INCOME TAX OFFICER WARD-1(1), MUMBAI vs. M/S.CENTAURUS EQUITIES PRIVATE LIMITED, MUMBAI

The captioned appeal has been filed by the Revenue challenging the order dated 15th March 2018, passed by the learned Commissioner (Appeals)–5, Mumbai, for the assessment year 2010–11.

2 Devendra S. Shah authorities. The reason for selection of scrutiny was intimated to the assessee. The notices under section 142(1) were issued and served on the assessee. In response, the authorised representative of the assessee attended and filed relevant information as called for.

3 Devendra S. Shah assessee provided the new address of the companies to the AO and in response all the parties submitted the replies under section 133(6) of the Act. Before AO, assessee contended that no specific mention was made by Praveen Kumar Jain in his statements recorded during the course of search that the transactions of share application money given to the assessee were accommodation entries. It was also claimed that the statements was recorded at the back of the assessee which could not be treated as evidence unless confronted. It was also submitted that Praveen Kumar Jain and his associates had retracted their statements recorded during the course of search. It was submitted that confirmation of all parties including their financial statements, bank statements and affidavits of respective companies were placed on record. It was claimed that no unaccounted cash in any manner was paid by the assessee to Praveen Kumar Jain & his associates in connection with these transactions. Accordingly it was submitted that identity and creditworthiness of the entities were given and also genuineness of the transaction were proved, no addition under section 68 could be made in this respect. The AO considered the submissions of the assessee and he rejected the same by heavily relying on the corroborating evidence as found by the Department during search conducted under section 132 of the act. Further AO commented on the retraction filed by the Praveen Jain and his associates in detail in his report and observed that it is merely an 4 Devendra S. Shah afterthought and legally not valid. Therefore AO concluded that the share application money was not genuine and is liable to be added to the income of the assessee under section 68 of the Act.

Aggrieved with the above order, assessee preferred an appeal before CIT(A) and made a detailed submission. For the sake of clarity it is reproduced below:

―4.2 Assessee's Submissions: During the course of appellate proceedings, the appellant tiled written submissions, the relevant extract of which is given below-

1. 1. The appellant company has received Share Application monies from S companies who are assessed to tax and who have confirmed the transactions and provided the necessary supporting documents to prove the identity of the concerns, credit worthiness and genuineness of the transactions.

2. Without prejudice to above, the AD cannot verify the source of the source and hence the addition is wrongly made. It may be stated that the source of source in respect of share application can be verified by the assessing officer only from the assessment year 2013-14 as per Proviso to Section 68 of the Act which was added only with effect from 01104/2013. The Proviso was added by Finance Act 2012 w.e.f 01/04/2013. However, it may be stated that the assessee company has proved source of the fund.

3. The said parties have filed the confirmations in respect of the shore application.

4. The appellant has filed the following documents during the assessment proceedings. Share application form along with Board Resolution to  investment and certificate of investment made. Confirmation along with full name and address of the parties  who have been allotted shares.

5 Devendra S. Shah Copy of Acknowledgement of Income Tax Return filed.  Copy of accounts as on 3 1.03.2010.  Copy of the bank statements showing the amounts paid by  the Said Companies to the appellant company. The affidavit by the Directors of the said companies  confirming the investment. Share Certificate issued by the Company.  Return of allotment filed with registrar of company (MCA)  allotting the shares. Copy of PAN Card.  5. The appellant also filed copies of its bank statements for the year ended on 31.03.2020.

6 Devendra S. Shah diligence, the burden does not lie on the appellant to prove the same. In any case the appellant has provided the full details to prove credit worthiness of the parties.

