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Income Tax Appellate Tribunal, DELHI BENCH: ‘E’, NEW DELHI
Before: SHRI BHAVNESH SAINI & SHRI O.P. KANT
ORDER PER O.P. KANT, AM:
This appeal by the assessee is directed against order dated 30.11.2018 passed by the learned CIT(A)-36, New Delhi [in short ‘the learned CIT(A)’] for assessment year 2012-13, raising following grounds of appeal:
1. That on the facts & circumstances of the case the learned AO and CIT (A)-36 while passing the order J/s 143(3) r.w.s 144 and U/s 250 respectively erred in: a) Upholdingthe addition of Rs. 12,91,000/- on account of unexplained Share Capital. b) Upholdingthe addition of Rs.98,92,590/- on account of unexplained Share Premium. c) Upholding the addition of unexplained Share Capital & unexplained Share premium in AY 2012-13 in spite of the fact that a sum of Rs.
1,10,22,000/- representing 1,00,200 equity shares of Rs. 10 each amounting to Rs. 10,02,000/- & share premium of Rs. 1,00,20,000/- @ Rs.100 per share was received in AY 2011-12. d) Upholdingthe addition of Rs.6,09,000/- on account of unexplained unsecured loans. e) Upholdingthe addition of Rs.1,97,04,926 on account of addition of trade payables. f) Upholding the rejection of books of accounts by the A.O. u/s 145(3).
Briefly stated facts of the case are that the assessee company was engaged in manufacturing of Thermoplastic Rubber Compound which is used in manufacturing of shoe soles. For the year under consideration, the assessee filed return of income on 28.09.2012, declaring total income of Rs.33,62,034/-. The case was selected for scrutiny and notice under Section 143(2) of the Income-tax Act, 1961 (in short ‘the Act’) was issued and served upon the assessee. It is noticed from the assessment order that Shri Deepak Jain, CA, attended once before the Assessing Officer, however, thereafter, no compliance of the queries raised by the Assessing Officer were made and thus, the Assessing Officer after issuing show-cause notice completed the assessment in terms of Section 144 of the Act, i.e., ex parte. The Assessing Officer rejected the books of accounts of the assessee under Section 145(3) of the Act and estimated the business profit @ 10% of the gross receipt of Rs.19,86,90,745/- and made addition of business profit of Rs.1,54,73,702/-. The Assessing Officer also made following additions: (i) unexplained share capital of Rs.15,63,500/-; (ii) unexplained share premium of Rs.1,28,90,090/-; (iii) unsecured Loans of Rs. 6,57,000/-; (iv) Trade Payables of Rs.1,97,07,926/- 2.1 On further appeal before the learned CIT(A), the assessee filed additional evidences and submitted that due to change of address, various notices issued by the Assessing Officer could not be served upon the assessee and, therefore, the assessee could not comply with the queries raised by the Assessing Officer. In view of the submissions of the assessee, the learned CIT(A) admitted the additional evidence. He, sustained the rejections of books of account. However, deleted the addition made of business income of Rs.1,54,73,702/-. The remaining additions have been sustained by the learned CIT(A), observing as under:
“ FINDINGS: Ground Nos. 2 & 3 (Addition of share capital and Addition of share premium)
4.3.5.4. During the instant year, there is an increase of Rs. 15,63,500/- in the share capital. In the absence of any confirmation and other supporting documents, the AO added back the amount to the income of the appellant company as unexplained share capital. During the year, there is also an increase of Rs. 1,28,90,090/- in the share premium. For want of any documentary evidences or any confirmation submitted by the appellant during the assessment proceedings, the AO added back the same to the income of the appellant company as unexplained share premium.
The AR of the appellant has submitted that during the year the company has allotted 156350 equity shares having face value of Rs.10/- each at a premium Rs.100/- each. Total amount thus received on account of share capital is 15,63,500/- and Rs.1,56,35,000/- on account of share premium. A copy of Form No.2 filed with the Ministry of Corporate Affairs detailing the allotment details has been filed annexed as per Annexure - 1 (attached with letter dated 16.11.2018) which is kept on record. Out of the above amount a sum of Rs.1,10,22,000/- was received as share application during the year 2010-11 and Rs.64,98,000/- were received during the year 2011-12, totaling to Rs.1,75,20,000/- against which shares has been allotted for Rs. 1,71,98,500/- being 156350 equity shares having face value of Rs.10/- each at a premium of Rs.100/-. A detail of share application money received and shares allotment made has been filed enclosed as per Annexure — 2 (attached with letter dated 16.11.2018) which is kept on record. The AR. of the appellant has filed copies of confirmation, share application, bank statement, ITRs for last three years and statement of affairs/balance sheet for the last three years in respect of the allottees attached as per Annexure - 3.
