ITO, WARD - 6(1), KOLKATA, KOLKATA vs. M/S. DHANKAMAL COMMOSAES PVT. LTD.,, KOLKATA

The assessee is a company and filed its return of income for the Assessment Year 2012-13 declaring total income of Rs. 390/-. The Assessing Officer passed an order u/s 143(3) of the Act on 28/03/2015, determining the total income of the assessee at Rs. 9,86,00,390/- interalia making an addition of share capital received along with share premium u/s 68 of the Act. Aggrieved the assessee carried the matter in appeal. The ld. First Appellate Authority granted relief on the ground that:- a) Section 68 of the Act, does not apply on the facts and circumstances of the case as it was barter/exchange of shares/investments. b) That the assessee has proved the creditworthiness and identity of the share applicant companies as well as the genuineness of the transactions. c) The shares in question were allotted through passing of journal entries only against the discharge of debts.

However, the second question is answered in favour of the assessee and 25. However, the second question is answered in favour of the assessee and 25. However, the second question is answered in favour of the assessee and against the Revenue by the judgment of the Division Bench of this Court in against the Revenue by the judgment of the Division Bench of this Court in against the Revenue by the judgment of the Division Bench of this Court in Commissioner of Income Tax v. Electro Polychem Ltd., supra, and Commissioner of Income Tax v. Electro Polychem Ltd., supra, and Commissioner of Income Tax v. Electro Polychem Ltd., supra, and Commissioner of Income Tax v. Steller Investment Ltd., supra. of Income Tax v. Steller Investment Ltd., supra.

This case is distinguishable from the case of C.I.T. v. Lovely Expos Pvt. Ltd., 26. This case is distinguishable from the case of C.I.T. v. Lovely Expos Pvt. Ltd., 26. This case is distinguishable from the case of C.I.T. v. Lovely Expos Pvt. Ltd., reported in 216 CTR 195, in that the transactions were only book reported in 216 CTR 195, in that the transactions were only book reported in 216 CTR 195, in that the transactions were only book transactions, and there was no cash receipt. The decision transactions, and there was no cash receipt. The decisions in (i) Commissioner s in (i) Commissioner of Income Tax v. Focus Exports Pvt. Ltd., reported in (2014) 90 CCH 0105 of Income Tax v. Focus Exports Pvt. Ltd., reported in (2014) 90 CCH 0105 of Income Tax v. Focus Exports Pvt. Ltd., reported in (2014) 90 CCH 0105 (Delhi); (ii) Commissioner of Income Tax v. Globus Securities & Finance Pvt. (Delhi); (ii) Commissioner of Income Tax v. Globus Securities & Finance Pvt. (Delhi); (ii) Commissioner of Income Tax v. Globus Securities & Finance Pvt. Ltd., reported in (2014) 264 CTR 481 (Delhi); (iii) Onassis Axles Private Ltd., reported in (2014) 264 CTR 481 (Delhi); (iii) Onassis Axles Private Ltd., reported in (2014) 264 CTR 481 (Delhi); (iii) Onassis Axles Private Limited v. Commissioner of Income Tax, reported in (2014) 364 ITR 53 Commissioner of Income Tax, reported in (2014) 364 ITR 53 Commissioner of Income Tax, reported in (2014) 364 ITR 53 (Delhi); (iv) Olwin Tiles India (P) Ltd. v. Deputy Commissioner of Income Tax, (Delhi); (iv) Olwin Tiles India (P) Ltd. v. Deputy Commissioner of Income Tax, (Delhi); (iv) Olwin Tiles India (P) Ltd. v. Deputy Commissioner of Income Tax, reported in (2016) 382 ITR 291 (Gujarat); (v) B.R.Petrochem Pvt. Ltd. v. The reported in (2016) 382 ITR 291 (Gujarat); (v) B.R.Petrochem Pvt. Ltd. v. The reported in (2016) 382 ITR 291 (Gujarat); (v) B.R.Petrochem Pvt. Ltd. v. The Income Tax Officer, (Order dated 24.4.201 Income Tax Officer, (Order dated 24.4.2017 in T.C.(A) No.1498 of 2007; and 7 in T.C.(A) No.1498 of 2007; and (vi) Rajmandir Estates Private Limited v. Principal Commissioner of Income (vi) Rajmandir Estates Private Limited v. Principal Commissioner of Income (vi) Rajmandir Estates Private Limited v. Principal Commissioner of Income Tax, reported in (2016) 386 ITR 162 (Calcutta), cited on behalf of the Tax, reported in (2016) 386 ITR 162 (Calcutta), cited on behalf of the Tax, reported in (2016) 386 ITR 162 (Calcutta), cited on behalf of the respondent are distinguishable, in that the cash credits towards share capit respondent are distinguishable, in that the cash credits towards share capit respondent are distinguishable, in that the cash credits towards share capital were admittedly only by way of book adjustment and not actual receipts were admittedly only by way of book adjustment and not actual receipts were admittedly only by way of book adjustment and not actual receipts Assessment Year: 2012-13 M/s. Dhankamal Commonsales Pvt. Ltd M/s. Dhankamal Commonsales which could not be substantiated as receipts towards share subscription which could not be substantiated as receipts towards share subscription which could not be substantiated as receipts towards share subscription money.