7 Devendra S. Shah Section 68 casts the responsibility upon the Assessec to prove the following– a) identity of the Creditors b) Capacity of the Creditors c) Genuineness of the Loan As regards Identity of the Creditors During the course of assessment proceedings the following details were submitted: a) Confirmation along with full name and address of the parties who have been allotted shares. b) Share application form along with Board Resolution to investment and certificate of investment made c) Copies of the PAN number of the investor d) The Income Tax Returns of the investor e) Profit and loss and Balance sheet each such investor f) These share application money were taken from five companies, which are registered with MCA The details or their existence, shareholding pattern, list of directors, history of the company and all accounts are available in public domain, all these companies are active on MCA site. Under the circumstance the identity of the investor companies has been established beyond doubt. As regards Creditworthiness of the parties: During the course of Assessment Proceedings following details were submitted: a) Confirmations from each of such investor. b) The audited accounts of each of such investor. c) Copy of Acknowledgement of Income Tax Returns of each of such investor. d) Copy of Bank Statements of each of such investor and those of your appellant for the relevant period. e) No cash was deposited in Bank Account before granting loan to Your Appellant. f) Now there is a paradox In the approach of the Income Tax Department as regards Mr. Praveen Kumar Jain and his associate

8 Devendra S. Shah companies and share application money given by them to Your Appellant. On one the Income Tax Assessment of Mr. Pravin Kumar Jain has been completed by assessing his income at Rs. 170 Crores and on the other hand department holds that he does not have capacity to making investment in other group . Both the stands of the department are contradictory to each other. g) The said company has sizeable Share capital, Reserves & Surplus and other income. Under the circumstances, Your Appellant submits that credit worthiness on the lenders has also been established. As regards Genuineness of the Loan On this point Your Appellant would like to make the following submissions: They have been reflected in the books of account of the  appellant as well as the investor company. Mr. Praveen Kumar Join as well as the directors of  respective companies whom the share application money was taken by way of their affidavits, have not only confirmed the transactions of share application money but also Categorically deposed that these loan were through account payee cheques Banking channels are absolutely genuine The fact of share application money being received through proper banking channels was also verified by the Assessing Officer. During the course of assessment proceedings no further  inquiries were made as regards alleged bogus share application money and no further statements were recorded in case of Your Appellant. Similarly, no specific questions were asked either to Mr.  Praveen Kumar Jain and his associates during the entire search operation or subsequently despite the fact that the subsequently many statement in his case were recorded. No specific query was paused as regards alleged bogus loans given to Your Appellant. In fact, the allegations made, by the officer are after  thoughts and only with the intention to make additions in the hands of Your Appellant. The general statement of Mr. Praveen Kumar Jam, and his  associates not serve the purpose of the Assessing Officer to 9 Devendra S. Shah prove a genuine transaction Into a non genuine transaction. It Is worthwhile to note that neither Mr. Praveen Kumar Jain nor his various associates (who were directors of the lender company) have anywhere made any specific averment that the share application money given to your appellant by them were sham and bogus and cash was passed on to them by Your Appellant against the share application money so given. On the contrary the specific affidavit that the share  application money given by the respective company to Your Appellant are through account payee cheques/ Banking channels are absolutely genuine. Moreover, the cross examination the Pravin Kumar Join as well as the Directors of the investor company was not provided to Your Appellant despite, specifically asked for. It may also be stated that Mr. Praveen Ku mar Jain and his  2ssociates have retracted their Statements. Despite the insistence of Your Appellant no cognizance was taken in respect of these retracted statements. The Assessing Officer being a person required to make n  Assessment, assumes qua Judicial powers. He is required to come to an opinion/ judgment of the matter on his own and he cannot simply rely upon or act upon any opinion framed by a third parry because he himself is an authority who has to pass an order, he cannot simply rely upon the work of the third party without drawing to his own conclusion. Under the circumstances, your appellant submits that the genuineness of the loans is also established by Your Appellant. 2) Thus, the appellant claims that the onus that lay upon him u/s 68 of the Act was discharged by him and, therefore, the AO was not justified in making the addition u/s 68 of the Act, as held in the following judicial decisions:- CIT Vs Smt Sushila Devi Khadaria 319 ITR 0413  Income Tax Officer Vs Anant Shel Ters (F) Ltd 51 SOT 0234  CIT Vs Varinder Rawlley 366 ITR 0232  CIT Vs Sahibganj Electric Cables (P) Ltd 11$ ITR 0408  ITO Vs Deep Darshan Properties Put Ltd & Others IDA no.  2117 & 2118/Mum/2014 3) The appellant further relies on following judgments to prove the point that having established the identity of lenders, the creditworthiness of the creditors and the genuineness of the loan, he was thereafter not required to prove anything further and no duty was cast upon him to establish as to how the 10 Devendra S. Shah lenders had arranged their funds to advance loans to him:- CIT Vs Orrisa Corporation (P) Ltd 159 ITR 0078  Nemi Chand Kothari Vs CIT 264 ITR 0254  Murlidhar Lahorimal Vs CIT 280 ITR 0512  Labh chand Bohra v. ITO 219 CTR 0571  CIT v. Dwarkadhish Investment Put. Ltd. 330 ITR 0298  CIT v. Value capita Services Put. Ltd 307 ITR 0334  Netscape Software Ltd. v. DCID ITA/38528M/2009  ACID v. Divine (India) Infrastructure Pvt. Ltd. IDA  No.2082/Del/2009 ACIT, CC-32, Mumbai Vs M/s Archieve Realty Developers  Ltd dated 18/11/2016 M/s Shree Laxmi Estate Put Ltd Vs ITO, Wd.1513)13),  Mumbai. ITA No.5954/Mum/2016) dated 29/12/2017. The Mumbai Tribunal had occasion to consider the similar facts where allegation was made in respect of money received from Companies alleged to be belonged to Praveen Kumar Join. The Hon'ble Tribunal considering the judgment of Bombay High Court in case of M/s. Gagandeep Infrastructure Put. Ltd. (2017) 394 ITR 680 (Bombay) and Supreme Court decision in case of Ws Lovely Exports Put Ltd. 216 CTR 195 (SC) has held that no addition can be made in respect of addition under section 68 of the Income Tax Act in respect of Share Capital for assessment year prior to Assessment Year 2013.14 in view of the specific provision in the act.  Recently in case of Commissioner of Income Tax — I Vs. MIs. Gagandeep Infrastructure PvC Ltd. (20271 80 taxmann.com 272 (Bombay) ITA No. 2613 of 2014 the Bombay High Court has held as under: We find that the proviso to section 68 of the Act has been introduced by the Finance Act 2022 with effect from 1st April, 2023. Thus it would be effective only from the Assessment Year 2013-24 onwards and not for the subject Assessment Year. In fact, before the Tribunal, it was not even the case of the Revenue that Section 68 of the Act as in force during the subject years has to be read/understood as though the proviso added subsequently effective only from 1st April, 2023 was its normal meaning. The Parliament did not introduce to proviso to Section 68 of the Act with retrospective effect nor does the proviso so introduced states that it was introduced "for removal of doubts or that it is "declaratory. Therefore it is not open to give it retrospective effect, by proceeding on the basis that the addition of the proviso to Section 68 of the Act is immaterial and does not change the interpretation of Section 68 of the Act both before and after the adding of the proviso. In any view of the matter

