal officer in the first 4 companies mentioned in Table-3 above. The Ld. AO in the note sheet dated 13.3.2015 noted that Sh. Pradeep Makkar, CA attended and filed power of attorney from 5 companies namely; Shubam Yarns Pvt. Ltd, Pushpa Yarn Pvt. Ld, Himachal Yarns Pvt., Garg Fincap Ltd., Gal Cottex Pvt. Ltd. I find that no enquiries were carried out by the Ld. AO from Mr. Pradeep Makkar with regarding the share application money received from the 5 companies in which he was Principal Officer and unsecured loans received from M/s GAL Coltex and M/s Shubham Yarns Pvt. Ltd. The AO insisted that the Principal Officer of these companies may be produced. The case was discussed on 13.3.2015 without further inquiry. 6.3.5 On 11.3.2015, the AO noted that a copy of Inspector's report was given to the AR for comments. On the next hearing held after a day's break on 13.3.2015, no queries were raised on the Inspector's report and on appellant's response thereon. 23 6.3.6 The Ld. AO also mentioned in the impugned order that with regard M/s Apoorva Leasing Finance and Investment Co. Ltd. the Inspector had reported that on reaching its given address at 104A, Ramesh Nagar, Single Story, New Delhi-110015, it was found that it was a residential house, on the front side of which one Mr. Hajur Singh was found at A-104-A and he was not aware of the resident on the backside of that premise. The Inspector also noted that there was no signboard or address board on the same premise. Further, enquiries from residents from other floors shows that this was a residential complex in which no company in the name of Apoorva Leasing Finance and Investment Company Ltd. ever existed. On perusal of the assessment records, I do not find such a report in the case records nor is there any mention in the note sheet of the case record about the fact of providing a copy of any report in this matter to the appellant during the assessment proceeding. The Ld. AO has also not mentioned about having furnished any opportunity to the appellant in this regard. FINDINGS 6.4 On careful consideration of the above facts, it is evident that with regard the share application money received from the following 5 companies, there were no adverse observations made by the Ld. AO at any stage. These companies are as under: S.No. Name Principal officer Flimachal Yarns Formerly Himachal Steel Udgoy Ltd. Pradeep Makkar 1 Garg Fincap Ltd. Pradeep Makkar 2 3 Shubam Yarns Pvt. Ltd. Pradeep Makkar 4 GAL Cottex Pvt. Ltd. Pradeep Makkar 5 Pushpa Yarns Pvt. Ltd Sanjeev Garg The appellant had furnished evidences comprising written confirmations, ITR, Bank statements in support of identity, genuineness and creditworthiness in respect of the above 5 companies in response to the 1st questionnaire itself, on 31.12.2014. The relevant balance sheets were filed subsequently, which show that all these companies had significant own funds, which were much higher than the amount of share application money paid to the appellant company. The bank statements show that the entire amount was paid to the appellant by cheque and in the bank statement, there were no cash deposits. Undisputedly, there was no doubt about the whereabouts of these companies even in the Inspector's report. The Ld. AO however, treated the share application money received from these companies as unexplained, on the grounds that the principal officers of these companies were not produced, however, the 24 appellant had given the list of Principal Officers to the AO on 23.2.2015. Further, on 11.3.2015 Mr. Sanjeev Garg, Principal Officer in Pushpa Yarns Pvt. Ltd. appeared before the Ld. AO, while Mr. Pradeep Makkar who is Principal Officer in the other 4 companies appeared before the AO on 13.3.2015. Both of them were not questioned on the basis of evidences filed by the appellant before the AO on 31.12.2014 in the form of Bank statement, ITR and written confirmations and the balance sheet. Moreover, the Ld. AO had also carried out enquiries in respect of unsecured loans received from M/s GAL Caltex and M/s Subam Yarns Pvt. Ltd. and on the same set of facts preferred not to make addition u/s 68 in respect thereof. Under the circumstances, the action of the AO of holding share application money received from these 5 companies as unexplained was without any prudent basis. Since the appellant had duly substantiated identity, genuineness and creditworthiness in respect of share application money received from the above 5 companies based on relevant evidences, addition u/s 68 in their case was without any basis and deserves to be deleted as such. 6.5 With regard M/s Brijeshwari Textile Ltd. and M/s Shiva Spin Fab Pvt. Ltd., I find that Ld. AO had deputed an Inspector, who had visited Ludhiana to gather information about the above 8 investing companies. The Inspector, in his report mentioned that first he visited 8L Model Town, Ludhiana which relates to Shiva Group of companies. The Inspector reported that there he met Sh. Navrantna Kumar, GM and Mr. Ramesh Malhotra GM Accounts who had informed him that the above companies did not exist at the given address. In support, the Inspector took a photograph of the signboard which shows that other than Shiva Texfebs Ltd., Shiva Spin-n-knit Ltd., Shiva Specialty Yarns Ltd, Yogender Worsted Limited, KK Fibers Ltd., Himachal Fibers Ltd. and Indian Yarns Ltd., no other companies operated for this location. I find that this report is claimed to have been handed over to the appellant by the Ld. AO on 11.3.2015 and without awaiting the reply of the appellant, the Ld. AO closed the proceeding on 13.3.2015. Since the said enquiry was carried out at Ludinana and there is mention of enquiry from Mr. Navratan Kumar, GM, and Mr. Ramesh Kumar Malhotra, GM, evidently, it would have required a reasonable time to confirm the facts reported by the Inspector for framing a rejoinder. The AO however, gave time for one day only, hence, evidently natural justice cannot be held to have been rendered to the appellant in this regard. 6.5.2 On my directions, the appellant was asked to explain as to why these companies, which belong to Shiva Group, as admitted by the Inspector also, were not found to be operating from 8L, Model Town, Ludhiana and further, why the two General Managers of Shiva Groups denied existence of these two companies at the premise from which the entire Shiva Groups operates. The appellant submitted that the concerned inspector (Sh. Jogender Singh) had visited the premise at 8L, Model Town, Ludhiana, and had asked about these two companies and since the Directors of the said companies and the 25 concerned person dealing with the accounts were away from the office for a short time, Mr. Ramesh Malhotra, GM, Accounts, informed this to the Inspector and request to wait for one hour. It was informed that the Inspector told Mr. Malhotra that he had to visit other offices in Ludhiana and hence, he would come back after some time, however, he did not return to the premise. In support, the appellant filed an affidavit from Sh. Ramesh Malhotra. In was informed that Mr. Ramesh Malhotra was the Principal Officer of these companies and this information was already given to the AO vide letter dated 23.2.2015, however, the Inspector did not carry out any enquiry from Mr. Ramesh Malhotra. FINDINGS 6.5.3 On careful consideration of the above facts, it is evident that the appellant had furnished evidences before the AO on 31.12.2014 in the form of Bank statement, ITR and written confirmations and the balance sheet in support of identity, genuineness and creditworthiness in respect of the share application money received from the above 2 companies, however, no adverse observations were made by the Ld. AO on the above evidences, which are germane to explain cash credit u/s 68. It is seen that share application money has been received from these 2 companies by cheque and there is no cash deposit in the bank during this period. The Ld. AO has also not made adverse observation in this regard. Further, it is also noticeable that these companies have own funds (Table-1), which was much higher than the investment made in the appellant company. Under the circumstances, creditworthiness of these companies and genuineness of these transactions stand proved. I find that the Ld. AO has made the addition u/s 68 by holding that the identity of these companies could not be proved. The Ld. AO has disregarded the fact of registration of these companies with ROC and issue of PAN by the Income Tax Department, by holding that such evidences were not sufficient as, in his view, no physical verification is made for such purposes. The AO had accordingly, based his decision only upon the report of the Income Tax Inspector dated 25.2.2015. 