4.3.5.5. During appellate proceedings, vide letter dated 16.11.2018, the appellant has submitted the details of the share applicants, which include:
NAME OF THE AMOUNT INCOME -RETURN FILED PARTY Natraj Steels Pvt. Ltd 6,36,000 AY 2010-11 (3628) Deepak Jain HUF 2,42,500 AY 2010-11 (1,58,800); AY 2011-12 (2,57,599); AY 2012-13 (2,00,000) Narendra Kumar 1,14,000 Individual Return not filed by Aggarwal appellant. HUF return filed. Ravinder Kumar 1,03,500 AY 2010-11 (1,85,750) AY 2011-12 (1,96,849) AY 2012-13 (1,85,397)
Narusingha Charan 72,500 AY 2010-11 (1,59,195) Sethi/NC Sethi AY 2011-12 (1,59,624) AY 2012-13 (1,81,426) Pushpa Aggarwal 1,22,500 AY 2011-12 (2,36,100) AY 2011-12 (2,39,840) Dhalu Ram Phulia & 2,72,500 Dhalu Ram Phulia Subhagwanti Pahuja AY 2010-11 (7,07,009) • AY 2011-12 (15,30,369) AY 2012-13 (9,46,798). * Subhagwanti Pahuja returns not filed by appellant TOTAL 15,63,500 During appellate proceedings, vide letter dated 16.11.2018, the appellant has submitted the details of the share applicants, which include: NAME OF THE TOTAL Amount PARTY AMOUNT Received in Income return filed On shares 2010-11 & allotted till 2011-12 03.05.2011 Pushpa 13,47,500 16,50,000 AY 2011-12 Aggarwal (2,36,100) AY 2011-12 (2,39,840) Ravinder Kumar 11,38,500 11,43,000 AY 2010-11 (1,85,750) AY 2011-12 (1,96,849) AY 2012-13 (1,85,397)
Deepak Jain 26,67,500 26,70,000 AY 2010-11 HUF (1,58,800) AY 2011-12 (2,57,599) AY 2012-13 (2,00,000) Narusingha 7,97,500 8,00,000 AY 2010-11 Charan (1,59,195) Sethi/NC Sethi AY 2011-12 (1,59,624) AY 2012-13 (1,81,426) Narendra Kumar 12,54, 12,57,000 AY 2010-11 Aggarwal 000 (1,59,700) HUF/N K AY 2011-12 Aggarwal HUF (1,59,240) AY 2012-13 (1,77,180) Natraj Steels Pvt 69,96,000 70,00,000 AY 2010-11 Ltd (3628) Dhalu Ram 29,97,500 30,00,000 AY 2010-11 Phulia (7,07,009) AY 2011-12 (15,30,369) AY 2012-13 (9,46,798) 17.198,500 From the above two charts, it can be seen that only Dhalu Ram Phulia has creditable taxable income filed in the Income Tax returns and therefore, the amount with respect to Dhalu Ram Phulia is accepted as genuine. The other share applicants and share premium partiesd have meagre income and their creditworthiness is not proved. In the analysis of the bank statements of all the share applicants: Pushpa Aggarwal, Ravinder Kumar, Deepak Jain HUF, Narusingha Charan Sethi/NC Sethi, Narendra Kumar Aggarwal HUF/N K Aggarwal HUF and Natraj Steels Pvt Ltd; it is seen that just prior to issue of funds to the appellant, amount is being deposited in the share applicant's account. Even in the case of Dhalu Ram Phulia, it is seen that just prior to issue of funds to the appellant, amount is being deposited in the share applicant's account, however, as the said party has a creditable income tax return filed for three years, therefore, the said party is accepted as genuine. For the balance parties, the return of income being meager and the fact that amount is deposited just before the issue of cheque to the appellant, shows that the parties do not have creditworthiness and therefore, the addition for the balance parties are upheld.