11 Devendra S. Shah the three essential tests while confirming the pre-proviso Section 68 of the Act laid down by the Courts namely the genuineness of the transaction, identity and the capacity of the share subscriber have all been examined by the impugned order of the Tribunal and on facts it was found satisfied. Further it was a submission on behalf of the Revenue that such large amount of share premium gives rise to suspicion on the genuineness (identity) of the shareholders i.e. they are bogus. The Apex Court in Lovely Exports (P.) Ltd. (supra) in the context to the pre-amended Section 68 of the Act has held that where the Revenue urges that the amount of share application money has been received from bogus shareholders then it is for the Income Tax Officer to proceed by reopening the assessment of such shareholders and assessing them to tax in accordance with law. It does not entitle the Revenue to add the same to the assessee's income as unexplained cash credit.  Arceli Realty Limited (Formerly known as Ellora Electricals Ltd.) Vs. Income Tax Officer (ITA NO.6492/Mum./2016) dated 19.04.2017–ITAT (Mum.) It has been held in the said case that the appellant having provided the details the addition cannot be made under section 68 of the Act. The said case is in respect of money received from Mr. Pravin Jam. It is reiterated that the AO had merely relied upon the statements of third parties and brushed aside the evidences led by the appellant and not discharged his own onus while making addition u/s 68 of the Act. In view of above submissions, it is prayed that the addition of Rs.5,47,50,000/- made by the AO should be deleted.‖ Considering the submissions of the assessee in detail and Ld 5. CIT(A) in reference to the financials of the investment companies and allowed the appeal of the assessee with the following observations:– ―The above reproduced financials of the investor companies indicate that these investors are in regular business and there does not appear to be any doubt. Thus the credit worthiness of the investor comnics i.e. they have the capacity to invest in the share capital of the Appellant Company. In these circumstances, it is submitted by the Authorized Representative that, by no stretch of imagination it can he said