6.5.4 In my considered view, the view taken by the AO about the evidentiary value of PAN and registration with ROC vis-a-vis the interpretation of the report of Sh. Jogender Singh, Inspector is untenable. The emphasis of the Inspector on the absence of signboard of these 2 companies at the given premise is misplaced, as an investment company need not have public dealing, therefore, in the business prudence of the company, expenses on signboard may not have been considered necessary. However, in the ROC, Income Tax Department, Bank etc. postal address of these companies has been given at 8L, Model Town, Ludhiana, which is the premise from which where the entire Shiva Group of Companies operates. The findings of the Inspector in itself in itself are shoddy as in his own admission he had to visit several offices on the 26 same day and as per his report he had also visited 61A, Sant Nagar, Civil Lines; Singla Willa, Civil Lines; M/s SEL Manufacturing Company 274, GT Road, Dhandiary Khurd, Ludhiana; and Kanganwal Road, Village Jugina, Ludhiana and one more premise, all in one day. As informed by the appellant, the Inspector was requested to wait for some time as the concerned Director and the person dealing with books of account was away, however, the Inspector left by stating that he had to cover other offices and shall come back. I also find that the Inspector had met Mr. Ramesh Malhotra, who is the Principal Officer of the company, as informed by the appellant vide letter dated 23.2.2015. Therefore, the Inspector could have carried out enquiries from him for which purpose, the Ld. AO had repeatedly asked the appellant to produce the Principal Officer of the company. Moreover, since evidently, the Inspector reported that from the premises at 8L, Model Town, Ludhiana, the other companies of Shiva Group operate and as informed by the appellant that such premise was owned by 'Shiva' group, there is no credibility in the report of the Inspector, based on the enquiry from the Principal Officer himself of these 2 companies (Mr. Ramesh Malhotra) that these 2 companies of Shiva Group did not exist at 8L, Model Town, Ludhiana. Looking to the facts of the case, it is very probable that the Inspector did not prefer to wait for the accountant/Director and thought of re-visiting the premises, but as he had to cover other premises the same day, he did not return and preferred to file a baseless report. In view of this, the Inspector's report cannot be considered as a credible evidence to hold that despite having given details of address in PAN, ROC registration, these 2 companies were not existing at the given address. Without prejudice, the Ld. AO had not given any reasonable opportunity to the appellant to furnish explanation on the aforesaid report of the inspector. In view of this, I hold that the appellant had duly substantiated the genuineness and creditworthiness of share application money from these two companies and no adverse observation were made by the AO on such evidences and with regard identity, the evidences in the form of PAN, ITR, ROC registration sufficiently substantiate the identity of the above two companies. In view of this, I hold that there was no merit in the action of the AO of treating the share application money received from these 2 companies as unexplained. 6.6 With regard the share application money received from M/s Apoorva Leasing Finance and Investment Company Ltd., which is not the group/associate company, I find that in the impugned order the Ld. AO has mentioned that he had got an enquiry carried out by deputing an Inspector for serving notice u/s 131 on the said company. It was mentioned that the said Inspector went to the premise at 104-A, Ramesh Nagar, however, he did not find any signboard of that company. Further, on enquiry from the residents in the neighborhood, he did not find any clue of existence of that company in that area. In view of this, the Ld. AO treated, the identity of that company in doubt and accordingly, by holding that company as a bogus company, made addition u/s 68. I find that the appellant had already filed a copy of bank statement, ITR, PAN and written confirmation before the AO on 31.12.2014 and a copy 27 of balance sheet subsequently. It was informed to the AO that such company is a listed company. On the basis of the above available evidences, no adverse observation was made by the Ld. AO. Under the circumstances, it is evident that the genuineness and creditworthiness of the share application money received from that company stood proved before the Ld. AO. I find that the Ld. AO has disregarded the furnishing of Permanent Account Number, ITR and registration with ROC as reliable evidence to support identity of that company and has relied upon the decision in the case of Dashratlal Agrawal (Supra). FINDINGS 6.7 On careful consideration of the above facts and the results of the enquiry, I find that first of all, it is evident that at no stage during the assessment proceeding, the Ld. AO had confronted the appellant about the above report of the Inspector about non¬existence of the company at the given address. Under the circumstances, the AO has not discharged the onus on the appellant, therefore, the appellant was pretended from rebutting in the matter. 6.7.2 Without prejudice, the said M/s Apoorva Leasing Finance and Investment Company Ltd. is a listed company, having share capital plus reserve of over Rs.183 Crores. For the purpose of being a listed company, a company has to follow compliance requirements of several stock exchanges, SEBI and Registrar of Companies on a regular basis. Therefore, merely on the basis of an enquiry, the authenticity of which remains doubtful, it cannot be held that the said company was a bogus company. During the course of appellate proceedings, the appellant was asked to explain as to why at the time of Inspector's visit, no evidence of existence of that company was found at the address given in the return of income, which was filed by the appellant before the AO in support of identity of that company. It was informed that M/s Apoorva Leasing Finance and Investment Company Ltd. was in the process of shifting its premise to Naiwala, Karol Bagh, New Delhi and in which regard, a copy of an agreement for hiring the premise at Karol Bagh w.e.f 15.4.2015 was filed before me along with the copy of electricity bill. These evidences undisputedly show the existence of the company and it cannot be held that M/s Apoorva Leasing Finance and Investment Company Ltd. was a bogus company with no actual identity, being a listed company. Further, with regard the Inspector's report to the AO, which was not shared with the appellant, it is seen that the Inspector has emphasized on the absence of a signboard at the given address. However, an investment company is not akin to a public utility service providing company, which may require existence of signboard. Moreover, there is no provision in law requiring a company to have a signboard installed outside the premise. The report of the Inspector, which was not found in the assessment records by me, is silent about the specific persons (with name and address) who were enquired by the inspector before forming an opinion that this company did not exist in that area. Under the 28 circumstances, the report of the Inspector in itself, does not carry any weightage, being shoddily made and lacking the necessary ingredients of a credible evidence. On the other hand, the company is a listed one and the evidences filed by the appellant in the form of PAN, ITR, Registration with ROC and subsequent agreement for hiring of the premise with another company, which as informed belonged to the Videocon Group, prove the actual existence of that company. Further, the appellant had also filed evidences, filed before ROC for changing the address of the company, which show the bonafide of the existence of the company. 6.7.3 With regard, genuineness and creditworthiness of the share application money received from M/s Apoorva Leasing Finance and Investment Company Ltd., it is evident that the entire amount of Rs.7.50 Crores received by the appellant company was in the form of cheques issued by that company. The relevant bank statements of that company clearly shows that there was no cash deposit prior to issue of cheque to the appellant company. The Ld. AO has not examined the bank statement, however, during the appellate proceeding, the source of funds in the hands of M/s Apoorva Leasing Finance and Investment Company Ltd. were examined, which show that the funds were primarily provided by M/s Anuvijay Investment Ltd. The appellant was asked to furnish a copy of the ITR, Bank statement of that company as also the written confirmations from its Directors, which were filed before me on my directions. No infirmity was observed by me. Under the circumstances, no adverse observation can be made on the genuineness of the source of the funds to M/s Apoorva Leasing Finance and Investment Company Ltd. It is also seen that that company has total share capital plus reserve of over Rs.180 Crores, therefore, it had the adequate capacity to make advance towards share application money in the appellant company of Rs.7.5 Crores. Accordingly, the creditworthiness of that company also stands proved. 