4.3.5.6. Section 68 of the Income-Tax Act, 1961 provides that, where any sum is found credited in the books of assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee for that previous year. The burden of proof is heavily cast on the assessee. First of all, he must furnish an explanation as otherwise the cash credit will be treated as his income. Secondly, the explanation offered must be to the satisfaction of the Assessing Officer. It is by now well-settled that what ail is required from the assessee by way of explanation is, (i) that he must establish the identity of the payer; (ii) that he must prove the creditworthiness of the payer, and (iii) that he must prove the genuineness of the transaction. In the case of Lovely Exports (P) Ltd [216 CTR 195 SC] it was held that, if the share application money is received by the assessee company from alleged bogus shareholders, whose names are given to the AO, then the Department is free to proceed to reopen their individual assessments in accordance with law, but it cannot be regarded as undisclosed income of assessee company. The Hon'ble Jurisdictional High Court in in the case of CIT Vs Gourdin Herbals India Ltd. order dated 17th Sep. 2009 followed the judgment of the Supreme Court in the case of Commissioner of Income Tax l/s. Lovely Exports Pvt. Ltd., 216 CTR 195, and held, "the ITAT has rightly held that the assessee had discharged its burden. In case those three companies had received certain cash, which were deposited in the bank accounts, it was for the Income Tax Department to take action against the said companies. We are, therefore, of the opinion that no substantial question of law arises for our consideration in this appeal, which is accordingly dismissed." Distinguishing the decision in Lovely Exports (supra), the following Judicial Views in favour of revenue are discussed below: (i) Recently, in the case of Navodaya Castle [56 taxmann.com 18 (SC)] it was held that, Hon'ble High Court by impugned order held that certificate of incorporation, PAN etc., were not sufficient for purpose of identification of subscriber company when there was material to show that subscriber was a paper company and not a genuine investor - Whether Special Leave Petition filed against impugned order was to be dismissed - Held, yes. (ii) In the case of CIT v. Sophia Finance Ltd. 205 ITR 98 (Del.) (F.B.) it was held that, Provisions of s. 68 are applicable even to share application money and if on enquiry it is found that "shareholders do not exist, sum credited may be treated as assessee's income. (iii) In the case of Titan Securities Ltd. [357 ITR 184 (del)] it was held that, Where Assessing Officer found that share applicants in case of assessee-company were established entry operators giving accommodation entries and, thus, he added amount paid by them to assessee's taxable income, Tribunal was not justified in deleting said addition without properly examining evidence brought on record by Assessing Officer (iv) In the case of N.R. PORTFOLIO PVT. LTD [87 DTR 0162 (Del)] it was held that Merely furnishing names, addresses and PAN particulars, or relying on entries in a Registrar of Companies website, if upon verification, or during proceedings, AO cannot contact share applicants, or that information becomes unverifiable, or there are further doubts in pursuit of such details, onus shifts back to assessee to explain same---Yes. (v) Also in the case of N.R. Portfolio Pvt Ltd [96 DTR 0281 (Del)] it was held that, the onus to prove the identity, creditworthiness and genuineness of the transaction is on the assessee as the facts are within the assessees knowledge. Mere production of incorporation details, PAN Nos. or the fact that third persons filed return in case of a private limited company may not be sufficient when surrounding and attending facts predicate a cover up. (vi) In the case of MAF ACADEMY P. LTD. [361 ITR 02858 (Delhi)] it was held that, mere production of incorporation details, PAN Nos. or returns may not be sufficient when surrounding and attending facts predicate cover up. In present case, it was strange that Assessee in year 2001 felt need of obtaining affidavits from persons investing in shares to certify genuineness when there was no inquiry. Such fact raised suspicion on genuineness of transaction. Further shares were purchased at large premium and then sold at substantial loss in short span of time. Also assessee failed to produce persons who had invested in shares and show that these people were completely unrelated to Assessee and as such, all entries were merely accommodation entries Thus, Assessee had not discharged onus satisfactorily and additions made by AO were sustained Orders of CIT (Appeals) and ITAT in deleting addition unsustainable-substantial question of law answered in favour of Appellant and against the Respondent Assessee-Appeal allowed. (vii) In the case of Tarika Properties Investment Pvt Ltd [221 TAXMAN 0014 (Del)] it was held that, Held, following decision of coordinate Bench in CIT vs. NR Portfolio Pvt. Ltd and CIT Vs Nova Promoters and Finlease Private Limited Case (2012) 342 ITR 169 (DELHI), mere production of PAN Number or assessment particulars submitted by assessee does not establish identity of a person/investorldentification of a person includes place of work, staff and fact that it was actually carrying on business and further recognition of said company/individual in eyes of public Bank statements of investors furnished by assessee omitted to show that there was deposit of cash immediately prior to issuance of cheques.