12 Devendra S. Shah that the appellant had not discharged the initial onus cast upon him to establish the identity and creditworthiness of the creditors as well as genuineness of the transactions. Therefore, the onus shifted to the AO. It is submitted that if the AO was not filed, he had the option of making inquiries from the lenders by summoning them, it is also submitted that no independent verification was carried out by the AC) with the investor companies, no summons u/s 131 was issued to the lender companies and no statements were recorded with regard to the genuineness of specific transactions with the appellant, no evidence was brought on record in order to controvert the claims of th appellant, it is submitted that there is no finding by the AO that the evidences produced by the appellant were untrustworthy or lacked credibility. In other words, the AO did not make any attempt to discharge his burden of proof to rebut the evidences produced by the appellant or to bring any contrary material on record. Thus, the appellants contention is that it had discharged onus of establishing the identity and creditworthiness of the investor companies and genuineness of the transactions with the help of relevant supporting evidences which could not be disproved by the AO appears to be correct. The AR during the appellate proceeding submitted that the Assessing Officer has only referred the information related to the outcome of search in the case of Shri Pravin Kumar Jain Group who were providing accommodation entries but the Assessing Officer has failed to demonstrate any such evidence that the appellant has in reality obtained any accommodation entries, there is no direct specific mention of the appellant by the director or key persons of the investor company, there is no evidence of cash deposits linked to the investors, that the assessing officer did not bring specific incriminating evidence linking the investor to the appellant, the only link is that the investors have invested in appellant company, it is not shown that appellant has given cash to the investors in lieu of entry is merely a surmise but not demonstrated. I have considered above submissions/arguments and it is concluded as under Papers/ evidence found in the search action raises presumption but the same is available in the case of person searched but not in the case of third parties unless proved and corroborated, Similarly, retraction may he rejected as motivated, but the same can be considered against the person who has retracted in his assessment. Such statement in the case of another person loses its sanctity unless it is corroborated with other evidences. When the investor company is filing regular Income tax returns of income and there is a transaction through banking channel, no addition can be made without having any contrary or cogent evidences in possession. The AR relied and brought to my notice the judgments to support the appellant which are equally applicable to the appellant's case. Some of 13 Devendra S. Shah them are discussed here below:-

1.

2. The Hon'ble Bombay High Court in the case of CIT v/s_Creative World Telefilms Ltd 333 ITR 100 has held as under: "If the share application money is received by the assessee company from alleged bogus shareholders who's name are given to the Assessing Officer then the department can always proceed against them and if necessary reopen their individual assess merits. Held, dismissing the appeal, that there was no dispute that the assessee had given the details of names and addresses of the shareholders, their PAN! GIR numbers and had also given the cheque numbers, name of the bankers. The Assessing Officer ought to have found out their details through PAN cards, bank details. Thus, the view taken by the Tribunal could not be faulted.

3. CIT vs. Gagandeep Infrastructure Pvt. Ltd {Bombay High Court. During the previous relevant to the subject Assessment Year the assessee had increased its share capital from Rs,2,50,000/– to Rs.83. 75 lakhs. During the assessment proceedings, the Assessing Officer noticed that the respondent had collected share premium to the extent of Rs.6.69 crores. Consequently he called upon the respondent to justify the charging of share premium at Rs. 190/per share. The respondent furnished the list of its shareholders, copy of the share application form, copy of share certificate and Form no.2 filed with the Registrar of companies. The justification for charging share premium was on the basis of the future prospects of the business of the assessee. The Assessing Officer did not accept the explanation/justification of the respondent and invoked Section 68 of the Act to treat the amount of Rs. 7.53 crores i.e. the aggregate of the issue price