6.7.4 in view of the above, as identity, genuineness and creditworthiness in respect of M/s Apoorva Leasing Finance and Investment Company Ltd. also stand duly proved, I find no merit in the addition made by the Ld. AO u/s 68 of the Act, merely, based on some report of the Inspector doubting identity of the company, which was not on the record and, which evidently, was not shared with the appellant. Under the circumstances, no addition u/s 68 was called for in respect of share application money received from M/s Apoorva Leasing Finance and Investment Co. Ltd. 6.8 I find that the Ld. AO was not satisfied as to how the appellant company charged premium of Rs.2490 per share. The Ld. Counsel filed before me detailed submissions and contended that the appellant company had sufficient net worth and if the net worth is calculated as per Rule 11 UF, the average of book value and EPS based shares comes at Rs.3812. In view of this, the appellant pleaded that the premium of Rs.2490 charged by the appellant company cannot be held as excessive and pleaded that the Board of Directors 29 ITA No.4713/Del/2015 of the company was fully empowered to charge the same. On careful consideration, I find merit in the argument of the appellant company. I also find that the Ld. AO has not applied the provisions of Rule 11UF of the IT Rules 1962 for making the valuation of Net worth of the appellant company. 6.8.2 However, in my view, the issue whether the appellant charged excessive premium or not is not germane to explain the cash credits. The observation of the Ld. AO could only be igniting point for carry out investigation, however, unless the result of the investigation results in making any adverse observation with regard identity, genuineness & creditworthiness, addition u/s 68 cannot be made. 6.9 I find that the Ld. AO has relied upon various judicial decisions, namely; Sofia Finance Ltd. (Supra), Lovely Export Ltd. (Supra), Osis Hospital Ltd. (333 ITR 119), CIT vs. Novapromoters Finlease Pvt. Ltd. (342 ITR 169), Dashratlal Agrawal vs. ITO: (1), Shekhawati Finlease Pvt. Ltd. vs. ITO (ITA No.2009/Del/2011) and Precision Finance Pvt. Ltd. 208 ITR 465. The Ld. AO has also referred to the decision of Hon'ble Supreme Court in the case Durga Das Morey 82 ITR 540, Sumati Dayal vs. CIT 214 ITR 801 in this regard. On careful consideration of the above cases, in my considered view the decision of Hon'ble Delhi High Court in the case of Lovely Export Ltd. and in the case of Sofia Finance Ltd. are not squarely applicable to the case of the appellant. The AO holds that like those cases in the case of the appellant, identity of two subscribers could not be proved and that the Principal Officers of the other companies did not appear in responses to the summons. However, as discussed above, the Principal Officers in respect of the 6 companies had already appeared before the AO, while the Inspector deputed by the Ld. AO himself acknowledges meeting Mr. Ramesh Malhotra, who is the Principal Officer in M/s Brijeshwari Taxtiles Pvt. Ltd. and m/s Shiva Spin Fab Pvt. Ltd. at the office of those companies at Ludhiana. In view of detailed discussion in the regard, the finding of the AO that these companies did not exist at the given address, where all other companies of the Shiva Group existed, has been held by me to be baseless. With regard M/s Apporva Leasing Finance and Investment Co. Ltd. it has been observed by me that the fact of non-serving of summons was not brought in the knowledge of the appellant and hence it is evident that the Ld. AO has not discharged onus in this regard. In view of this, the appellant does not get any help from the decision of Hon'ble Delhi High Court in the case of CIT vs. Nova promoters Finlease Pvt. Ltd. (Supra) and M/s Lovely Export Ltd. (Supra). 6.9.2 With regard, the Ld. AO's reliance on the ITAT, Indore in the case of the Dashratlal Agrawal, Ratlam (Supra), I find that the facts in that case are distinguishable. On perusal of the said order, it is seen that the Hon'ble ITAT had held unexplained cash credit in respect of the amounts deposited from M/s Hindustan Continental Ltd., based on the decision of the same tribunal in the case of M/s Aggarwal Coal Corporation Ltd. and Others (ITA No.151136, 30 196, 137 and 190) and other cases in which the said M/s Hindustan Continental Ltd., was proved to be a bogus company. On the facts of the case, it was observed in other decisions, by the tribunal that there were cash deposits made in the bank account of that company out of which cheques were issued to the plaintiff. Further detailed enquiries were conducted by the tribunal through the department, which proved that such company was not existing and was a bogus company. In the case of the appellant, however, evidently, the bank statements clearly show that no cash deposits were made in its bank account. Secondly, the finding that such companies were bogus was based on shoddy enquiry by the Inspector without giving due opportunities to the appellant and hence cannot be held as conclusive. Further, in that case the subscriber company's employees or directors did not comply with the directions of the Tribunal to appear before the Tribunal, however in the case of the appellant, as mentioned above, the principal officers of 6 companies had appeared before the Ld. AO, while the Inspector had made enquiries at the office of two companies, and met the concerned principal officer. In any case, on the basis of the evidences filed, namely bank statement and ITR, no adverse inference was drawn by the Ld. AO. Therefore, the facts of the case in the case of appellant are distinguishable from the facts in the case are Dasrath Lai AggrawaL Moreover, in that case the assessee could not establish identity, creditworthiness and genuineness of the transactions, and therefore, the amounts received from M/s Hindustan Continental Ltd. were held as unexplained cash credit in the case of the appellant. However, no doubts were raised by the AO based on the information furnished before him regarding genuineness and creditworthiness in respect of any of the share applicants. In view of this, in my considered view, the decision in the case of Dasrath Lai Aggrawal (supra), cannot be applied to the case of the appellant. In the case of Shekhawati Capital Finlease Pvt. Ltd. vs. ITO (supra), the addition was made u/s 68 on the ground that the appellant could not prove the creditworthiness of the subscribers, who evidently were not produced before the AO. However, in the case of the appellant, based on the evidence on record, the creditworthiness of the share applicants stands proved. In view of this, that decision also cannot be applied in the case of the appellant. 6.10 In view of the above facts, it is evident that the appellant had substantiated the identity, genuineness and creditworthiness in respect of all the 8 investor companies, in respect of which supporting evidences were filed before the AO, on which no adverse evidence could be drawn. The Ld. AO's reservation was only with respect to non production of principal officers, however he failed to appreciate that the appellant had already produce principal officers in respect of 6 companies. Further, the enquiries conducted by the Ld. AO by deputing Inspector are held to be not credible, the results of which were used against the appellant without giving due opportunity. In any case, based on the evidences filed by the appellant and on due examination of the same, I hold that it was not a fit case for application of provisions of section 68. Accordingly, this ground is allowed in favour of the appellant.” 31 ITA No.4713/Del/2015 16. Aggrieved with such order of the CIT(A), the Revenue is in appeal before the Tribunal by raising the following original grounds:- “1. Whether on the facts and circumstances of the case and law, the Ld. CIT(A) erred in deleting the addition of Rs. 20,17,00,000/- made on account of unexplained cash credits u/s68 ignoring the fact that all the six companies are not having any income to subscribe such huge share premium and companies are directly or indirectly operated by the promoters of the assessee as evident from the address of entry providers.

