SINGHAL SUNRISE STEELS PVT. LTD.,GHAZIABAD vs. ITO, GHAZIABAD

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘G’, NEW DELHI Before Sh. Amit Shukla, Judicial Member Dr. B. R. R. Kumar, Accountant Member Asstt. Year : 2010-11 Singhal Sunrise Steels Pvt. Ltd., Vs Income Tax Officer, 241, Loha Mandi, Ward-2(3), Ghaziabad Ghaziabad (APPELLANT) (RESPONDENT) PAN No. AAJCS7938P Assessee by : Sh. M. S. Sekhon, CA Revenue by : Sh. N. K. Bansal, Sr. DR Date of Hearing: 21.08.2019 Date of Pronouncement: 18.09.2019 ORDER Per Dr. B. R. R. Kumar, Accountant Member:

The present appeal has been filed by the assessee against the order of the ld. CIT(A), Muzaffarnagar dated 16.02.2015.

2. Following grounds have been raised by the assessee: “1. That the Learned Commissioner of Income Tax (Appeals), Muzaffarnagar has erred in confirming the addition of Rs.79,00,000/- against the returned income of Rs.2,29,830/-.

2. That the Learned CIT(Appeals) has erred in confirming the addition of Rs.79,00,000/- received as share application money by the appellant under section 68 of the Income Tax Act, 1961.”

3. The facts have been taken from the orders of the revenue and submissions of the assessee.

2 Singhal Sunrise Steels Pvt. Ltd. 4. Brief facts of the case are that Assessee is a closely held Private Limited Company. Assessee has filed it’s income Tax Return on Dt.30/9/2010 declaring a total income of Rs. 2,29,830/-. The Company has Sh. Anil Singhal, Sh. Salek Chand Singhal, Ms. Sushma Singhal and Sh. Umesh Kumar Singhal as Directors. The assessee Company is engaged in the business of trading of Iron & Steels.

5. Balance sheet of the assessee firm stands it at Rs.2,91,08,993.59/- as on 31.03.2010, wherein issued share capital has been shown at Rs.4,00,000/- further, Share Application money has been shown at Rs.85,00,000/- as on 31.03.2010.

6. During the course of assessment proceedings assessee was enquired vide questionnaire dated 03.08.2012 to furnish complete details of share application money shown at Rs.85,00,000/-./It was asked to furnish name and complete addresses and PAN of the persons from whom the share application money was received along with copy of their bank statement, copy of Balance-sheet and confirmation of account in support of identity and creditworthiness of these persons and genuineness of transaction. In response to the query, the assessee could not furnish any convincing evidence to substantiate the genuineness of said transactions shown by the assessee in this regard following opportunities were afforded to the assessee by the Assessing Officer:

3 Singhal Sunrise Steels Pvt. Ltd. S. Notice/order Information sought Date fixed Compliance of the No. sheet date assessee 1 Substantiate the detail filed 10.10.2011 No compliance 28.09.2013 in ITR Notice u/s 143(2) 2 03.08.2012 Notice u/s 142(1) with 14.08.2012 Adjournment personally questionnaire, details of sought adjourned served persons from whom share to 28.08.2012 application money received along with complete business details. 3 28.08.2012 No compliance made. 4 08.10.2012 Again for name and complete 16.10.2012 Part reply addresses of share applicant. 5 16.10.2012 Again asked to furnish 22.10.2012 No details requisite details 6 22.10.2012 Again specifically asked to 01.11.2012 Part reply, details furnish name and current of share applicant addresses of share applicant. still not furnished 7 01.11.2012 Adjournment sought, no 06.11.2012 compliance 8 06.11.2012 Remaining details 23.11.2012 Only name & address of share applicant furnished. 9 23.11.2012 Remaining details. 07.12.2012 copy of ITR, bank statement, balance- sheet etc of share applicant furnished 10 07.12.2012 No compliance made. 11 10.01.2013 21.01.2013 No reply It is intimated that none of the companies found at given addresses. Asked to produce Principal officers of all the companies along with their current ITR, Balance-sheet profit & loss account for recording of their statement. 12 29.01.2013 Letter u/s 142(1) issued 05.02.2013 ROC records of 1 again intimating that all 8 company and companies not found at the Balance- sheet, given addresses. Identity of P&L account of 4 the companies not proved. companies Again asked to produce furnished. Principal officers of 4 Singhal Sunrise Steels Pvt. Ltd. companies. Registers of General meeting of shareholders, from 01.04.2009 till date. 13 06.02.2013 Asked to produce current 11.02.2013 No reply, no one addresses of companies produced, where summons u/s 131 can registers also not be issued to the Principal produced. officers, so that physical identity of companies can be established. Also asked to produce Directors of assessee company for recording of statement 14 11.02.2013 To substantiate the share 21.02.2013 Written submission application money Also asked to produce Directors of assessee company and share applicant. 15 21.02.2013 To substantiate the share 06.03.2013 Written submission application money Also asked to produce Directors of assessee company and share applicant. 16 05.03.2013 To substantiate the share Written submission application money Also asked to produce Directors of assessee company and share applicant. 17 12.03.2013 To substantiate the share Written submission application money Also asked to produce Directors of assessee company and share applicant. 18 19.03.2013 To substantiate the share Written submission application money Also asked to produce Directors of assessee company and share applicant.

7. The assessee was requested to prove the identity of companies from whom share application money claimed to have been received and to produce Principal Officers of these companies so that genuineness of documents and physical existence of companies can be examined. It was asked to furnish name and complete addresses and PAN of the persons from whom share application money was received along with copy of their bank statement, copy of Balance- sheet and confirmation of account in support of identity and creditworthiness of these persons and genuineness 5 Singhal Sunrise Steels Pvt. Ltd. of transaction. Despite repeated requests and ample opportunity, as mentioned above, the assessee vide reply dated 06.11.2012 could furnish only list of companies along with their addresses from whom share application money was received along with their addresses during the relevant financial year as under:

S. No. Name and address of applicant company Amount paid as share application money along with premium 1 Safari Tradex Private Limited, S-561, Room No. 218, 6,00,000/- Bhagwati Business Centre, School Block, Shakarpur, New Delhi 2 Focus Tradimpex Private Limited, D-111, South Ganesh 8,00,000/- Nagar, Mandawali New Delhi 3 Naman Lam Private Limited, Room No.204 21st Century 13,00,000/- Business Centre, D-64, Shakarpur New Delhi 4 Monitor Sprint Elevators Private Limited, Room No.204 21st 10,00,000/- Century Business Centre, D-64, Shakarpur New Delhi 5 Visit India Voyages Private Limited, 108, Shopping 14,00,000/- Complex, Veer Savarkar Block, Shakarpur, New Delhi 6 Kabir Enterprises Private Limited, Room No.204 21st 10,00,000/- Century Business Centre, D-64, Shakarpur New Delhi 7 Rachita Buildcon Pvt. Ltd., DA/4,106, Dua Business Centre, 10,00,000/- Main Vikas Marg, Shakarpur Delhi 8 Anubhav Buildmart Private Limited, DA/4, 106, Dua 10,00,000/- Business Centre, Main Vikas Marg, Shakarpur Delhi 9 Anil Singhal, R-9/67, Raj Nagar, Ghaziabad 1,50,000/- 10 Umesh Singhal, R-9/67, Raj Nagar, Ghaziabad 1,50,000/- 11 Amit Singhal, R-9/67, Raj Nagar, Ghaziabad 1,50,000/- 12 Salek Chand Singhal, R-9/67, Raj Nagar, Ghaziabad 1,50,000/-