The appeal is, thus, allowed and the judgment and order of the learned 28. The appeal is, thus, allowed and the judgment and order of the learned 28. The appeal is, thus, allowed and the judgment and order of the learned Tribunal dated 1.9.2016 is s Tribunal dated 1.9.2016 is set aside, for the reasons discussed above. et aside, for the reasons discussed above. Additions under Section 68 of the 1961 Act are also set aside. The questions of Additions under Section 68 of the 1961 Act are also set aside. The questions of Additions under Section 68 of the 1961 Act are also set aside. The questions of law are answered against the Revenue. No costs. Consequently, CMP No.9496 law are answered against the Revenue. No costs. Consequently, CMP No.9496 law are answered against the Revenue. No costs. Consequently, CMP No.9496 of 2017 is closed.”

The Hon’ble Calcutta High Court in t The Hon’ble Calcutta High Court in the case of Jatia Investment Co. vs Jatia Investment Co. vs Commissioner of Income-Tax Tax reported in 1994 206 ITR 718 Cal, held as follows: held as follows:- “6. The matter came up in appeal before the Tribunal and it was also argued “6. The matter came up in appeal before the Tribunal and it was also argued “6. The matter came up in appeal before the Tribunal and it was also argued that the companies had to reduce their indebtedness in view of that the companies had to reduce their indebtedness in view of rule 58 rule 58A of the Companies Act. The Tribunal held as follows : . The Tribunal held as follows : "We have considered the rival submissions. The case sought to be made out in "We have considered the rival submissions. The case sought to be made out in "We have considered the rival submissions. The case sought to be made out in favour of the assessee is rather strange. The assessee maintains favour of the assessee is rather strange. The assessee maintains favour of the assessee is rather strange. The assessee maintains regular books of account and makes certain entries. The assessee is now trying to convince us of account and makes certain entries. The assessee is now trying to convince us of account and makes certain entries. The assessee is now trying to convince us that the entries made in the books were false and no value should be attached that the entries made in the books were false and no value should be attached that the entries made in the books were false and no value should be attached to them. It is impossible for us to hold that we have to disregard the entries in to them. It is impossible for us to hold that we have to disregard the entries in to them. It is impossible for us to hold that we have to disregard the entries in the books of account merely because it suits the assessee. If the idea was to he books of account merely because it suits the assessee. If the idea was to he books of account merely because it suits the assessee. If the idea was to reduce the indebtedness of the companies we do not understand how it has reduce the indebtedness of the companies we do not understand how it has reduce the indebtedness of the companies we do not understand how it has been brought out when corresponding assets have also been jettisoned by those been brought out when corresponding assets have also been jettisoned by those been brought out when corresponding assets have also been jettisoned by those companies making the overall companies making the overall ratio of indebtedness the same as before. We do ratio of indebtedness the same as before. We do not also see how rule 58 not also see how rule 58A of the Indian Companies Act comes into the picture. comes into the picture. Also, if those entries were merely adjustment entries we do not understand why Also, if those entries were merely adjustment entries we do not understand why Also, if those entries were merely adjustment entries we do not understand why journal entries were not passed making havalas which should have brought the journal entries were not passed making havalas which should have brought the journal entries were not passed making havalas which should have brought the same result. The very fact that cash entries are made for the purchase of shares same result. The very fact that cash entries are made for the purchase of shares same result. The very fact that cash entries are made for the purchase of shares by the assessee would show that the assessee had paid cash for the purchase of by the assessee would show that the assessee had paid cash for the purchase of by the assessee would show that the assessee had paid cash for the purchase of shares. Obviously, the assessee is not able to show how the cash was provided. the assessee is not able to show how the cash was provided. the assessee is not able to show how the cash was provided. The concerns from whom cash allegedly passed did not have enough cash The concerns from whom cash allegedly passed did not have enough cash The concerns from whom cash allegedly passed did not have enough cash balance to lend money to the assessee. In these circumstances, the Income balance to lend money to the assessee. In these circumstances, the Income balance to lend money to the assessee. In these circumstances, the Income-tax Officer was fully justified in drawing the conc Officer was fully justified in drawing the conclusion that the assessee brought lusion that the assessee brought cash into the books of account for the purchase of shares but the source thereof cash into the books of account for the purchase of shares but the source thereof cash into the books of account for the purchase of shares but the source thereof was unexplained. The learned Commissioner of Income was unexplained. The learned Commissioner of Income-tax (Appeals) was fully tax (Appeals) was fully justified in endorsing the findings of the Income justified in endorsing the findings of the Income-tax Officer. We, tax Officer. We, therefore, do not see any reason to interfere with the orders of the authorities below. The not see any reason to interfere with the orders of the authorities below. The not see any reason to interfere with the orders of the authorities below. The appeal accordingly fails and is dismissed." appeal accordingly fails and is dismissed."

At the hearing, Mr. Bajoria, learned counsel appearing for the assessee, 8. At the hearing, Mr. Bajoria, learned counsel appearing for the assessee, 8. At the hearing, Mr. Bajoria, learned counsel appearing for the assessee, summed up the facts at the outset. at the outset.