2. Whether on the facts and circumstances of the case and law, the Ld. CIT(A) erred in deleting the addition of Rs. 20,24,39,341/- made on account of income form undisclosed sources ignoring the fact that all the purchases and sales proved bogus during the course of search and survey.

4. The appellant craves leave, to add, alter or amend any ground of appeal

raised above at the time of the hearing.” ITA No.4713/Del/2015 “1. On the facts and circumstances of the case the Ld. CIT(A)-4 has erred in deleting the addition on account of undisclosed investment under section 68 of the Income Tax Act, amounting to Rs. 28,98,25,000/-.

2. The appellant craves leave, to add, alter or amend any ground of appeal raised above at the time of the hearing.”

16.1 Subsequently, the Revenue has filed the revised grounds which are as under:- i. Whether on the facts and circumstances of the case , the Ld. CIT(A) erred in deleting the addition of Rs. 20,17,00,000/- made on account of unexplained cash credits u/s 68 of the Income Tax Act. ii. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs. 20,24,39,341/- made on account of income from undisclosed sources ignoring the fact that all the purchases and sales proved bogus during the course of search and survey. iii. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred on holding that provisions of section 145(3) were not applied despite the fact that all the purchases and sales was found bogus and the same has elaborately discussed in the assessment order and that is tantamount to rejection of books of accounts u/s 145(3). iv. The appellant craves leave to add, amend, modify, vary, omit or substitute any of the aforesaid grounds of appeal at any time before or at the time of hearing of the appeal.” “i. Whether on the facts and circumstances of the case, Ld. CIT(A) has erred in deleting the addition on account of unexplained cash credit under section 68 of the Income Tax Act, 1961 amounting to Rs. 28,98,25,000. ii. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in admitting and considering the additional evidence in the form of an affidavit of Mr. Ramesh Malhotra, GM of Brijeshwari Textiles Ltd. and Shiva Spin Fav P Ltd., an agreement for hiring the premise and electricity bill without giving an opportunity to the AO which is in violation of Rule 46A of the Income Tax Rules, 1962. iii. The appellant craves leave to add, amend, modify, vary, omit or substitute any of the aforesaid grounds of appeal at any time before or at the time of hearing of the appeal.”

19. So far as the order of the CIT(A) in deleting the addition of Rs.20,24,39,341/- made by the AO on account of undisclosed income from bogus purchase and sales with M/s SEL Manufacturing Co. Ltd., is concerned, he relied on the order of the AO. He submitted that under the facts and circumstances of the case, the ld.CIT(A) was not justified in deleting the addition, therefore, the same also should be reversed and that of the AO be restored. 35 ITA No.4713/Del/2015 20. The ld. Counsel for the assessee, on the other hand, heavily relied on the order of the CIT(A). The ld. counsel at the outset drew the attention of the Bench to the original grounds and revised grounds filed by the assessee and submitted that a perusal of the original grounds would show that the words “companies are directly or indirectly operated by the promoters of the assessee as evident from the address of entry providers” is missing in the revised grounds for assessment year 2011-12. So far as the addition made by the AO under section 68 of the Income- Tax Act is concerned the ld. counsel submitted that the name of the subscribers are very much known to the AO which are the group companies as admitted by him and are having sufficient capital and free reserves to their credit and the AO only for the sake of making the addition has made the addition. The ld. counsel filed the following chart to substantiate the profit earned by the assessee company from assessment year 2004-05 to 2014-15 which is as under:-