11. The Assessing Officer directed the assessee to produce Principal Officer of all the above companies along with ID proof and ITR, Balance- sheet and Profit & Loss account of the last three years for recording of their statement. Date fixed was 21.01.2013, but they have not been produced. Documents produced vide letter dated 21.01.2013 and dated 29.01.2013 have similar addresses which have already been verified and found to be incorrect. The assessee has again provided the same addresses, except three addresses, of companies, vide letter dated 11.02.2013, addresses of three companies are changed as under: 1 Safari Tradex Private Limited, G-10, Best Plaza, H-8, Behind 6,00,000/- P.P. Jewellers, Netaji Subhash Place, New Delhi 2 Focus Tradimpex Private Limited, 25/14A, No.14, Kunti Marg, 8,00,000/- 60 Feet Road, Vishwas Nagar, Shahdara, New Delhi 3 Kabir Enterprises Private Limited., A-85, First Floor, Office 10,00,000/- No.2, ST No.15, Madhu Vihar, New Delhi 12. Physical inquiries were made at the above addresses by the officials of revenue and found that these companies are not inexistence at the given address. At Safari Tradex Private Limited, S-561, Room No. 218, 8 Singhal Sunrise Steels Pvt. Ltd. Bhagwati Business Centre, School Block, Shakarpur, New Delhi, a person named Sh. S.K. Srivastava is having office at this address, he has denied that such company was ever at this address. At South Ganesh Nagar, Mandawali New Delhi, the builder who is also owner of building stated that there is no such company since 1980. Similarly, the enquiries of other companies revealed the following: 1 Naman Lam Private Limited, Locked for many years, local inquiry Monitor Sprint Elevators Private Limited, reveal that such companies have Kabir Enterprises Private Limited, never been at this address. All at Room No.204 21st Century Business Centre, D-64, Shakarpur New Delhi 2 Visit India Voyages Private Limited, 108, There is office of M/s Max Bupa. They Shopping Complex, Veer Savarkar Block, have denied existence of such Shakarpur, New Delhi company. 3 Anubhav Buildmart Private Limited, There is office of M/s Sunline Rachita Buildeon Pvt. Ltd., Communication Systems for 7 years. DA/4, 106, Dua Business Centre, Main Vikas Sh. Desh Raj Bali of above has Marg, Shakarpur Delhi denied that such company was ever at this address. Also provided his visiting card, having same address. 4 Safari Tradex Private Limited, G-18, Garg Residential address some other Tower, Netaji Subhash Nagar, Pitampura, person residing who has denied New Delhi heard of such company. 5 Focus Tradimpex Private Limited, YP-43 B, Residential address some other Pitampura, New Delhi person residing who has denied heard of such company. 6 Safari Tradex Private Limited, G-10, Best Building is Locked. Building guard Plaza, H-8, Behind P.P. Jewellers, Netaji and nearby told that they have never Subhash Place, New Delhi heard such company’s name. 7 Focus Tradimpex Private Limited, 25/14A, Information obtained from owner of No.14, Kunti Marg, 60 Feet Road, Vishwas the building and nearby shopkeepers. Nagar, Shahdara, New Delhi No such company office have been in building. 8 Kabir Enterprises Private Limited., A-85, First Sh. Anil owner of M/s Drishya Eye Floor, Office No.2, ST No. 15, Madhu Vihar, care since 2009 told that he has not New Delhi heard of such company.

14. The Assessing Officer concluding that since the Assessee has failed to furnish current addresses of the companies, owing to which summons u/s 131 could not be issued, the notices issued u/s 133(6) have come back unserved, the filed enquiries conducted did not prove the existence of the companies, their identity not established, and failed to produce Principal Officers of company made addition of the amounts received by the company u/s 68 of the Income Tax Act, 1961.