The partners of the assessee 9. The partners of the assessee-firm are members of the Jatia family running firm are members of the Jatia family running several businesses and industries through numerous firms, concerns and several businesses and industries through numerous firms, concerns and several businesses and industries through numerous firms, concerns and companies commonly known as the Jatia Group. The three companies of the companies commonly known as the Jatia Group. The three companies of the companies commonly known as the Jatia Group. The three companies of the group, viz., Jatia Industries Pvt. Ltd., Praise Co. Pvt Ltd., and Onkar Industries ndustries Pvt. Ltd., Praise Co. Pvt Ltd., and Onkar Industries ndustries Pvt. Ltd., Praise Co. Pvt Ltd., and Onkar Industries Pvt. Ltd., borrowed large sums from Messrs. Gazanand Bissweswarlal and Co. Pvt. Ltd., borrowed large sums from Messrs. Gazanand Bissweswarlal and Co. Pvt. Ltd., borrowed large sums from Messrs. Gazanand Bissweswarlal and Co. (for short GB and Co.), a sole concern of Shri J. M. Jatia (for short GB and Co.), a sole concern of Shri J. M. Jatia--one of the partners of one of the partners of the assessee. The ratio of the said the assessee. The ratio of the said borrowing to the paid-up share capital and up share capital and reserves exceeded the permissible limit under the circular issued by the Reserve reserves exceeded the permissible limit under the circular issued by the Reserve reserves exceeded the permissible limit under the circular issued by the Reserve Bank of India in exercise of its powers under the Bank of India in exercise of its powers under the Reserve Bank of India Act Reserve Bank of India Act, 1934. According to the directions of the Reserve Bank of India, the said three 4. According to the directions of the Reserve Bank of India, the said three 4. According to the directions of the Reserve Bank of India, the said three companies of the group being non companies of the group being non-financial companies were required to keep financial companies were required to keep down the ratio of the loan to share capital and free reserves to the ceiling limit down the ratio of the loan to share capital and free reserves to the ceiling limit down the ratio of the loan to share capital and free reserves to the ceiling limit of 25% (later reduced of 25% (later reduced to 15%). Learned counsel submitted that for the to 15%). Learned counsel submitted that for the requirement of conforming to this prescribed ceiling limit of the volume of requirement of conforming to this prescribed ceiling limit of the volume of requirement of conforming to this prescribed ceiling limit of the volume of loans, the said three companies were to liquidate the loans borrowed from the loans, the said three companies were to liquidate the loans borrowed from the loans, the said three companies were to liquidate the loans borrowed from the said proprietary concern of Shri J. M. Jatia. But the said proprietary concern of Shri J. M. Jatia. But the said companies had not the said companies had not the requisite liquidity to discharge the loans. Since the lending proprietary concern requisite liquidity to discharge the loans. Since the lending proprietary concern requisite liquidity to discharge the loans. Since the lending proprietary concern of Shri J. M. Jatia belonged to the same group, an arrangement was made for of Shri J. M. Jatia belonged to the same group, an arrangement was made for of Shri J. M. Jatia belonged to the same group, an arrangement was made for reduction of the volume of borrowing of the companies to the requisite reduction of the volume of borrowing of the companies to the requisite reduction of the volume of borrowing of the companies to the requisite limit. Therefore, a partnership firm, i.e., the assessee, was constituted on April 20, Therefore, a partnership firm, i.e., the assessee, was constituted on April 20, Therefore, a partnership firm, i.e., the assessee, was constituted on April 20, 1975, with the members of the Jatia family as its partners. Within three days 1975, with the members of the Jatia family as its partners. Within three days 1975, with the members of the Jatia family as its partners. Within three days from the date of constitution of the firm, the said three companies showed sale from the date of constitution of the firm, the said three companies showed sale from the date of constitution of the firm, the said three companies showed sale of shares which it had been holding in various companies of the Jatia group to hich it had been holding in various companies of the Jatia group to hich it had been holding in various companies of the Jatia group to the firm. In exchange, as consideration, the firm made a credit entry in the cash the firm. In exchange, as consideration, the firm made a credit entry in the cash the firm. In exchange, as consideration, the firm made a credit entry in the cash book of an aggregate sum of Rs. 11.20 lakhs in favour of the said three book of an aggregate sum of Rs. 11.20 lakhs in favour of the said three book of an aggregate sum of Rs. 11.20 lakhs in favour of the said three companies. The said three companie companies. The said three companies, in turn, showed the credit entries in the s, in turn, showed the credit entries in the cash books as repayment of loan aggregating in all to Rs. 11.20 lakhs. The cash books as repayment of loan aggregating in all to Rs. 11.20 lakhs. The cash books as repayment of loan aggregating in all to Rs. 11.20 lakhs. The assessee-firm showed the amount of consideration payable to the three firm showed the amount of consideration payable to the three firm showed the amount of consideration payable to the three companies as paid out of the loan from the said sole concern of Sh companies as paid out of the loan from the said sole concern of Sh companies as paid out of the loan from the said sole concern of Shri ). M. Jatia, Assessment Year: 2012-13 M/s. Dhankamal Commonsales Pvt. Ltd M/s. Dhankamal Commonsales viz., GB and Co., by making a debit entry in the cash book without, however, viz., GB and Co., by making a debit entry in the cash book without, however, viz., GB and Co., by making a debit entry in the cash book without, however, receiving any cash. Necessary entries relating to the transactions were passed receiving any cash. Necessary entries relating to the transactions were passed receiving any cash. Necessary entries relating to the transactions were passed in the books of account of the assessee, GB and Co., and the three companies in the books of account of the assessee, GB and Co., and the three companies in the books of account of the assessee, GB and Co., and the three companies through their respective cash books. Thus, the cash book showed that there was their respective cash books. Thus, the cash book showed that there was their respective cash books. Thus, the cash book showed that there was merely a circulation of cash ending at the point it began, the cumulative effect merely a circulation of cash ending at the point it began, the cumulative effect merely a circulation of cash ending at the point it began, the cumulative effect being that the assessee became a debtor to GB and Co. in place of the said three being that the assessee became a debtor to GB and Co. in place of the said three being that the assessee became a debtor to GB and Co. in place of the said three companies of the group companies of the group.