14 Devendra S. Shah and the premium on the shares issued as unexplained cash credit within the meaning of Section 68 of the Act. This addition was deleted by the CIT(A) and the Tribunal. Before the High Court, the department contended that the proviso to Section 68 of the Act which was introduced with effect from 1st April, 2023 would apply in the facts of the present case even for A. Y. 2008-09. The basis of the above submission was that the de hors the proviso also the requirements as set out therein would have to be satisfied. HELD by. the High Court dismissing the appeal: (i) We find that the proviso to Section 68 of the Act has been introduced by the Finance Act 2022 with effect from 1st April, 2013. Thus it would be effective only from the Assessment Year 2013-24 onwards and not for the subject Assessment Year. In fact, before the Tribunal, it was not even the case of the Revenue that Section 68 of the Act as in force during the subject years has to be read/understood as though the proviso added subsequently effective only from 1st April. 2013 was its normal meaning. The Parliament did not introduce to proviso to Section 68 of the Act with retrospective effect nor does the proviso so introduced states that it was introduced 'for removal of doubts" or that it is 'declaratory". Therefore it is not open to give it retrospective effect, by proceeding on the basis that the addition of the proviso to Section 68 of the Act is immaterial and does not change the interpretation of Section 68 of the Act both before and after the adding of the proviso. In any view of the matter the three essential tests while confirming the pre proviso Section 68 of the Act laid down by the Courts namely the genuineness of the transaction, identity and the capacity of the investor have all been examined by the impugned order of the Tribunal and on facts it was found satisfied. (ii) Further it was a submission on behalf of the Revenue that such large amount of share premium gives rise to suspicion on the genuineness (identity) of the shareholders i.e. they are bogus. The Apex Court in CIT v/s. Lovely Exports (P)Ltd. 317 JTR 218 in the context to the preamended Section 68 of the Act has held that where the Revenue urges that the amount of share application money has been received from bogus shareholders then it is for the income Tax Officer to proceed by reopening the assessment of such shareholders and assessing them to tax in accordance with law. It does not entitle the Revenue to add the same to the assessee’s income as unexplained cash credit." The Authorized Representative has also brought to my notice in a recent judgment, the Hon’ble ITAT, Mumbai in the case of Arceli realty Ltd. dated 21/04/2017 has decided the similar issue, involving some of the investors who are common to the appellant and the case cited by the appellant. The 15 Devendra S. Shah investors are M/s Alka Diamond Industries Ltd and M/s Yash-V- Jewels Ltd. The operative portion of the decision is as under :- If the totality of facts and the judicial pronouncements, discussed hereinabove, are analyzed, we are of the considered opinion that the onus caste upon the assessee, as provided u/s 68 of the Act, has been duly discharged by the assessee as the identity of the share subscribers, creditworthiness and genuineness of the transaction is not in doubt or it can be said that the same has been proved/explained by the assessee. Now, The onus has reverted back upon the Revenue to prove otherwise. The Ld. Assessing Officer merely relied upon the information received from the investigation wing and did not made any independent enquiry. The Assessing Officer, was expected to disprove the claim of the assessee with the help of evidence, if any, received from the investigation wing, as has been claimed by the Revenue. The Revenue has nowhere proved that any malafide is done by the assessee. Failure to do so, vitiate the addition made under the set of facts. Reference can be made to the decision in CIT vs Orissa Corporation Pvt. Ltd. 158 ITR 78 (SC) and the ratio laid down in Khandelwal Construction vs CIT 227 ITR 900 (Guw.). The satisfaction has to he derived from the relevant facts and that to on the basis of proper enquiry by the Assessing Officer and such enquiry must be reasonable and just In the present case, the Assessing Officer has not brought any evidence on record that the amounts received from M/s Alka Diamond Industries Ltd. arid M/s Yash-V–Jewels Ltd. are merely accommodation entries. As mentioned earlier, the Ld. Assessing Officer has acted merely on the basis of information received from the Investigation wing. The ratio laid down by Hon'ble Delhi High Cowl in CIT vs Vrindaban Farms Pvt. Ltd. squarely gives shelter to the assessee, wherein, it was held that if the identity and other details of share applicant are available, the share application money cannot be treated as undisclosed income in the hands of the company. in the present case, the assessee even has proved the source of source, therefore, the creditworthiness was also proved, consequently, no addition made u/s 68 of the Act can be said to be justified. The ratio laid down in Creative World Tele films Ltd. (supra) by Hon'ble jurisdictional High Cowl squarely comes to the rescue of the assessee. The assessee duly furnished the proof of identity like PAN, bank account details from the bank, other relevant material, genuineness of the transaction, payment through banking channel and even the source of source, therefore, the assessee has proved the conditions laid down u/s 68 of the Act. it is also noted that in spite of repeated request. the Ld. Assessing Officer did not provide opportunity to cross examine the concerned persons and even the relevant information and allegation, if any, made therein, which has been used against the assessee, was not provided to the assessee. At this stage, we add