15. The Assessing Officer also placed reliance on the following judgments:- (See: CIT v, Durga Prasad More [1971] 82 ITR 540 (SC), at pages 545, 547). “This raises the question whether the apparent can be considered as the real. As laid down by this court the apparent must be considered the real until it is shown that there are reasons to believe that the apparent is not the real and that the taxing authorities are entitled to look into the surrounding circumstances to find out the reality and the matter has to be considered by applying the test of human probabilities. In Commissioner of Income-Tax, West Bengal II v. Durga Prasad More, (1971) 82 ITR 540 Hegde J. speaking for the Supreme Court observed as unde”: - 11 Singhal Sunrise Steels Pvt. Ltd. “Now we shall proceed to examine the validity of those grounds that appealed to the learned judges. It is true that the apparent must be considered real until it is shown that there are reasons to believe that the apparent is not the real. In a case of the present kind a party who relies on a recital in a deed has to establish the truth of those recitals, otherwise it will be very easy to make self-serving statements in documents either executed or taken by a party and rely on those recitals. If all that an assessee who wants to evade tax is to have some recitals made in a document either executed by him or executed in his favour then the door will be left wide open to evade tax. A little probing was sufficient in the present case to show that the apparent was not the real. The taxing au thorities were - not required to put on blinkers while looking at the documents produced before them. They were entitled to look into the surrounding circumstances to find out the reality of the recitals made in those documents. ”

16. The ld. CIT (A) confirmed the order of the Assessing Officer relying on the judgment in the case of Empire Buildtech Pvt. Ltd. 366 ITR 110 and Nova Promoters and Finlease Pvt. Ltd. of Hon’ble Delhi High Court.

17. Before us, during the hearing, the ld. AR filed the minutes of the proceedings of extra ordinary general meeting of the assessee, ITR of the share applicant companies, the confirmations, the ROC record, P&L and balance sheet of the share applicant companies, copies of the application of the equity shares. It was argued that all the evidences to prove identity, genuineness and creditworthiness have been submitted before the authorities which has summarily rejected without giving due consideration. He relied on the documents filed in the paper book serial number upto 331.

12 Singhal Sunrise Steels Pvt. Ltd.

18. On the other hand, ld. DR, Sh. N. K. Bansal strongly supported the orders of the lower authorities. He took us through various aspect of the investigations and enquiries conducted by the Assessing Officer and the rationale to the ld. CIT (A) in confirming the appeal. He has filed his arguments in the form of written submission which are as under: “1. PCIT Vs NRA Iron & Steel (P.) Ltd. [2019] 103 taxmann.com 48 (SC) (Copy Enclosed) where Hon’ble Supreme Court reverse order of lower Authorities holding that where there was failure of assessee to establish credit worthiness of investor companies, Assessing Officer was justified in passing assessment order making additions under section 68 for share capital / premium received by assessee company. Merely because assessee company had filed all primary evidence, it could not be said that onus on assessee to establish credit worthiness of investor companies stood discharged

13 Singhal Sunrise Steels Pvt. Ltd.

Prem Castings (P.) Ltd. Vs CIT 2018-TIOL-274-SC-IT (Copy Enclosed) where Hon’ble Supreme Court held as follows: “We do not find any merit in this petition. The Special Leave Petition is accordingly dismissed.”

"20. Now, when we go to the order of the Tribunal in the present case, we notice that the Tribunal has merely reproduced the order of the Commissioner of Income-tax (Appeals) and upheld the deletion of the addition. In fact, they substantially relied upon and quoted the decision of its co-ordinate Bench in the case of MAF Academy P. Ltd., a decision which has been overturned by the Delhi High Court, vide its judgment in CIT v. MAF Academy P. Ltd. [2014] 206 DLT 277 ; [2014] 361 ITR 258 (Delhi)). In the impugned order it is accepted that the assessee was unable to produce directors and principal officers of the six shareholder companies and also the fact that as per the information and details collected by the Assessing Officer from the concerned bank, the Assessing Officer has observed that there were genuine concerns 15 Singhal Sunrise Steels Pvt. Ltd. about identity, creditworthiness of shareholders as well as genuineness of the transactions.

21. In view of the aforesaid discussion, we feel that the matter requires an order of remit to the Tribunal for fresh adjudication keeping in view the aforesaid case law."