24.1 So far as assessment year 2012-13 is concerned, he submitted that out of the eight shareholders five are common to assessment year 2011-12 except M/s Balmukhi Textiles (P) Ltd. There are only three new shareholders, i.e., M/s Garg Fincap, M/s Pushpa Yarns (P) Ltd. and M/s Apoorva Leasing Finance and Investment Company Ltd. He submitted that in respect of M/s Garg Fincap Ltd. and M/s Pushpa Yarns (P) Ltd., Mr Sanjeev Garg was produced on 11th March 2015. Similarly, Mr. Pradeep Makkar was produced on 13th March 2015 who is the principal officer of four companies, namely, (1) Himachal Yarns (P) Ltd; (2) M/s Garg Fincap Ltd.; (3) Shubam Yarns (P) Ltd.; and (4) Gal Cottex (P) Ltd.. So far as M/s Apoorva Leasing Finance and Investment Company Ltd., is concerned, the same company was assessed under section 153C/153A of the Act for assessment year 2010-11 and is a listed company with reserves of Rs.120/- crores. Referring to various pages of the paper book, the ld. counsel submitted that the assessee has discharged the burden cast on it by producing all the relevant details such as their PAN numbers, bank details, Income-Tax particulars, copy of income- tax returns, audited balance sheets, etc., and has substantiated the availability of huge capital and free reserves and surplus with them to invest in the shares of the assessee company.

ITA No.4713/Del/2015 27.1 The ld. Counsel for the assessee relied on the various decisions for the following propositions:- a) BURDEN OF APPELLANT STOOD DISCHARGED AS ENTIRE EVIDENCE STOOD FURNISHED. SUPREME COURT i) 319 ITR 5 (St.) CIT v Lovely Exports (P) Ltd ii) 159 ITR 78 (SC) CIT vs. Orissa Corp. (P) Ltd. i11) 251 ITR 363 (SC) CIT vs. Stellar Investment Ltd. DELHI HIGH COURT i) dated 13.1.2015 Funnay Time Finvest Ltd. ii) ITA No. 443/2014 dated 25.2.2015 (Del) CIT vs. Well Worth Construction Udyog Ltd iii) ITA No. 778/2015{Del) dated 13.10.2015 CIT vs. Rakam Money Matters(P) Ltd, iv) ITA No. 467/2016 dated 24.8.2016 (Del) Pr. CIT v. Lakshmi Float Glass Ltd. v) 387 ITR 636 (Del) dated 31.8.2016 (Del) CIT v. Softline Creations (P) Ltd. vi) ITA No. 678/2016 dated 26.9.2016 (Del) Pr. CIT v. Muni Ram Verma vii) 391 ITR 11 (Del) dated 11.1.2017 Pr. CIT vs M/s N.C. Cables Ltd. viii) ITA No. 169/2017 (Del) dated 14.3.2017 Pr. CIT v. Laxman Industrial Resources Ltd. ix) ITA No. 130/2018 (Del) Dated 6.2.2018 Pr. CIT v. M/s Adamine Construction (P) Ltd. x) 101 CCH 004 (DEL) Pr. CIT v. Oriental International Co. (P) Ltd. ITA No.4713/Del/2015 xi) ITA No. 151/2018 (Del) dated 9.2.2018 Pr. CIT v. Rathi Ispat P) Ltd. xii) 237 Taxman 104 (Del) CIT vs. Shiv Dhooti Pearls & Investment Ltd. xiii) 299 ITR 286 (Del) CIT vs. Divine Leasing & Finance Ltd xiv) 330 ITR 298 (Del) CIT vs. Dwarkadhish Investment (P.) Ltd. xv) 333 ITR 119 (Del) CIT vs. Oasis Hospitalities (P) Ltd. xvi) 354 ITR 282 (Del) MOD Creations (P) Ltd. vs. ITO xvii) 361 ITR 147 (Del) CIT v. Expo Global India Ltd. xviii) 361 ITR 220 (Del) CIT v. Kamdhenu Steel and Alloys Ltd, xix) 366 ITR 110 (Del)CIT vs, Empire Buildtech (P) Ltd. xx) 380 ITR 289 (Dei) CTT v. Five Vision Promoters (P.) Ltd. xxi) ITA No. 71/2019 (Del) Pr. CIT vs. Priyatam Plaschem Pvt. Ltd. BOMBAY HIGH, COURT i) ITA No. 66/2016 dated 10.4.2017 Pr. CIT v. Paradise Inland Shipping (P) Ltd. ii) 397 ITR 136 (Bom) CIT v. Orchid Industries (P) Ltd. iii) 394 ITR 680 CIT v. Gagandeep Infrastructure (P) Ltd, iv) 403 ITR 415 (Bom) dated 17.04.2018 Pr. CIT vs. Veedhata Tower Pvt. Ltd. ALLAHABAD HIGH COURT i) 350 ITR 220 (All) CIT vs, Jav Dee Securities and Finance Ltd. ii) 350 ITR 222 (All) CIT vs. Misra Preservers (P) Ltd. - MADHYA PRADESH HIGH COURT i) 356 ITR 65 (MP) CIT vs. Peoples General Hospital Ltd 45 ITA No.4713/Del/2015 CALCUTTA HIGH COURT i) GA No. 2856/2011 (Cal) dated 21.9.2011 CIT vs. Dataware (P) Ltd. ii) 2016 TIOL 1227 CIT v.JJ Development (P) Ltd. INCOME TAX APPELLATE TRIBUNAL i) ITA No, 6492/M/2016 AY 2007-08 Arceli Realty Ltd. v. ITO ii) ITA No. 453/13/2016 AY 2012-13 ACIT v. TRN Energy, (P) Ltd. iii) ITA No.5955/D2014 AY 2010-11 dated 23.2.2018 Umbrella Projects (P) Ltd, iv) 62 ITR (Trib) 512 (Del) ACIT v. Shyam Indus Power Solutions (P) Ltd. v) ITA No. 2525/D/2015 for Assessment year 2011-12 M/s Prabhatam Investment (P) Ltd. v. ACIT vi) C.O.No.163, 164 & 165/Del/2016 M/s. Garuda Imaging & Diagnostics Pvt. Ltd v. ACIT vii) ITA No. 3611/D/2014 dated 16.10.2017 ACIT v. NRA Iron. & Steel Pvt, Ltd viii) ITA No. 02 & 03/D/2016 AY 2012-13 & 2013-14 ACIT v, Dev Suman Sindhu ix) ITA No. 5955/D/2014 for Assessment year 2010-11 Umbrella Projects (P) Ltd b) That low income of share holder is an irrelevant consideration and net worth is the relevant test to determine the creditworthiness of the share holder. i) 77 taxmann.com 204 (Del) Pr. CIT vs. Goodview Trading Pvt. Ltd. ii) ITA No. 4122/D/2009 dated 22.10.2014 AY 2001-02 ITO v. N.C, Cables Ltd, iii) ITA No. 71/2015 dated 12.8.2015 (Del) CIT vs. Vrindavan Farms (P) Ltd. 46 ITA No.4713/Del/2015 iv) ITA No. 2372/D/2016 dated 12.2.2019 Samco Alloys (India) (P) Ltd. v) ITA No, 6507/D/2017 dated 13.4.2018 M/s Topline Buildtech Pvt. Ltd. vs. DC1T vi) ITA No. 5680/D/2016 dated 24.5.2019 ITO vs. Computer Home Information Plus Pvt. Ltd. vii) 53 CCH 0726 (Raipur - Trib.) Anjuni Associates vs. ITO viii) 52 CCH 137 (Del. Trib.) Zion Promoters & Developers (P) Ltd. Vs. ACIT ix) ITA No. 1886/Del/2010 dated 29.10.2010 ACIT vs. Smt. Meenu Chauhan x) ITA No. 3773/Del/2011 dated 23.05.2014 DCIT vs. Landmark Exim Pvt. Ltd., c) Source of Source cannot be a basis to make an addition u/s 68 of the Act and, on facts once initial burden of the assessee stand discharged: i) 87 ITR 349(SC) CIT vs. Daulat Ram Rawatmull ii) 177 Taxman 33I (Del) CIT vs. Diamond Products Ltd. iii) 237 Taxman 101 (Del)CIT VS. Shiv Dhooti Pearls and Investment Ltd. iv) 256 ITR 360 (Guj) DCIT vs. Rohini Builders v) 306 ITR 35 (Del) CIT vs. Real Time Marketing (P) Ltd. vi) 400 ITR 120 (Jharkhand) Prayag Tendu Leaves Processing Co. vs, CIT vii) ITA No. 1583/D/2011 A.Y. 1996-97 dated 11.5.2013 DCIT vs, Rainee Singh viii) ITA No. 2799/D/2018 dated 21.6.2019 Champ Info Software vs. PCIT ix) 163 ITD 491 (Chd-Trib,) Nirmal Rani vs. DCIT x) 173 ITD 30 (Mumbai-trib.) ITO vs. Iraisaa Hotels (P) Ltd.