16 Devendra S. Shah here that mere information is not enough rather it has to be substantiated with facts. The information may and may not be correct. For fastening the liability upon anybody, the Department has to provide the authenticity of the inform at/on to the person against whom such information is used. The principle of natural justice demands that without confronting the assessee of such evidence, if any, or the information, no addition can be made. Even otherwise, as per Article-265 of the Constitution of India, only legitimate taxes have to be levied and collected. In our humble opinion, the assessee has duly discharged the onus caste upon it, therefore, respectfully following the decisions from Hon'ble Apex Court, Hon'ble High Courts and Hon'ble jurisdictional High Court, we reverse the order of the Ld. Commissioner of Income Tax (Appeal), resultantly, this ground of the assessee is allowed. Finally, the appeal of the assessee is partly allowed. In view of the above factual and legal position it is established that when details of share application money and shareholders are provided during the course of assessment proceedings and the same have been brought on record, in such a case the same cannot be treated as unexplained cash credit in the hands of the receiver of such share application money. In view of the above facts and following the decisions by the Hon’ble jurisdictional ITAT which are applicable to the facts of the Appellants case the addition of Rs.5,47,50,000/- made by the AC) u/s 68 in the case of the appellant is not justified. Therefore, the said addition is to be deleted. Grounds No.2&3 taken up by the appellant are accordingly allowed.‖ Aggrieved with the above order revenue is in appeal before us 6. raising following grounds of appeal:– ―i) Whether On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in deleting the addition made on account of bogus share application money without appreciating the fact that the inv3esting companies were paper entities providing accommodation entries of share application managed by Shri Pravin Jain Group? ii) Whether On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in deleting the addition of bogus share application money without appreciating the provisions of 17 Devendra S. Shah section 68 of the I.T. Act, 1961. Further, once it was established during search u/s 132 on Pravin Jain and Associate Concerns that the investing companies were paper entities providing accommodation entries of share application, the confirmation filed in response to notice under section 133(6) of the Act holds no ground?‖ Before us, learned DR submitted her submission in the return 7. form, which is reproduced below:– ―Sub: Written submission in the above case: On receipt of information from the DIT(lnv), Mumbai regarding the assessee being a beneficiary of accommodation entries by way of share application monies through the Pravin Jain controlled entities, the case of the assessee was reopened, after following due process of law. The assessee had received share application monies from 5 parties: Yash V Jewels Ltd. Rs 1.70 Cr Triangular Infocom Ltd. Rs 2.42 Cr Vingaurd Jewels Ltd. Rs 0.95 Cr Alka Diamond Ind. Ltd. Rs 0.30 Cr Ansh Merchandise Pvt. Ltd. Rs 0.10 Cr On this issue, the Hon'ble Bench may please consider the following points, 1. Perusal of the bank statements show that amounts were credited into the accounts of these entities and the amounts were transferred to the assessee on the same day. a. Page 45 Paper Book ('PB') - Paras Gems deposits RS.90 Lakhs into the a/c of Yash V Jewels on 06/10/2009; who then transfers it to the assessee on the same day. b. Page 46 PB - Taj Impex deposits Rs.80 Lakhs into the a/c of Yash V–Jewels on 20/10/2009; who then transfers it to the assessee on the same day. c. Page 84 & 85 PB - Taj Impex deposits Rs.85.50 Lakhs and Rs. 64.50 Lakhs into the a/c of Triangular Infocom Ltd on 10/10/2009; who then transfers Rs.75 Lakhs and RS.50