Extracts of bank statements furnished by assessee were found to be fabricated. Assessee failed to establish creditworthiness of investors and also genuineness of transactionOrders of CIT(A) and ITAT were perverse in as much as they had failed to appreciate fabrication in bank statements of share applicants that had been filed by Assessee. (viii) In the case of Globus Securities & Finance Pvt Ltd [224 TAXMAN 237 (Delhi)] it was held that, Assessees Directors, who had purportedly made investment in shares were not related or known to them. Assessee had no proven good past track record justifying hefty premium, four times face value. Only certain papers showing that assessee had taken care to ensure legal compliances were placed on record. Tribunal had not given due credence to surrounding circumstances which included huge premium, credit entries in bank accounts before transfer of money to assessee, failure of companies to file details of inventories and fact that assessee company had not charged any premium earlier. Three factum in all cases was not established by only showing that transaction was through banking channels or account payee instrument. Surrounding and corroborative factual details were equally important and justify further proof or details before it is held that onus is discharged. Thus, matter remitted to tribunal for entire issue to be dealt afresh. (ix) In the case of Empire Builtech Pvt Ltd [366 ITR 110 (Delhi)] it was held that, merely because assessee had disclosed the identity of the investors, it cannot be said that burden imposed upon it u/s 68 had been discharged, particularly when investors not only did not submit any confirmation, but had concededly reported far less income than the amounts invested. (x) In the case of ONASSIS AXLES PRIVATE LIMITED [364 ITR S3 (Delhi)] it was held that, Held, bank statement of three companies filed in remand report before CIT(A) shows that accounts did not disclose large volume of transactions. Cash deposits were made into accounts of companies on same day or on proximate days. Pay orders given to apply to shares were issued from a far off bank branch in NOIDA. These facts, together with share applicants lack of resources and inadequate share capital, as well as authorized and subscribed share capital of assessee i.e. Rs.50 lakh being the authorized capital, and paid up capital being Rs.70 lakh, as against it reserves being over Rs.2 crores, for reason of the premium received, showed that share money transaction was dubious. Amount received by assessee falls within mischief of Section 68 as unexplained amounts. Tribunal was justified in holding that amount received by assessee was bogus share capital. Assessee's appeal dismissed.
(xi) In the case of FOCUS EXPORTS PVT. LTD. [Ill DTR 0012 (Del)] it was held that, if the assessee offers no explanation about the nature and source of credit of amounts in the books maintained by it or the explanation offered is not satisfactory, then the sums so credited can be treated as income of the assessee for that previous year. (xii) In the case of Rathi Finlease Ltd (215 CTR 429 MP) it was held that, though confirmation letters were produced, genuineness of share application money received by assessee company cannot be said to have been established since the alleged companies which had paid the money were found to be non-existent and the amounts were paid by cheques on the same date on which such amounts were credited to the bank accounts of those companies failed to discharge the burden, addition u/s 68 upheld. (xiii) In the case of Kundan Investment Ltd (263 ITR 626 (Cal)) it washeld that, since the assessee did not take any steps to obtain confirmatory letters from the subscribers of public issue quota who did not respond to the enquiry nor attempted to produce said subscribers or to disclose their income-tax file numbers subscription said to have been made by such subscribers to the shares of the assessee-company cannot be accepted as genuine; in the absence any material except the income-tax file numbers, the identity of the subscribers to the promoters quota and their creditworthiness could not be established and the subscription made by them could not be accepted as genuine; however, matter is remanded to the Tribunal for deciding the same afresh. (xiv) In the case of Korlay Trading Co. Ltd (232 ITR 820 (Cal)) it was held that, merely filing of income-tax file number of creditor is not enough to prove the genuineness of cash credit unless the creditor is