This is the crux of the whole matter. The Income 10. This is the crux of the whole matter. The Income-tax Officer's case is that the tax Officer's case is that the transactions were recorded in the cash book through a circuit, but at no point transactions were recorded in the cash book through a circuit, but at no point transactions were recorded in the cash book through a circuit, but at no point in the circuit there was cash. In the words of the Income in the circuit there was cash. In the words of the Income-tax Officer, the position tax Officer, the position found by him that warranted the addition of this amount of Rs. 11.20 lakhs in by him that warranted the addition of this amount of Rs. 11.20 lakhs in by him that warranted the addition of this amount of Rs. 11.20 lakhs in the hands of the assessee is as under : the hands of the assessee is as under : "In view of the transactions recorded above, it is apparent that the money "In view of the transactions recorded above, it is apparent that the money "In view of the transactions recorded above, it is apparent that the money flowing amongst the parties including the assessee flowing amongst the parties including the assessee-firm cannot be ex firm cannot be explained as belonging to Messrs. GB and Co. The same cannot be said to have belonged to belonging to Messrs. GB and Co. The same cannot be said to have belonged to belonging to Messrs. GB and Co. The same cannot be said to have belonged to Messrs. Jatia Industries Pvt. Ltd., Messrs. Onkar Industries Pvt. Ltd., and Messrs. Messrs. Jatia Industries Pvt. Ltd., Messrs. Onkar Industries Pvt. Ltd., and Messrs. Messrs. Jatia Industries Pvt. Ltd., Messrs. Onkar Industries Pvt. Ltd., and Messrs. Praise Co. P. Ltd., as they did not have their own cash balance for advancing Praise Co. P. Ltd., as they did not have their own cash balance for advancing Praise Co. P. Ltd., as they did not have their own cash balance for advancing money to Messrs. GB and Co." o Messrs. GB and Co."

What the Officer drives at is that each of the parties made entries in the 11. What the Officer drives at is that each of the parties made entries in the 11. What the Officer drives at is that each of the parties made entries in the cash book in spite of their not having any cash to pass on. cash book in spite of their not having any cash to pass on.

Therefore, the advance of loan in cash by GB and Co. to the assessee 12. Therefore, the advance of loan in cash by GB and Co. to the assessee 12. Therefore, the advance of loan in cash by GB and Co. to the assessee-firm, as reflected in the entry in the cash book of the assessee n the entry in the cash book of the assessee-firm, is unexplained cash firm, is unexplained cash credit, which attracts the provisions of credit, which attracts the provisions of Section 68 of the Income-tax Act, 1961. tax Act, 1961.

According to Shri Bajoria 13. According to Shri Bajoria, the whole matter boils down to the fact that , the whole matter boils down to the fact that though the entries were made in the cash book in the case, there was no though the entries were made in the cash book in the case, there was no though the entries were made in the cash book in the case, there was no passage of cash at any stage. The whole thing was arranged by the entries to passage of cash at any stage. The whole thing was arranged by the entries to passage of cash at any stage. The whole thing was arranged by the entries to show that GB and Co. notionally advanced cash to the assesse show that GB and Co. notionally advanced cash to the assessee-firm though not firm though not having cash to pass on. The assessee having cash to pass on. The assessee-firm, in turn, paid as consideration for the firm, in turn, paid as consideration for the shares to the said three companies the same nonexistent cash as the aggregate shares to the said three companies the same nonexistent cash as the aggregate shares to the said three companies the same nonexistent cash as the aggregate purchase value of the shares held by the said companies in the other companies purchase value of the shares held by the said companies in the other companies purchase value of the shares held by the said companies in the other companies of the group without, however, any passage of cash and the said companies in of the group without, however, any passage of cash and the said companies in of the group without, however, any passage of cash and the said companies in their turn passing on the said non their turn passing on the said non-existent cash to GB and Co.

Shri Bajoria emphasised that, in the course of assessment proceedings, the 14. Shri Bajoria emphasised that, in the course of assessment proceedings, the 14. Shri Bajoria emphasised that, in the course of assessment proceedings, the Income-tax Officer examined the tra tax Officer examined the transactions and found that these are only nsactions and found that these are only entries not involving at any stage any cash. He pointed out that the entire entries not involving at any stage any cash. He pointed out that the entire entries not involving at any stage any cash. He pointed out that the entire transactions were effected between the assessee transactions were effected between the assessee-firm and the concerns firm and the concerns belonging to the Jatia group only for the requirement of complying wit belonging to the Jatia group only for the requirement of complying wit belonging to the Jatia group only for the requirement of complying with the directions of the Reserve Bank of India that cast on the companies a statutory directions of the Reserve Bank of India that cast on the companies a statutory directions of the Reserve Bank of India that cast on the companies a statutory obligation to reduce their borrowing to maintain parity with the loan and obligation to reduce their borrowing to maintain parity with the loan and obligation to reduce their borrowing to maintain parity with the loan and capital ratio as prescribed. The assessee capital ratio as prescribed. The assessee-company merely substituted the said company merely substituted the said three companies as three companies as debtors to GB and Co. and received the shares for debtors to GB and Co. and received the shares for undertaking the liability. undertaking the liability.

It is finally emphasised by learned counsel for the assessee that the ultimate 16. It is finally emphasised by learned counsel for the assessee that the ultimate 16. It is finally emphasised by learned counsel for the assessee that the ultimate result is that the firm becomes a debtor to GB and Co. and the three non result is that the firm becomes a debtor to GB and Co. and the three non result is that the firm becomes a debtor to GB and Co. and the three non- financial companies of the group got disch financial companies of the group got discharged. Learned counsel also arged. Learned counsel also emphasised that, at the worst, it can be said that the assessee emphasised that, at the worst, it can be said that the assessee-firm has received firm has received valuable assets being the said shares of the equivalent value of the debt taken valuable assets being the said shares of the equivalent value of the debt taken valuable assets being the said shares of the equivalent value of the debt taken over by it from the companies, i.e., Rs. 11.20 lakhs. over by it from the companies, i.e., Rs. 11.20 lakhs.