18 Devendra S. Shah Lakhs to the assessee on the same day. d. Page 85 PB - Taj Impex deposits Rs.57.30 Lakhs and Rs 58.50 Lakhs into the a/c of Triangular Infocom Ltd on 21/10/2009; who then transfers Rs. 57.50 Lakhs and Rs.60 Lakhs to the assessee on the same day. e. Page 122 PB - Seven Star Gems deposits Rs.25 Lakhs into the a/c of Vangaurd Jewels Ltd on 09/10/2009; who then transfers it to the assessee on the same day. f. Page 122 PB - Taj Impex deposits Rs. 88 Lakhs into the a/c of Vangaurd Jewels Ltd on 16/10/2009; who then transfers Rs.70 Lakhs to the assessee on same day. g. Page 157 PB - Ryan Intl deposits Rs. 20 Lakhs and Paras Gems deposits Rs.2 Lakhs into the a/c of Alka Diamond Industries Ltd on 06/10/2009; who then transfers RS.30 Lakhs to the assessee on the same day. h. Page 216 PB - Vanguard Jewels deposits Rs.27.8 Lakhs into the a/c of Ansh Merchandise Pvt Ltd on 07/10/2009; who then transfers Rs.20 Lakhs to the assessee on the same day. i. The balances, before and after these transactions, are minimal. ii. Taj Impex and Paras Gems form part ofthe bank statements in all the 5 entities. iii. All transactions are in round figures.

2. Perusal of the Return of Income of Yash V Jewels on page 48 of PB, Triangular Infocom Ltd on page 87 of PB, and Vangaurd Jewels Ltd on page 125 of PB, shows that they were all filed on 14/10/2010 from IP address 115.96.142.59, though the Directors, Auditors as well as the addresses of the companies are different. It is also seen that the Return of Income for Alka Diamond was also filed from the same IP address, though on 15/10/2010. This vindicates the cause of the Assessing Officer that these are entities controlled by the Pravin Jain Group.

3. Further, the bank accounts of Triangular Infocom (page 84 of PB), Vanguard Jewels Ltd (page–121 of PB), and Ansh Merchandise (page 215 of PB) are managed by the same person ie. rishabbabel@yahoo.com, which is again indicative of entities controlled by a common person.

19 Devendra S. Shah

Considered the rival submissions and material on record. We 9. notice that assessee had received share application monies of ₹ 5,47,50,000/– from 5 companies. In the assessment proceedings, assessee has filed all the relevant documents in support of the receipt of share application money from these parties which includes board resolution, confirmations from all the parties, income tax returns, copy of accounts and bank statements along with affidavit of directors of all the companies and share certificates and copy of PAN card of all the companies. The assessing officer rejected all the documents submitted by the assessee and proceeded to make addition based on the information received from investigation wing – Mumbai. We further

20 Devendra S. Shah notice that the Ld CIT(A) considered the detailed submissions of the assessee and gave his findings by observing that assessee has provided all the details and supporting documents which proves that all the 3 ingredients of section 68 are satisfied. Ld CIT(A) observes that assessee has filed all the documents which proves the identity of the parties who had invested the share application money, the financial documents submitted by the assessee which proves that they have capacity to invest in the share capital of the assessee company. Further he observed that all the transactions were routed through the banking channel which proves that the transaction is genuine. Since assessee has submitted all the relevant document to prove the genuinity of the transaction which led him to come to the conclusion that assessee has discharged the initial onus cast upon him to establish the identity, creditworthiness and genuineness of the transactions. He observed that the onus now shifted to the AO. He noticed that assessing officer could have carried out independent verification of all the parties by issuing summons under section 131 of the Act. The assessing officer has not made any further investigation to controvert the claims of the assessee but proceeded to make the addition heavily relying on the information of investigation wing and merely on the fact that these transactions involving Shri Praveen Kumar Jain.

21 Devendra S. Shah We notice that Ld DR in her submission brought to our notice 10. from the information contained in bank statements of the parties filed in the paper book. She brought to our notice that the amounts transferred by the parties to the assessee were received from another concern and transferred on the same day. She does not dispute the fact that all the transactions were routed through banking channel and assessee has submitted all the information which were before the assessing officer. The assessing officer should have investigated all the information and could have controverted the submissions made by the assessee or could have found the sources of the money transferred and he could have traced whether any involvement of cash deposits. It is not the case of the assessing officer that unaccounted money were transferred in the above transactions. Further we notice that she brought to notice commonness of email ID and commonness in board’s resolutions passed by these companies. These commonness could be the employment of common company secretary or accountant. These evidences will not make any difference to the genuine transaction.

We notice that Ld CIT(A) allowed the appeal of the assessee by 11. relying on the case of coordinate bench decision in the case of M/s Arceli reality Ltd (ITA No. 6492/M/2016 dated 21/04/2017) in which similar issue was considered. What is relevant is that 2 of the investors in the present case are the investors in the above case i.e., M/s Alka

22 Devendra S. Shah Diamond Industries Ltd and M/s Yash-V-Jewels Limited. The operative portion of the decision for the sake of clarity is reproduced below:

―If the totality of facts and the judicial pronouncements, discussed hereinabove, are analyzed, we are of the considered opinion that the onus caste upon the assessee, as provided u/s 68 of the Act, has been duly discharged by the assessee as the identity of the share subscribers, creditworthiness and genuineness of the transaction is not in doubt or it can be said that the same has been proved/explained by the assessee. Now, The onus has reverted back upon the Revenue to prove otherwise. The Ld. Assessing Officer merely relied upon the information received from the investigation wing and did not made any independent enquiry. The Assessing Officer was expected to disprove the claim of the assessee with the help of evidence, if any, received from the investigation wing, as has been claimed by the Revenue. The Revenue has nowhere proved that any malafide is done by the assessee. Failure to do so, vitiate the addition made under the set of facts. Reference can be made to the decision in CIT vs Orissa Corporation Pvt. Ltd. 158 1TR 78 (SC) and the ratio laid down in Khandelwal Construction vs CIT 227 ITR 900(Guw.). The satisfaction has to be derived from the relevant facts and that to on the basis of proper enquiry by the Assessing Officer and such enquiry must be reasonable and just. In the present case, the Assessing Officer has not brought any evidence on record that the amounts received from M/s Alka Diamond Industries Ltd. and M/s Yash- V-Jewels Ltd. are merely accommodation entries. As mentioned earlier, the Ld. Assessing Officer has acted merely on the basis of information received from the Investigation wing. The ratio laid down by Hon'bie Delhi High Court in CIT vs Vrindaban Farms Pvt. Ltd. squarely gives shelter to the assessee, wherein, it was held that if the identity and other details of share applicant are available, the share application money cannot be treated as undisclosed income in the hands of the company. In the present case, the assessee even has proved the source of source, therefore, the creditworthiness was also proved, consequently, no addition made u/s 68 of the Act can be said to be justified. The ratio laid down in Creative World Telefilms Ltd. (supra) by Hon'ble jurisdictional High Court squarely comes to the rescue of the assessee. The assessee duly furnished the proof of identity like PAN, bank account details from the bank, other relevant material, genuineness of the transaction, payment through banking channel and even the source of source, therefore, the assessee has proved the conditions laid down u/s 68 of the Act. It is also noted that in spite of repeated request, the Ld. Assessing Officer did not provide opportunity to cross

23 Devendra S. Shah examine the concerned persons and even the relevant information and allegation, if any, made therein, which has been used against the assessee, was not provided to the assessee. At this stage, we add here that mere information is not enough rather it has to be substantiated with facts. The information may and may not be correct. For fastening the liability upon anybody, the Department has to provide the authenticity of the information to the person against whom such information is used. The principle of natural justice, demands that without confronting the assessee of such evidence, if any, or the information, no addition can be made. Even otherwise, as per Article-265 of the Constitution of India, only legitimate taxes have to be levied and collected. In our humble opinion, the assessee has duly discharged the onus caste upon it, therefore, respectfully following the decisions from Hon'ble Apex Court, Hon'ble High Courts and Hon'ble jurisdictional High Court, we reverse the order of the Ld. Commissioner of Income Tax (Appeal), resultantly, this ground of the assessee is allowed.

The Facts of the above case is similar to the facts in the present 12. case and we are in agreement with the findings of the coordinate bench in the above paragraph. Therefore the appeal filed by the revenue is accordingly dismissed.