identified and his creditworthiness is established. Addition justified. (xv) In the case of Sumati Dayal (214 ITR 801 (SC)) it was held that, applying the test of human probabilities was right that the assessee's claim about the amount being her winnings from races is not genuine. (xvi) In the case of Power Drugs Ltd. (245 CTR 623 P & H) it was held that, Assessee-company having failed to establish the identity and creditworthiness of the alleged share applicants and the genuineness of the share application money shown by it, addition under s.68 was rightly upheld by the Tribunal. (xvii) In the case of Nova Promoters & Finlease (P) Ltd (342 ITR 169 Del) it was held that Assessing Officer after issuance of summons not being satisfied by the explanations provided held that that assessee was unable to prove the genuineness of the transactions with the companies and that it also proved that the assessee company had introduced its own monies through non-existing companies using the banking channel in the shape of share application monies There is no explanation as to why the deponents could not be produced and did not appear in response to the summons - the modus operandi involves receipt by the entry providers of equivalent amount of cash from the assessee Section 68 places no duty upon Assessing Officer to point to the source from which the money was received by the assessee. Order of Tribunal set aside - Question of law answered in favour of department—Yes. (xviii) In the case of AZEEM INVESTMENT PVT LTD (252 CTR 0217 Del) it was held that Reassessment proceedings were initiated in the case of the assessee after information was received from Director of Investigation regarding bogus/accommodation entries allegedly provided by different companies which were managed and operated by Mukesh Gupta and Rajan Jassal. AO noticed that these companies had been issued shares by the appellant assessee. A question arose whether the share application money received was a genuine transaction Tribunal after noticing the facts on record remitted the matter back to the AO and felt that the matter cannot be decided in a superficial manner, by only making reference to the bank account entries and whether or not the alleged shareholders were incorporated companies. Held, the Tribunal elucidated the relevant facts and given cogent and good reasons why an order of remit was necessary and required in the facts of the present case. Whether or not an order of remand is justified and required depends on facts of each case. An order of the remit has been passed, with a direction to conduct in depth inquiry, reach and record correct and true finding, which depending upon the material may eventually even go in favour of the assessee. Assessees appeal dismissed. (xix) In the case of MAJOR METALS LTD (359 ITR 0450 (Bom)) it was held that Settlement commission addition under section 68 interference in exercise of writ jurisdiction Assessee an unlisted company was given huge loan of Rs. 6 crores by two companies Later on these companies were allotted 30,000 shares each of face value 10 at huge premium of Rs.
Settlement Commission has considered all material on record including material which had a bearing on the creditworthiness and financial standing of the alleged subscribing companies to the share capital of the assessee. None of the companies was held to have a financial standing or creditworthiness which would justify making of such a large investment of Rs. 6 crores at a premium of Rs. 990 per share. Allotment of shares has taken place in pursuance of a private placement. View which has been taken by the Settlement Commission is consequently borne out on the basis of the material on record. Commission has not proceeded contrary to law or on the basis of no evidence. There is no perversity in the findings of the Settlement Commission. Re-appreciation of finding of facts not warranted in exercise of judicial review. Order of the Settlement Commission upheld. (xx) In the case of INDEPENDENT MEDIA PVT. LTD. (25 taxmann.com 276 (Delhi)) it was held that, For addition u/s 68, AO need not establish money coming from assessee's coffers - For making addition under section 68, it is not incumbent upon AO to establish that money had come from assessee's coffers. (xxi) In the case of NEELKANTH ISPAT UDHYOG PVT LTD (81 DTR 0214) it was held that, In cases where the explanation offered by the assessee about the nature and source of the sums found credited in the books is not satisfactory there is, prima facie, evidence against the assessee, viz., the receipt of money. The burden is on the assessee to rebut the same, and, if he fails to rebut it, it can be held against the assessee that it was a receipt of an income nature—Yes. (xxii) In the case of Frostair P. Ltd [92 DTR 393 (Del)] it was held that, Share application money, Genuineness of the transaction, Revenue received information alleging that assessee had accepted share capital from companies engaged in providing bogus entries in the form of loan and share application money to interested parties. Accordingly, the AO called for information u/s 142 (l)Assessee filed a list of 18 shareholders and felt that the nature of the assess company and its business was not such as to attract a huge premium. After taking into account various factors, incorrect GIR/PAN number and designation of the concerned AOs, who were seized of the share applicant companies' returns; none of the shareholders existed at the addresses given by the assessee; the books of accounts of the share applicants not being produced before him, the AO held that an inference could be drawn that the transactions were not genuine— Yes. (xxiii) In the case of Rajani Hotels Ltd [79 DTR 185 (Mad)] it was held that, some Shareholders refused having applied. Director of the assessee company stated that they were benami investors. Payment to and from shareholders were in cash and therefore the claim of director is rejected— To that extent treated as unexplained, x) In the case of Youth Construction Pvt Ltd [357 ITR 197 (Delhi)] it was held that, mere proof of identity without genuineness and creditworthiness is enough—No. (xxiv)In the case of ULTRA MODERN EXPORTS PVT. LTD [220 Taxman 165 (Delhi)] it was held that Information that assessee furnishes would have to be credible and at same time verifiable. Five share applicants could not be served as notices were returned unserved. Assessee's ability to secure documents such as income tax returns of share applicants as well as bank account particulars would itself give rise to a circumstance which AO in this case proceeded to draw inferences from 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. CIT (A) and ITAT erred in holding that AO could not have added back said amount u/s 68 Yes.
4.3.5.7. In conclusion, as can be seen from the above said judgements, it is clear that the initial onus is upon the assessee to prove the identity, genuineness and creditworthiness of the persons in whose name the credit entry is appearing by way of share capital/premium, loan or creditor etc. After that the Assessing Officer is duty bound to check the veracity of those details filed and thereafter arrive at a conclusion in connection with the genuineness of share capital/premium. However, the recent judgements of different high courts in this regard are quite different particularly considering the facts of each case. Moreover, recent judgement in the case of Navodaya Castle (supra) has distinguished the position of law settled in the case of Lovely Exports (supra). In CIT V/s. Navodaya Castles (P) Ltd. 109 DTR (Delhi HC) 109 (184) Certificate of Incorporation, PAN etc are relevant for the purpose of identification, but have their limitation when there is evidence and material to show that the subscriber was a paper company and not a genuine investor., Matter is remanded for reconsideration. In the case of Navodaya Castle [56 taxmann.com 18 (SC)], this it was held- Whether Special Leave Petition filed against impugned order was to be dismissed - Held, yes. In the present case, the appellants has filed submissions which are kept on record and have been perused by the undersigned and considered. The submission of the appellant, the case laws cited and the assessment order have been considered. The submission filed by the appellant have been considered not found not to be tenable and the case laws cited by the appellant are distinguishable in facts. Hence, I find no reason to interfere with the AO's order on these issues and the addition on this ground is upheld. In view of the above discussion, appeal on Ground Nos. 2 & 3 are partly allowed; only the investment done by Dhalu Ram Phulia is allowed.
FINDINGS (Addition of unsecured loans): 4.3.5.8. During the year, there is an increase of Rs. 6,57,000/- in the unsecured loans. The details are given as under:
PARTY UNSECURED LOANS PAN AMOUNT Tusha Pande 48,000 APGPP2960M Ankita Tiwari 2,00,000 AZAPK3847J Ocean Thermoplastics 5,57,229 AAAC04517H Elastomers Pvt. Ltd.
In the absence of any confirmation and other supporting documents, the AO added back the same to the income of the appellant company as unsecured loan. During appellate proceedings, the AR of the appellant has filed the confirmation. It has been stated that the appellant has returned Rs 1 lac on 23.3.2012 to the Tusha Pande and the closing balance is Rs. 48,000/-. The ITR reflects, AY 2011- 12 (2,47,690) and AY 2012-13 (2,14,767). In view of the above discussion, this addition with regard to Tusha Pande is deleted. With regard to Ankita Tiwari, only confirmation is filed, there is no ITR or Bank Statement, this addition is upheld. There are no details filed with regard to the loan of Rs.5,57,229/- and the same is upheld. In view of the above discussion, appeal on Ground No. 4 is partly allowed. FIDINGS (Addition of trade payables): 4.3.5.9. During the instant year, there is an increase of Rs. 1,97,04,926/- in the trade payables. The AO has held that for want of any documentary evidences or any confirmation submitted by the appellant or received, and added back the same to the income of the appellant company as unexplained trade payables. The AR of the appellant has stated that the addition to the trade payables is fully supported with confirmations of the creditors along-with other supporting documents and same should not be treated as unexplained trade payables of the appellant during the year. The submissions filed by the appellant have been considered, however, the same are not found to be tenable. The details filed do not conclusively prove the genuineness of the trade payables. Hence, I find no reason to interfere with the AO's order on these issues and the addition on this ground is upheld. In view of the above discussion, appeal on Ground No. 5 is dismissed.”
Before us, in ground no. 1, the assessee is aggrieved with the various additions sustained by the learned CIT(A). 3.1 In support of the contention, the learned counsel for the assessee filed two paper-books containing pages 1 to 278 and 1 to 183. The learned counsel referred to pages 72 and 258 of the paper-book (Volume-1) and submitted that part of the amount of the share capital and share application money was received in earlier years, and therefore, the Assessing Officer was not justified in making the addition for the same in the year under consideration. The learned counsel for the assessee submitted that this fact was duly noticed by the learned CIT(A), however, he sustained the addition for the complete amount of share capital and share application money. He further submitted that complete details, including PAN, Income Tax Return, Balance-sheet etc. have been filed by the assessee in respect of additions made of share capital, share premium, trade payables and unsecured loan. In view of the submissions filed, the learned counsel for the assessee prayed that the matter may be restored back to the file of the Assessing Officer for deciding the quantum addition as well as verifying the documents filed by the assessee for discharging its onus under Section 68 of the Act. 3.2 The learned DR, on the other hand, though relied on the order of the learned CIT(A), however, he did not object for referring the matter back to the Assessing Officer. 3.3 We have heard the rival submissions of the parties and perused the relevant material on record. We find that the company has allotted 1,56,350 equity shares having face value of Rs.10/- each at a premium of Rs.100/- each and, thus, amount of Rs. 15,36,500/- has been received on account of share capital and Rs.1,56,35,000/- has been received on account of share premium. On perusal of page no. 258 of the APB-I, we find that during the year under consideration there is an increase in share capital from Rs.50 lakhs as on 31.03.2011 to Rs.65,63,500/- as on 31.03.2012. Similarly, there is decrease in share application money pending allotment from Rs. 1,13,26,990/- as on 31.03.2011 to Rs.33,71,400/- as on 31.03.2012. Further, on page 72 of the paper-book (Volume -1) the assessee has filed person-wise details of the amount for share application for financial year 2010-11 and 2011-12. It is seen that in assessment year 2010-11, the assessee has received total amount of Rs.1,10,22,000/- whereas in financial year 2011-12, the assessee has received total amount of Rs.64,98,000/-. It is settled principle that the additions under Section 68 of the Act can be made in respect of credits appearing for the year under consideration. Thus, it is evident that the addition has been wrongly sustained in respect of credits received in earlier years. Further, the various evidences in support of discharge of onus under Section 68 of the Act filed by the assessee also needs detailed verification at the hands of the Assessing Officer. In view of the facts and circumstances, we feel it appropriate to restore the issue of additions of share capital, share premium, trade payables and unsecured loans to the file of the Assessing Officer for deciding afresh in accordance with law, after affording adequate opportunity of being heard to the assessee. As far as the issue of rejection of books of account under Section 145(3) of the Act is concerned, the learned CIT(A) has sustained the rejections in view of the finding that no books of account and vouchers were produced before him but we find that the addition made in respect of the business income has already been deleted by the learned CIT(A) and, thus, this issue is only of academic interest and, thus, we are not adjudicating this issue. Ground no. 1 of the appeal is partly allowed for statistical purposes.
In ground no. 2, the assessee has raised the issue of additions of business income, which in our opinion, has already been allowed in favour of the assessee and, thus, the ground being infructuous, is dismissed.
In the result, the appeal of the assessee is partly allowed for statistical purposes. Order is pronounced in the open court on 15th November, 2019.