Therefore, the question of cash credit does not come in, there being no re, the question of cash credit does not come in, there being no re, the question of cash credit does not come in, there being no actual passing or receipt of cash. In other words, the transactions are mere actual passing or receipt of cash. In other words, the transactions are mere actual passing or receipt of cash. In other words, the transactions are mere book entries. It was contended that the fact that the entries passed through the book entries. It was contended that the fact that the entries passed through the book entries. It was contended that the fact that the entries passed through the cash book could not detract from cash book could not detract from or efface the essential nature of the entries. It or efface the essential nature of the entries. It was also urged that the entries were passed through the cash book so that the was also urged that the entries were passed through the cash book so that the was also urged that the entries were passed through the cash book so that the repayment of loans by the said three companies could be established before the repayment of loans by the said three companies could be established before the repayment of loans by the said three companies could be established before the Reserve Bank of India. But, according to Shri Baj Reserve Bank of India. But, according to Shri Bajoria, that does not mean that it oria, that does not mean that it amounts to an artifice employed to deceive any authorities, because the amounts to an artifice employed to deceive any authorities, because the amounts to an artifice employed to deceive any authorities, because the transactions showing the amount as received in cash and paid away transactions showing the amount as received in cash and paid away transactions showing the amount as received in cash and paid away spontaneously and simultaneously were not actual but only notional. He, spontaneously and simultaneously were not actual but only notional. He, spontaneously and simultaneously were not actual but only notional. He, however, stated that, as far as the question of ed that, as far as the question of Section 68 is concerned, the is concerned, the nature of the transactions and the entries clearly show that no cash, in fact, nature of the transactions and the entries clearly show that no cash, in fact, nature of the transactions and the entries clearly show that no cash, in fact, flowed. It was further stressed that the transactions are abo flowed. It was further stressed that the transactions are abo flowed. It was further stressed that the transactions are above board. No outsider is involved. The entries were made in the books of the concerns of the outsider is involved. The entries were made in the books of the concerns of the outsider is involved. The entries were made in the books of the concerns of the same group. The shares in question were also of the companies of the group. same group. The shares in question were also of the companies of the group. same group. The shares in question were also of the companies of the group. There was no attempt at hiding the transactions. Nor is it the case of any of the There was no attempt at hiding the transactions. Nor is it the case of any of the There was no attempt at hiding the transactions. Nor is it the case of any of the parties to the transaction that there was any passing of cash. Every party es to the transaction that there was any passing of cash. Every party es to the transaction that there was any passing of cash. Every party unequivocally stated that the transactions were carried into effect merely by unequivocally stated that the transactions were carried into effect merely by unequivocally stated that the transactions were carried into effect merely by way of adjustments of the said loans and the share transfers. way of adjustments of the said loans and the share transfers.

Shri A.C. Moitra, the learned advocate fo 18. Shri A.C. Moitra, the learned advocate for the Revenue, reiterated the r the Revenue, reiterated the grounds on which the Tribunal has affirmed the addition of the amount of Rs. grounds on which the Tribunal has affirmed the addition of the amount of Rs. grounds on which the Tribunal has affirmed the addition of the amount of Rs. 11.20 lakhs as unexplained cash credit. He particularly emphasised that the 11.20 lakhs as unexplained cash credit. He particularly emphasised that the 11.20 lakhs as unexplained cash credit. He particularly emphasised that the assessee's contention that the entries are only adjustment entries is not assessee's contention that the entries are only adjustment entries is not assessee's contention that the entries are only adjustment entries is not acceptable, because the adjustment entries are not made through the cash acceptable, because the adjustment entries are not made through the cash acceptable, because the adjustment entries are not made through the cash book. It is an accepted principle of accounting that book adjustments and the book. It is an accepted principle of accounting that book adjustments and the book. It is an accepted principle of accounting that book adjustments and the Assessment Year: 2012-13 M/s. Dhankamal Commonsales Pvt. Ltd M/s. Dhankamal Commonsales entries in effecting them are made by journal entries and not cash entries. He entries in effecting them are made by journal entries and not cash entries. He entries in effecting them are made by journal entries and not cash entries. He urged that the purported urged that the purported motive of the entries being the reduction of loans of motive of the entries being the reduction of loans of the three limited companies does not explain the whole matter, because the the three limited companies does not explain the whole matter, because the the three limited companies does not explain the whole matter, because the entries are cash entries. The fact remains that, at every stage, the parties entries are cash entries. The fact remains that, at every stage, the parties entries are cash entries. The fact remains that, at every stage, the parties showed the payments and receipts of cash even when showed the payments and receipts of cash even when there was no cash there was no cash available for such entries. This quite justifies the addition as sustained by the available for such entries. This quite justifies the addition as sustained by the available for such entries. This quite justifies the addition as sustained by the Tribunal.