Navodava Castle Pvt Ltd Vs CIT ([2015] 56 taxmann.com 18 (SC)/[2015] 230 Taxman 268 (SC)) (Copy Enclosed) SLP of assessee dismissed by Hon’ble Supreme Court

Konark Structural Engineering (P.) Ltd. Vs DCIT [2018] 90 taxmann.com 56 (Bombay) (Copy Enclosed) where Hon’ble Bombay High Court held that where assessee-company received certain amount as share capital from various shareholders, in view of fact that summons served to shareholders under section 131 were unserved with remark that addressees were not available, and, moreover, those shareholders were first time assessees and were not earning enough income to make deposits in question, impugned addition made by AO under sec. 68, was to be confirmed.

16 Singhal Sunrise Steels Pvt. Ltd. 8. Pratham Telecom India Pvt Ltd Vs PCIT (2018-TIOL-1983-HC-MUM- IT) (Copy Enclosed) where Hon’ble Bombay High Court held that mere production of PAN numbers & bank statements is sufficient enough to discharge the burden on taxpayer to escape the realms of Section 68.

10. DRB Exports (P.) Ltd. Vs CIT [2018] 93 taxmann.com 490 (Calcutta) (Copy Enclosed) where Hon’ble Calcutta High Court held that where AO made addition under section 68 in respect of increase in share capital of assessee- company, in view of fact that addresses of most of purported shareholders were identical and they could not be traced out despite notice issued under section 131, Tribunal was justified in confirming impugned addition.

“41. In the case before us, not only did the material before the Assessing Officer show the link between the entry providers and the 18 Singhal Sunrise Steels Pvt. Ltd. assessee-company, but the Assessing Officer had also provided the statements of Mukesh Gupta and Rajan Jassal to the assessee in compliance with the rules of natural justice. Out of the 22 companies whose names figured in the information given by them to the investigation wing, 15 companies had provided the so-called "share subscription monies" to the assessee. There was thus specific involvement of the assessee-company in the modus operandi followed by Mukesh Gupta and Rajan Jassal. Thus, on crucial factual aspects the present case stands on a completely different footing from the case of Oasis Hospitalities (P.) Ltd. (supra).

13. CIT Vs Ultra Modern Exports (P.) Ltd (40 taxmann.com 458, 220 Taxman 165) (Copy Enclosed) where Hon’ble Delhi High Court held that where in order to ascertain genuineness of assessee's claim relating to receipt of share application money, Assessing Officer sent notices to share applicants which returned unserved, however, assessee still managed to secure documents such as their income tax returns as well as bank account particulars, in such circumstances, Assessing Officer was justified in drawing adverse inference and adding amount in question to assessee's taxable income under section 68. It was held as follows: “9. As noticed previously, the CIT (A) was of the opinion that the assessee had discharged the basic onus which was cast upon it after 19 Singhal Sunrise Steels Pvt. Ltd. considering the ruling in Lovely Exports (P.) Ltd. 's case (supra). The material and the records in this case show that notice issued to the 5 of the share applicants were returned unserved. The particulars of returns made available by the assessee and taken into consideration in paragraph 3.4 by the AO in this case would show that the said parties/applicants had disclosed very meager income. The AO also noticed that before issuing cheques to the assessee, huge amounts were transferred in the accounts of said share applicants. This discussion itself would reveal that even though the share applicants could not be accessed through notices, the assessee was in a position to obtain documents from them.

While there can be no doubt that in Lovely Exports (P.) Ltd. (supra), the Court indicated the rule of "shifting onus" i.e. the responsibility of the Revenue to prove that Section 68 could be invoked once the basic burden stood discharged by furnishing relevant and material particulars, at the same time, that judgment cannot be said to limit the inferences that can be logically and legitimately drawn by the Revenue in the natural course of assessment proceedings. The information that assessee furnishes would have to be credible and at the same time verifiable. In this case, 5 share applicants could not be served as the notices were returned unserved. In the backdrop of this circumstance, the assessee's ability to secure documents such as income tax returns of the share applicants as well as bank account particulars would itself give rise to a circumstance which the AO in this case proceeded to draw inferences from. Having regard to the totality of the facts, i.e., that the assessee commenced its business and immediately sought to infuse share capital at a premium ranging between Rs. 90-190 per share and was able to garner a colossal amount of Rs. 4.34 Crores, this Court is of the opinion that the CIT 20 Singhal Sunrise Steels Pvt. Ltd. (Appeals) and the IT AT fell into error in holding that AO could not have added back the said amount under Section 68. The question of law consequently is answered in favour of the Revenue and against the assessee.”

21 Singhal Sunrise Steels Pvt. Ltd. 13. In view of the above reasons, the questions of law in these appeals are answered in favour of the revenue. The orders of the Assessing Officer are restored. The appeals are to succeed and are therefore allowed.

22 Singhal Sunrise Steels Pvt. Ltd.

23 Singhal Sunrise Steels Pvt. Ltd. 20. Rick Lunsford Trade & Investment Ltd Vs CIT [2016-TIOL-207-SC- IT](Supreme Court) (Copy Enclosed) where Hon’ble Supreme Court dismissed SLP upholding that it is open to the Revenue Department to make addition on account of alleged share capital u/s 68, where the assessee company has failed to show genuineness of its shareholders.”

19. Heard the arguments of both the parties and perused the material available on record.

24 Singhal Sunrise Steels Pvt. Ltd. S. No. Name of companies Owner's/Director 1 Rachita Buildcon Private Limited Anil Agrawal Sanjay DA/4,106, Dua Business Centre, Main Vikas Marg, Shakarpur Agrawal Delhi 2 Kabir Enterprises Anil Agrawal Rajeev Room No.-204, 21St Century Business Centre, D-64, Kumar Bansal Shakarpur, New Delhi 3 Anubhav Buiidmart Private Limited Rajeev Kumar Bansal DA/4,106, Dua Business Centre, Main Vikas Marg, Shakarpur Dushyant Agarwal Delhi 4 Focus Tradimpex Private Limited Sumit Kumar Verma D-lll, South Ganesh Nagar, Mandawali, New Delhi Lokesh Garg 5 Monitor Sprint Elevators Private Limited. Anil Agrawal Dushyant DA/4,106, Dpa Business Center, Main Vikas Marg, Agarwal Shakarpur, New Delhi 6 Naman Lam Private Limited Rajeev Kumar Bansal ‘ Room No.204 D-64 21St Century Business Centre Shakarpur Dushyant Agarwal Delhi 7 Safari Tradex Private Limited Yogendra Kumar Vinod S-556, 2nd Floor School Block, Shakarpur, New Delhi Sharma 8 Visit India Voyages Private Limited Anil Agrawal, Madhukar 108, M J Shopping Centre Dubey Surendra Kumar Veer Savarkar Block, Shakarpur New Delhi Garg, 9 True way network & Marketing Prop. Akhilesh Sharma 206, M J Shopping Centre, 3,Veer Savarkar Block, Shakarpur, New Delhi 10 Thakurji Sales Corporation, Prop. Madhukar Dubey 202, 23, Veer Savarkar Block, Shakapur, Delhi 11 BR Gupta & Co. Pvt. Ltd., Anil Agrawal Rajeev 202, 23, Veer Savarkar Block, Shakapur, Delhi Kumar Bansal and 108, M J Shopping Centre, Veer Savarkar Block, Shakapur, Delhi 12 Harshit Textiles, Prop.Madhukar Dubey 301, 23, Veer Savarkar Block, Shakapur, Delhi 13 Sona Electrical Services Pvt.Ltd Madhukar Dubey 202 ,23, Veer Savarkar Block, Delhi -110092 14 J K SALES CORPORATION Mahukar Dubey 301 23 Veer Savarkar Block, Delhi 15 Accord sales& Tradex Pvt. Ltd. Yogendra Kumar D-lll, South Ganesh Nagar, Mandawali, New Delhi Vinod Sharma 25 Singhal Sunrise Steels Pvt. Ltd.