ITA No.4713/Del/2015 d) That nature of income and source of income can be examined only by the Assessing Officer of the shareholder and not by the Assessing Officer of the assessee i) GA No. 2856/2011 (Cal) dated 21.9.2011 CIT vs. Dataware (P) Ltd. ii) 366 ITR 232 (P&H) CIT vs. Varinder Rawlley iii) 237 Taxman 104 (Del) CIT vs. Shiv Dhooti Pearls & Investment Ltd. iv) 103 ITR 344 (Pat) Saraogi Credit Corporation vs. CIT v) 59 ITR 632 (Assam) Tola Ram Daga vs. CIT vi) 49 ITR 273 (Mad) S. Hastimal vs. CIT vii) 151 ITR 150 (Pat) Additional CIT. Bihar vs. Hanuman Aggarwal viii) 154 ITR 244 (Pat) Addl. CIT vs. Bahri Brothers (P) Ltd. ix) 87 ITR 349 (SC) CIT vs. Daulat Ram Rawatmull x) ITA No. 3133/Del/2018 dated 25.6.2018 Moti Adhesives (P) Ltd. vs, ITO xi) ITA NO. 1162/Kol/2015 dated 14.6.2018 ITO vs. Wiz-Tech Solutions (P) Ltd. xii) ITA 1463/Kol/2010 dated 21.6.2013 Sri Nirmal Kumar Bose vs. ITO xiii) ITA No. 2677/Kol/2013 dated 25.7.2014 Jyoti Saraf vs. ITO e) The common address of shareholders is otherwise not a valid basis to disregard the claim of the Assessee i) 329 ITR 271 (Del) CIT vs. Victor Electrodes Ltd. ii) 330 ITR 603 (Del) CIT vs. Winstral Petrochemicals Pvt. Ltd. iii) 238 Taxman 653 (Del) CIT vs. SVP Builders India Ltd. iv) 357 ITR 146 (Del) CIT(IV) vs. Fair Finvest Ltd. dated 22.11.2012 48 ITA No.4713/Del/2015 v) ITA No. 71/2015 dated 12.8.2015 (Del) CIT v. Vrindavan Farms (P) Ltd. f) That share application money received during the year from group company then addition u/s 68 is otherwise not permissible in law i) ITA No. 112/2018 dated 07.08.2018 Pr CIT vs M/s. Chain House International (P) Ltd,), (Mad) ii) 257 Taxman 390(Del) dated 7.7.2018 Pr. CIT v. Hi-Tech Residency (P) Ltd. iii) 105 taxman.com 158 (Del) CIT vs. E-Smart Systems (P) Ltd. iv) 361 ITR 155 (Del) CIT vs. Nipun Auto (P) Ltd. v) 62 ITR (T) 512 (Del) ACIT vs. Shyam Indus Power Solutions (P) Ltd. g) Admitted position that money received did not originate from the coffers of the assessee: i) 307 ITR 334 (Del) CIT vs. Value Capital Services Ltd. II) 306 ITR 55 (Del) CIT vs. Real Time Marketing (P) Ltd. iii) 361 ITR 220 (Del) CIT vs. Kamdhenu Steel and Alloys Ltd Iv) 380 ITR 289 (Del) CIT v. Five Vision Promoters (P) Ltd. h) That once investment has been accepted in the case of share holders in their assessment order even in subsequent years u/s 143(3) then no addition is tenable in the hands of appellant for same investment i) ITA No. 491/D/2016 dated 15.07.2016 Layak Fabrics (P) Ltd. vs. ITO ii) ITA No. 5694/D/2014 dated 26.12.2017 DCIT vs. Bhagwan Mahavir Properties (P) Ltd iii) ITA No, 2849/D/2015 dated 10.08.2016 DCIT vs. KLA Foods (India) Ltd.

ITA No.4713/Del/2015 iv) dated 01.04.2016 ITO vs. Alewian Infratech (P) Ltd. v) ITA no. 3133/D/2018 Moti Adhesives (P) Ltd. vs. ITO dated 25.6.2018 vi) ITA No. 2376/D/2018 dated 1.8.2018 Heat Flex Cables (P) Ltd. vs. ITO vii) ITA No. 574/D/2018 dated 19.6.2018 M/s Vidya Prakashan Mandir (P) Ltd. PCIT i) Lack of enquiry by the learned Assessing officer to rebut the evidence placed on record by the assessee in as much as no further enquiries were made from shareholder by issuing notice u/s 131 of the Act: i) 361 ITR 10 (Del) CIT v. Gangeshwari Metal (P) Ltd. ii) 357 ITR 146 (Del) CIT vs. Fair Finvest Ltd iii) ITA No. 212/2012 dated 11.4.2012 (Del) CIT v. Goel Sons Golden Estate (P) Ltd. iv) 342 ITR 169 (Del) Nova Promoters & Finlease (p) Ltd v) ITA No. 645/2012 dated 13.1.2015 (Del) Funnay Time Finvest Ltd vi) 361 ITR 220 (Del) CIT vs. M/s Kamdhenu Steel and Alloys Ltd. vii) ITA No. 71/2015 dated 12.8.2015 (Del) CIT v. Vrindavan Farms (P) Ltd. viii) ITA No. 3342/D/2013 ITO v. XO Infotech Ltd. 27.2 So far as the order of the CIT(A) in deleting the addition of Rs.20,24,29,341/- in assessment year 2011-12 representing difference of sale and purchase made by the assessee with M/s SEL Manufacturing Company Ltd. is concerned, he submitted that the ld. CIT(A) has given justifiable reasons while ITA No.4713/Del/2015 deleting the addition. He submitted that the assessee had made total payments for trading purchases at Rs.110,89,61,370/- and had shown total receipts for trading sales at Rs.131,14,00,711/- which have been booked in the accounts. Accordingly, it is evident that the resultant difference of Rs.20.24 crores has already been offered to tax by the assessee. Therefore, the sum of Rs.20.24 crores could not have been taxed again by the AO which amounted to double addition. Further, it is also evident that the AO had taken adverse view regarding the transaction of the assessee with M/s SEL Manufacturing Company Ltd., including purchase of Rs.29.16 crores and sales of Rs.44 crores. However, the AO has held the entire trading transactions with other parties as bogus without any adverse findings/evidence in respect of such parties. He submitted that the AO has neither rejected the books of accounts under section 145 of the Act nor passed the assessment order under section 144 of the Act. He has also not gathered any additional evidence / material and, therefore, the CIT(A) was fully justified in deleting the addition. So far as the addition made by the AO on the basis of statement recorded under section 133A by Shri Sanjeev Garg is concerned, the ld. counsel submitted that the said statement has no evidentiary value in absence of any corroborative material and, therefore, the CIT(A) was justified in deleting the addition. The ld. counsel submitted that there is no set off of loss by indulging in fictitious purchase and sale and, in fact, if the total income of the assessee is considered it can be seen that the assessee has earned huge income from this transaction and therefore the Ld. AO was not justified in stating that the assessee 51 has indulged in bogus purchases and sales. Further, he cannot accept part of the transaction as genuine and the other part as fictitious. He accordingly submitted that the order of the CIT(A) is justified under the facts and circumstances of the case and the grounds raised by the Revenue should be dismissed. He also relied on the following decisions:- a) That addition represents double addition as the income on trading business has duly offered to tax which is not permissible in law. i)

42. ITR 427 (SC) CIT v. DharamDas HarGovanDas ii)

72. ITR 291 (SC) CIT v. LaxmiPat Singhania vs. CIT iii) 118 ITR

50. State of Uttar Pradesh vs. Raja Buland Sugar Co. Ltd. iv) 258 ITR 717 (Del) ITO vs. Vinod Kumar Soni b) That statement recorded u/s 132(4) of the Act itself alone cannot be a basis to compute the disallowance i) 290 CTR 263 (Del) CIT vs. Harjeev Aggarwal ii) 397 ITR

82. (Del) Pr. CIT v. Best Infrastructure (India) (P) Ltd, iii) ITA No. 02 and 03/D/2016 ACTT vs. Dev Suman Sindhu iv)

53. CCH 0120 (Del-Trib.) Moon Beverages Ltd. vs. ACIT

has deleted the words ‘group companies’ which the AO has mentioned in both the assessment years that the subscriber companies are group companies. It is also his submission that all these companies are assessed to tax and in subsequent year also the share application money in respect of three of the companies has been accepted under section 143(3) as per the direction of the Joint Commissioner under section 144A. Further, the principal officers of some of the companies were produced before the AO but the AO chose not to record their statements. It is also his submission that the AO has mixed up the facts of some other case with that of the assessee and has proceeded to make the addition on misconception of facts and misunderstanding. According to him, since the assessee has discharged the burden cast on it, therefore, no adverse view should have been taken and, therefore, the ld. CIT(A) has rightly deleted the addition. 54 ITA No.4713/Del/2015

30. We find some force in the above argument of the ld. Counsel. A perusal of the assessment order shows that the AO at Page 3 of the assessment order for assessment year 2011-12 has mentioned as under:- “The share holding pattern of the applicant companies was also examined and found that these companies are being promoted and operated by the family members of the promoters of the assessee company.”

31. Similarly in assessment year 2012-13, the AO at page 5 of the assessment order has mentioned as under:- “The share holding pattern of the applicant companies was also examined and found that these companies are being promoted and operated by the family members of the promoters of the assessee company.”

33.1 So far as assessment year 2011-12 is concerned, a perusal of the Order sheet notings which was forwarded by the AO shows that on 24th March 2014, the AO discussed the case with the assessee’s representative and asked him to produce the principal officers of six companies for his examination fixing the hearing date on 28th March 2014 and passed the order on 31st March 2014, but, there is no entry on 28th March 2014 as to what has happened. On being pointed out to the CIT-DR regarding the above, he submitted that whatever order sheet entry has been provided by the AO is before the Bench and the Bench can take a view on this.

33.2 So far as assessment year 2012-13 is concerned, on 13th March 2015, Shri Pradeep Makkar attended the proceedings and filed the power of attorney from Shubham Yarns (P) Ltd., Himachal Yarns Ltd., M/s Garg Fincap Ltd. and M/s Gal Cottex (P) Ltd.. However, the AO has not recorded the statement of Mr. Pradeep Makkar although he is fully aware that he is the director-cum-shareholder of the assessee company as well as the principal officer of above four companies. From the various details furnished by the assessee before the AO, before the CIT(A) as well as before us, it is clearly established that the company who have invested in the shares of the assessee company are group companies as admitted by the AO in the body of the assessment order. No doubt, the companies have declared meager income for the current year when they have subscribed to the shares of the assessee company. However, their credit worthiness stands proved from the balance sheet filed by them which shows huge own capital and free reserves available with them. There is no evidence on record that money from the coffers of the assessee company has directly or indirectly gone to those companies which have come back in the form of share capital / share premium. It is also seen that in the preceding and subsequent years the investment by some of the companies have been accepted in the orders passed under section 143(3) in their respective cases, details of which are placed in the paper book and synopsis which can be summarized as under:-

33.3 It is the settled proposition of law that for accepting any share capital / share premium / cash credit as genuine, the onus is always on the assessee to prove to the satisfaction of the AO regarding the identity and credit worthiness of the loan creditor/share applicants and the genuineness of the transaction. In the instant case, the assessee in our opinion has duly discharged such onus and the AO has not disproved any of the vital documents furnished before him. When the AO himself mentions that the investor companies are group companies and in the past also their investment in the assessee company has been accepted in the order passed under section 143(3), he could not have mentioned that these companies are merely entry provider companies. 58 33.4 So far as the non-production of some of the principal officers of the share applicant companies are concerned, we find for assessment year 2011-12, there was no sufficient opportunity granted to the assessee. It is pertinent to mention here that all the applicants have responded to notice issued u/s 133(6) and no summon u/s 131 has been issued by the AO. No further enquiry was also conducted by the AO. Only towards the fag end of the assessment proceedings the AO asked the assessee to produce the principal officers on 28.03.2014 and passed the order on 31.03.2014 as mentioned earlier at para 33.1 of his order.

33.5 So far as assessment year 2012-13 is concerned, Shri Pradeep Makkar and Shri Sanjeev Garg were produced before the AO. However, no statement was recorded. A perusal of copy of letter dated 23.02.2015 addressed to the AO by the assessee shows that the assessee had categorically given the names of the principal officers of the companies/entities who have subscribed to the equity capital of the company. At clause 19 of the said letter reads as under:- “GAL/2014-15/ Dated, 23.02.2015 The Deputy Commissioner of Income Tax, Circle 10(1), New Delhi. Sub: Submission of information for Assessment proceedings for assessment year 2012-13. Dear Sir, ……………………………………………………………………..…………… …………………………………………………………………………………..

33.6 However, it is not known as to why the AO did not examine either Shri Pradeep Makkar or Mr. Sanjiv Garg who had appeared before him.

33.7 Similarly, in the case of M/s Apoorva Leasing Finance & Investment Co., is concerned, we find from the details furnished by the assessee company in the paper book that the said company is a listed company with a capital and free reserve of more than Rs.120/- crores. Further, we find from the paper book pages 496 and 497 (PDF paper book pages 68 and 69) that assessment in this company was completed u/s 153C/153A on 28.03.2013 for the A.Y. 2010-11 accepting the returned income. Further, the ld.CIT(A) has also examined the source of source of M/s Apoorva Leasing Finance & Investment Co. Ltd. and has given a finding that the source of the same came to M/s Apoorva Leasing Finance & Investment Co. Ltd. from M/s Anu Vijay Investment and Revenue has not brought any material to controvert the same.

33.8 So far as the report of the Inspector that these companies are not existing at the given address is concerned, the same, in our opinion, cannot be a valid ground for making the addition under section 68 of the Act especially when the AO is fully aware that all these companies are group companies except M/s Apoorva Leasing Finance & Investment Co. Ltd. which is a listed company. Further, in the past as well as in the subsequent assessment years the investment of some of these companies have been accepted in the order passed under section 143(3) and in the immediately succeeding assessment year, i.e., assessment year 2013-14, such investment has been accepted in the order passed u/s 143(3) as per direction of the joint Commissioner under section 144A of the Act.

33.9. So far as the allegation of the AO regarding charging of huge premium is concerned, we find the assessee before the ld.CIT(A) has given the average of book value and EPS based share valuation at Rs.3,812/- which is as under:- “CALCULATION OF THE BOOK VALUE OF SHARE OF THE COMPANY A) Calculation of Book value of Equity Shares 31-03-2011 Equity Capital 596000 Nos Rs. 59,60,000.00 Preference Capital 20,00,000 Nos Rs. 20,00,00,000.00 General Reserve Rs. 23,45,12,144.00 Capital Revaluation Reserve Rs. 31,38,63,258.00 Capital Reserve Rs. 30,00,000.00 Security Premium Account Rs. 23,82,50,000.00 Surplus/Profit & Loss Account Rs. 46,94,42,087.00 Total Shareholders Fund Rs.l,46,50,27,489.00 Less Preference Capital Rs. 20,00,00,000.00 Amount Attributable to Equity Shareholders Rs.l,26,50,27,489.00 Weighted average number of equity share 517534 Opening 516000 25-03-2011 Allotted 80,000x7= 1534 365 Book value per share (A) Rs. 2444.00 61 B) EPS based Share Value Calculation of EPS 2010-11 Profit after tax (in lacs) 2681.17 No. of Eq. Shares(Weighted) 517534 EPS Rs. 518.02 Capitalized @10% (B) Rs.5180.70 Average of Book value & EPS based share Value (Rs. 2444+ 5181) / 2 Rs. 3812.00"

33.10. The ld. DR has not brought any material to show that such valuation is incorrect. Therefore, we do not find any force in the allegation of the AO or DR that the premium charged by the assessee company is exorbitantly high.

33.11. So far as the ground raised by the Revenue that the ld.CIT(A) has admitted additional evidence in the form of an affidavit of Mr. Ramesh Malhotra, GM of Brajeswari Textiles Ltd. and Shiva Spin Fab Pvt. Ltd. is concerned, we find from the order of the ld.CIT(A) at para 6.5.2 (which has been reproduced at page 25 of this order) that the affidavit was filed at the direction of the ld.CIT(A) and, therefore, we are of the opinion that there is no violation of the Rule 46A when some document is filed at the direction of the CIT(A). The ground raised by the Revenue on this issue is accordingly dismissed.