We have perused the assessment order carefully. We find that cash did not 19. We have perused the assessment order carefully. We find that cash did not 19. We have perused the assessment order carefully. We find that cash did not pass at any stage though entries were made in the cash book showin pass at any stage though entries were made in the cash book showin pass at any stage though entries were made in the cash book showing payments and receipts ; but since the entries made a complete round, no payments and receipts ; but since the entries made a complete round, no payments and receipts ; but since the entries made a complete round, no passing of cash was necessary for the purpose of making the entries. That there passing of cash was necessary for the purpose of making the entries. That there passing of cash was necessary for the purpose of making the entries. That there was no passing of cash is also admitted by the Income was no passing of cash is also admitted by the Income-tax Officer himself. We tax Officer himself. We have already extracted t have already extracted the observation of the Income-tax Officer in paragraph tax Officer in paragraph 14 of his assessment order. The Income 14 of his assessment order. The Income-tax Officer has clearly opined that all tax Officer has clearly opined that all the respective parties did not receive cash nor did pay cash as none had any the respective parties did not receive cash nor did pay cash as none had any the respective parties did not receive cash nor did pay cash as none had any cash for the purpose. The only point in the as cash for the purpose. The only point in the assessment order is that the entries sessment order is that the entries not involving the passing of cash should not have found a place in the cash not involving the passing of cash should not have found a place in the cash not involving the passing of cash should not have found a place in the cash book, but in the ledger account through journal entries. There is another self book, but in the ledger account through journal entries. There is another self book, but in the ledger account through journal entries. There is another self- contradiction in the Income contradiction in the Income-tax Officer's finding that, if there was no real cash as no real cash entry on the credit side of the cash book, but merely a notional or fictitious cash entry on the credit side of the cash book, but merely a notional or fictitious cash entry on the credit side of the cash book, but merely a notional or fictitious cash entry, as admitted by him, there is no real credit of cash to its cash book ; the entry, as admitted by him, there is no real credit of cash to its cash book ; the entry, as admitted by him, there is no real credit of cash to its cash book ; the question of inclusion of the amount of the entry as unexplained cash credi question of inclusion of the amount of the entry as unexplained cash credi question of inclusion of the amount of the entry as unexplained cash credit cannot arise.

One of the grounds of the Tribunal for disbelieving the assessee's case is that 20. One of the grounds of the Tribunal for disbelieving the assessee's case is that 20. One of the grounds of the Tribunal for disbelieving the assessee's case is that the adjustment entries were made by notional cash entries with a view to the adjustment entries were made by notional cash entries with a view to the adjustment entries were made by notional cash entries with a view to bringing down the debt bringing down the debt-and-capital ratio, i.e., that while being discharged of capital ratio, i.e., that while being discharged of the debt the said companies also jettisoned their assets, i.e., the shares held by debt the said companies also jettisoned their assets, i.e., the shares held by debt the said companies also jettisoned their assets, i.e., the shares held by them of equivalent sum without achieving the avowed purpose. Here the them of equivalent sum without achieving the avowed purpose. Here the them of equivalent sum without achieving the avowed purpose. Here the Tribunal certainly misdirected itself. The ratio to be reduced is of the loan in Tribunal certainly misdirected itself. The ratio to be reduced is of the loan in Tribunal certainly misdirected itself. The ratio to be reduced is of the loan in relation to the share cap relation to the share capital and the reserves. Jettisoning the shares had the ital and the reserves. Jettisoning the shares had the desired effect of reducing the borrowed capital. desired effect of reducing the borrowed capital.

Again, as regards the Tribunal's refusal to take notice of the directions of 21. Again, as regards the Tribunal's refusal to take notice of the directions of 21. Again, as regards the Tribunal's refusal to take notice of the directions of the Reserve Bank, it is not correct for the Tribunal to hold that the s the Reserve Bank, it is not correct for the Tribunal to hold that the s the Reserve Bank, it is not correct for the Tribunal to hold that the said document was a new evidence in the true sense of the term. The assessee has document was a new evidence in the true sense of the term. The assessee has document was a new evidence in the true sense of the term. The assessee has been consistently pleading before the lower authorities that the entries had to been consistently pleading before the lower authorities that the entries had to been consistently pleading before the lower authorities that the entries had to be made in order to bring the companies in conformity with the said direction. be made in order to bring the companies in conformity with the said direction. be made in order to bring the companies in conformity with the said direction. Moreover, the direction of the Reserve Bank is a public document within the ection of the Reserve Bank is a public document within the ection of the Reserve Bank is a public document within the meaning of Section 74 Section 74 of the Evidence Act, 1872. Documents of a public nature of the Evidence Act, 1872. Documents of a public nature and public authority are generally admissible in evidence subject t and public authority are generally admissible in evidence subject t and public authority are generally admissible in evidence subject to the mode of proving them as laid down in proving them as laid down in sections 76 and 78 of the Evidence Act. of the Evidence Act.

In our view, the effect and import of the transactions is that th 22. In our view, the effect and import of the transactions is that th 22. In our view, the effect and import of the transactions is that the assessee took over the liability of the aforesaid non took over the liability of the aforesaid non-financial companies to GB and Co. in financial companies to GB and Co. in exchange for the shares as aforesaid. exchange for the shares as aforesaid.

The Kolkata ‘D’ Bench of the Tribunal in the case of The Kolkata ‘D’ Bench of the Tribunal in the case of M/s. ABA Earthline M/s. ABA Earthline Communications Ltd. vs. ITO in Communications Ltd. vs. ITO in Assessment Year 2012 ITA No. 1141/Kol/2017; Assessment Year 2012-13, order dt. 09/11/2018, held as follows: held as follows:- “6. On these facts, we find that the issue in question which is to be adjudicated is these facts, we find that the issue in question which is to be adjudicated is these facts, we find that the issue in question which is to be adjudicated is whether the addition can be made u/s 68 of the Act be made where there was whether the addition can be made u/s 68 of the Act be made where there was whether the addition can be made u/s 68 of the Act be made where there was allotment of shares other than by way of cash i.e. for consideration for purchase allotment of shares other than by way of cash i.e. for consideration for purchase allotment of shares other than by way of cash i.e. for consideration for purchase of shares of another company. This issue is covered by the order of the 'C' Bench company. This issue is covered by the order of the 'C' Bench company. This issue is covered by the order of the 'C' Bench of the Kolkata Tribunal in the case of of the Kolkata Tribunal in the case of ITO vs. M/s. Anand Enterprises Ltd., ITA No ITO vs. M/s. Anand Enterprises Ltd., ITA No. 1614/Kol/2016 & C.O. No.56/Kol/2016; dt. 26/09/2018, whe 1614/Kol/2016 & C.O. No.56/Kol/2016; dt. 26/09/2018, wherein it has been rein it has been held as follows:- "4. We have heard the rival submissions. At the outset, we find that the assessee "4. We have heard the rival submissions. At the outset, we find that the assessee "4. We have heard the rival submissions. At the outset, we find that the assessee had not raised any share capital by receipt of cash consideration in the instant had not raised any share capital by receipt of cash consideration in the instant had not raised any share capital by receipt of cash consideration in the instant case. The shares were issued for consideration other than case. The shares were issued for consideration other than cash in lieu of assessee cash in lieu of assessee company making investment in shares in some other company. Effectively, the company making investment in shares in some other company. Effectively, the company making investment in shares in some other company. Effectively, the assessee purchased certain shares from the aforesaid six shareholders and assessee purchased certain shares from the aforesaid six shareholders and assessee purchased certain shares from the aforesaid six shareholders and instead of paying cash to them, assessee company issued shares in its own instead of paying cash to them, assessee company issued shares in its own instead of paying cash to them, assessee company issued shares in its own company to those shareholders. Hence the assessee had made investments in y to those shareholders. Hence the assessee had made investments in y to those shareholders. Hence the assessee had made investments in shares of another company for which consideration was settled through shares of another company for which consideration was settled through shares of another company for which consideration was settled through issuance of its shares to those shareholders. Now the crucial point is whether the issuance of its shares to those shareholders. Now the crucial point is whether the issuance of its shares to those shareholders. Now the crucial point is whether the provisions of section 68 could be i provisions of section 68 could be invoked in the instant case for making nvoked in the instant case for making investment towards share capital. There was no receipt of any sum as provided investment towards share capital. There was no receipt of any sum as provided investment towards share capital. There was no receipt of any sum as provided u/s 68 of the Act in the instant case. It would be pertinent here to refer to the u/s 68 of the Act in the instant case. It would be pertinent here to refer to the u/s 68 of the Act in the instant case. It would be pertinent here to refer to the decision of Hon'ble Supreme Court in the case of decision of Hon'ble Supreme Court in the case of Shri H.H. Rama Varma vs. CIT Shri H.H. Rama Varma vs. CIT reported in 187 ITR 308 (SC) wherein it was held that 'any sum' means 'sum of reported in 187 ITR 308 (SC) wherein it was held that 'any sum' means 'sum of reported in 187 ITR 308 (SC) wherein it was held that 'any sum' means 'sum of money'. We find that ld. CIT(A) had deleted the addition by observing as under: money'. We find that ld. CIT(A) had deleted the addition by observing as under: money'. We find that ld. CIT(A) had deleted the addition by observing as under: "6. On consideration of the "6. On consideration of the AR's submission, especially the portion AR's submission, especially the portion reproduced above, it is seen that reproduced above, it is seen that section 68 of I.T. Act, 1961 does not of I.T. Act, 1961 does not apply to cases of purchase of share assets and allotment of shares apply to cases of purchase of share assets and allotment of shares apply to cases of purchase of share assets and allotment of shares by the appellant when pur by the appellant when purchase ITA No. 1141/Kol/2017 chase ITA No. 1141/Kol/2017 Assessment Year: 2012 Assessment Year: 2012-13 M/s. ABA Earthline Communications Ltd 13 M/s. ABA Earthline Communications Ltd and allotment are under a barter system. The AO has not refuted and allotment are under a barter system. The AO has not refuted and allotment are under a barter system. The AO has not refuted the appellant's claim that shares were allotted in exchange for the appellant's claim that shares were allotted in exchange for the appellant's claim that shares were allotted in exchange for acquisition of shares by the appellan acquisition of shares by the appellant from the companies which t from the companies which surrendered such shares to the appellant. Though as per the AO to surrendered such shares to the appellant. Though as per the AO to surrendered such shares to the appellant. Though as per the AO to apply section 68 section 68 to make the said addition in the appellant's hand. to make the said addition in the appellant's hand. Transactions purportedly executed by entry o Transactions purportedly executed by entry operators involve perators involve multiple layers and other complexities, introducing delays in multiple layers and other complexities, introducing delays in multiple layers and other complexities, introducing delays in Assessment Year: 2012-13 M/s. Dhankamal Commonsales Pvt. Ltd M/s. Dhankamal Commonsales introduction of unaccounted cash/money and multiple players introduction of unaccounted cash/money and multiple players introduction of unaccounted cash/money and multiple players being incorporated entities. Measures taken by the AO in the course being incorporated entities. Measures taken by the AO in the course being incorporated entities. Measures taken by the AO in the course of the assessment proceeding falls much short of of the assessment proceeding falls much short of what is required to what is required to be done in such case laws, which have evolved on this issue, call for be done in such case laws, which have evolved on this issue, call for be done in such case laws, which have evolved on this issue, call for concerted actions on the part of the AO pinpointing utilization of concerted actions on the part of the AO pinpointing utilization of concerted actions on the part of the AO pinpointing utilization of unexplained/unaccounted/untaxed money and the players and the unexplained/unaccounted/untaxed money and the players and the unexplained/unaccounted/untaxed money and the players and the beneficiaries effectively using the w beneficiaries effectively using the weblike scheme to plunder black eblike scheme to plunder black money. For example introduction and use of black money in the money. For example introduction and use of black money in the money. For example introduction and use of black money in the present case may be at a different point of time and in different present case may be at a different point of time and in different present case may be at a different point of time and in different hands. The AO's action in the present case cannot be upheld in law. hands. The AO's action in the present case cannot be upheld in law. hands. The AO's action in the present case cannot be upheld in law. I, therefore, delete the addi I, therefore, delete the additions and grounds of appeal Nos. 3 & 4 tions and grounds of appeal Nos. 3 & 4 are allowed." are allowed." 4.1. We find that the Hon'ble Allahabad High Court in the case of 4.1. We find that the Hon'ble Allahabad High Court in the case of 4.1. We find that the Hon'ble Allahabad High Court in the case of CIT vs. Sohanlal Singhania reported in 235 ITR 616 (All) had held in the context of reported in 235 ITR 616 (All) had held in the context of reported in 235 ITR 616 (All) had held in the context of allowability of donation as deduction u/s 80G of the Act that the expression 'any sum paid' used donation as deduction u/s 80G of the Act that the expression 'any sum paid' used donation as deduction u/s 80G of the Act that the expression 'any sum paid' used in the said section denotes ' sum of money paid' . Hence if certain shares were in the said section denotes ' sum of money paid' . Hence if certain shares were in the said section denotes ' sum of money paid' . Hence if certain shares were donated by a person, then the same would not fall eligible for deduction u/s 8 donated by a person, then the same would not fall eligible for deduction u/s 8 donated by a person, then the same would not fall eligible for deduction u/s 80G of the Act. We also find that the Hon'ble Jurisdictional High Court in the case of of the Act. We also find that the Hon'ble Jurisdictional High Court in the case of of the Act. We also find that the Hon'ble Jurisdictional High Court in the case of Jatia Investment Company (Co.) vs. CIT Jatia Investment Company (Co.) vs. CIT reported in 206 ITR 718 (Cal) also reported in 206 ITR 718 (Cal) also supports the case of the assessee herein, wh supports the case of the assessee herein, wherein it was held as under: erein it was held as under: "It is finally emphasised by learned counsel for the assessee that the ultimate "It is finally emphasised by learned counsel for the assessee that the ultimate "It is finally emphasised by learned counsel for the assessee that the ultimate result is that the firm becomes a debtor to GB and Co. and the three non result is that the firm becomes a debtor to GB and Co. and the three non result is that the firm becomes a debtor to GB and Co. and the three non- financial companies of the group got discharged. Learned counsel also financial companies of the group got discharged. Learned counsel also financial companies of the group got discharged. Learned counsel also emphasised that, at the worst, it can be said that the assessee asised that, at the worst, it can be said that the assessee-firm has received firm has received valuable assets being the said shares of the equivalent value of the debt taken valuable assets being the said shares of the equivalent value of the debt taken valuable assets being the said shares of the equivalent value of the debt taken over by it from the companies, i.e., Rs. 11.20 lakhs. over by it from the companies, i.e., Rs. 11.20 lakhs. Therefore, the question of cash credit does Therefore, the question of cash credit does not come in, there being no actual not come in, there being no actual passing or receipt of cash. In other words, the transactions are mere book passing or receipt of cash. In other words, the transactions are mere book passing or receipt of cash. In other words, the transactions are mere book entries. It was contended that the fact that the entries passed through the cash entries. It was contended that the fact that the entries passed through the cash entries. It was contended that the fact that the entries passed through the cash book could not detract from or efface the essential nature of th book could not detract from or efface the essential nature of th book could not detract from or efface the essential nature of the entries. It was also urged that the entries were passed through the cash book so that the also urged that the entries were passed through the cash book so that the also urged that the entries were passed through the cash book so that the repayment of loans by the said three companies could be established before the repayment of loans by the said three companies could be established before the repayment of loans by the said three companies could be established before the Reserve Bank of India. But, according to Shri Bajoria, that does not mean that Reserve Bank of India. But, according to Shri Bajoria, that does not mean that Reserve Bank of India. But, according to Shri Bajoria, that does not mean that it amounts to an artifice employed to deceive any authorities, because the unts to an artifice employed to deceive any authorities, because the unts to an artifice employed to deceive any authorities, because the transactions showing the amount as received in cash and paid away transactions showing the amount as received in cash and paid away transactions showing the amount as received in cash and paid away spontaneously and simultaneously were not actual but only notional. He, spontaneously and simultaneously were not actual but only notional. He, spontaneously and simultaneously were not actual but only notional. He, however, stated that, as far as the question of however, stated that, as far as the question of section 68 is concerned, the is concerned, the nature of the transactions and the entries clearly show that no cash, in fact, nature of the transactions and the entries clearly show that no cash, in fact, nature of the transactions and the entries clearly show that no cash, in fact, flowed. It was further stressed that the transactions are above board. No flowed. It was further stressed that the transactions are above board. No flowed. It was further stressed that the transactions are above board. No outsider is involved. The entries were made in the books of the concerns of the outsider is involved. The entries were made in the books of the concerns of the outsider is involved. The entries were made in the books of the concerns of the same group. The shares in question were also of the companies of the group. group. The shares in question were also of the companies of the group. group. The shares in question were also of the companies of the group.

In the result, appeal of the revenue is dismissed. In the result, appeal of the revenue is dismissed. Kolkata, the kata, the 17th day of June, 2020. Sd/- Sd/- [Aby T. Varkey] [J. Sudhakar Reddy J. Sudhakar Reddy] Judicial Member Accountant Member Accountant Member Dated : 17.06.2020 {SC SPS} Copy of the order forwarded to: