ITO 4(3)(4), MUMBAI vs. SIDHIVINAYAK FILAMENTS P LTD, MUMBAI

आदेश / O R D E R PER M. BALAGANESH (A.M):

M/s. Siddhivinayak Filaments P. Ltd.

back its unaccounted income in the garb of unsecured loans and introduced the same in the books of accounts. With these observations, he made addition u/s.68 of the Act in the sum of Rs.25 lakhs. 3.1. Before the ld. CIT(A), the assessee stated that this loan of Rs.25 lakhs was received from M/s. Fastline Multitrade Pvt. Ltd., by account payee cheques / RTGS. The assessee had paid interest on such loans after due deduction of tax at source thereon. Assessee had filed confirmation of loan during the course of assessment proceedings. The assessee had also filed income tax return acknowledgement for A.Y.2012-13 of the lender together with the financial statements and ITR acknowledgements for the A.Yrs 2013-14 and 2014-15 of the lender. The assessee also submitted that the copy of bank statement of the lender was also furnished before the ld. AO. Hence, it was pleaded that the assessee had proved the three necessary ingredients of the Section 68 of the Act viz. Identity of the creditor, genuineness of transactions and creditworthiness of the creditor. The ld. AO had not found any deficiencies in the said documents filed by the assessee and merely relied on the statements given by Shri Praveen Kumar Jain and his group of concerns during the course of their search operations. 3.2. The assessee submitted that it had requested the ld. AO to furnish copy of statement either of Shri Praveen Kumar Jain or Directors of the lender company or any other document or evidences which are being M/s. Siddhivinayak Filaments P. Ltd. relied upon by the ld. AO to draw adverse inference on the assessee on the subject mentioned transactions. It was also pleaded that no such statements were given to the assessee. It was also pleaded that the ld. AO did not allow cross examination of persons on whose statements the ld. AO had placed heavy reliance. 3.3. The ld. CIT(A) on due appreciation of various documentary evidences filed by the assessee that are available on record before the ld. AO, observed that the ld. AO had merely used the information received from the Investigation wing and the statements recorded during the course of search action u/s.132 of the Act carried out in the case of Shri Praveen Kumar Jain and his group concerns without establishing the fact that the assessee had really obtained accommodation entries and brought back its unexplained money as unsecured loan. He observed that the assessee had duly discharged its onus by furnishing the necessary documentary evidences to prove the genuineness of the loan received by it. The ld. CIT(A) on perusal of the financial statements of the lender observed that the loan given to the assessee is duly reflected in the audited balance sheet of the lender under the head “short term loans and advances”. The assessee has paid interest on this loan after deduction of tax at source. Further, the ld. AO had not provided to the assessee any evidences or other findings of the search action in the case of Shri Praveen Kumar Jain which could prove that the lender company has given M/s. Siddhivinayak Filaments P. Ltd. to the assessee only accommodation entries. The ld CIT(A) observed that the ld. AO had not supplied copies of statement recorded from Shri Praveen Kumar Jain and other Directors of the lender company to the assessee to show that the loan given to the assessee by the lender company is only accommodation entry. 3.4. On the contrary, the assessee was able to prove on record that the lender company had duly offered the interest income received from the assessee and taken credit for the TDS thereon which has also been granted by the ld. AO of the lender company. The entire transactions are by account payee cheque. The assessee has filed the entire copies of its bank statements as well as the bank statements of the lender company. All these documents go to prove that the loan received by the assessee from M/s. Fastline Multitrade Pvt. Ltd., is a genuine loan. The identity of the loan is not disputed by the ld. AO. The loan transactions given by the lender company to the assessee company by way of account payee cheque / RTGS is duly disclosed in the balance sheet of the lender company and hence, the genuineness of the transaction is also established. The financial statements of the lender company sufficiently go to prove that there is adequate creditworthiness for the lender to advance a sum of Rs.25 lakhs to the assessee company. Hence, the ld. CIT(A) observed that the three necessary ingredients of Section 68 of the Act had been duly established beyond doubt by the assessee company.

M/s. Siddhivinayak Filaments P. Ltd. The ld. CIT(A) observed that in the instant case, the assessee had duly established the nature and source of credit in the form of unsecured loan. The ld. CIT(A) also observed that the assessee had filed the bank statement of the lender company wherein the source of source is also reflected thereon which is also proved in the instant case by the assessee company. The ld. CIT(A) further added that there was no cash deposit in the bank statement in the bank account of the lender before granting of loan to the assessee. No further action was taken by the ld. AO with regard to the various documentary evidences submitted by the assessee by making enquiries with the Assessing Officer of the lender company despite knowing the details of assessment particulars of lender company. With all these observations, the ld.CIT(A) deleted the addition made in the sum of Rs.25 lakhs towards unexplained cash credit u/s.68 of the Act.

paid interest on the said loan after due deduction of tax at source and that the said interest income has also been offered by the lender company and the revenue had given due credit for the TDS claim thereon in the assessment of lender company. Even in the hands of the assessee company, the interest paid on loans is allowed as deduction. From the elaborate findings given by the ld. CIT(A) above, we find that the assessee had duly discharged the necessary three ingredients of Section 68 of the Act in the instant case. Merely because the notice u/s.133(6) of the Act returned unserved, no adverse inference could be drawn on the assessee ignoring the various documentary evidences on record. Nothing prevented the ld. AO to make enquiries from his side with the Assessing Officer of the lender company, and examine the veracity of the loan taken by the assessee, the details of which are very much available before the ld. AO. We also find that the entire addition has been made merely by placing reliance on the statement recorded from Shri Praveen Kumar Jain during the course of his search action, which statement was also not furnished to the assessee for its rebuttal and cross examination, though specifically asked for in the course of assessment proceedings. In these facts and circumstances, there is no case for the revenue to draw adverse inference on the various documentary evidences submitted by the assessee eventually to treat the loan received from M/s. Fastline Multitrade Pvt. Ltd., as “ingenuine loan”. Accordingly, we do not find any M/s. Siddhivinayak Filaments P. Ltd. infirmity in the order of the ld. CIT(A) granting relief to the assessee and the ground No.1 raised by the revenue is dismissed.

7.1. The ld. AO observed that during the course of search and seizure action by the Investigation Wing of Income Tax Department at the residence and office of Shri Shirish Chandrakant Shah on 09/04/2013, it was found that the said person was engaged in providing accommodation entries through a web of companies. The aforesaid four concerns were part of the companies found to be engaged in providing accommodation entries and controlled by Shri Shirish C Shah. The ld. AO based on the information gathered during the search action in the case of Shirish C Shah proceeded to treat the share capital and share premium received from the aforesaid five persons in the sum of Rs.2,50,00,000 as bogus and accordingly, show caused the assessee as to why the same should not be treated as unexplained cash credit u/s.68 of the Act. The assessee filed a reply vide letter dated 09/03/2015 wherein it submitted copies of confirmation from the investors duly confirming the investment made by them in the assessee company, bank statements, ITR acknowledgements, their financial statements, share application forms, board resolution for making the investment, the letter confirming the investment made by them in the assessee company, return of allotment filed with Registrar of Companies for having allotted the shares at premium, bank statements evidencing the investment made in the assessee company together with its source of funds. The ld. AO however, disregarded the entire evidences M/s. Siddhivinayak Filaments P. Ltd. filed by the assessee without finding any deficiencies in these documentary evidences submitted before him. The ld. AO merely placed reliance on the investigation report of the Investigation Department carried out in the case of Shri Shirish C Shah. Accordingly, he treated the receipt of share capital and share premium in the sum of Rs.2,50,00,000/- as unexplained cash credit u/s.68 of the Act and completed the assessment. 7.2. The assessee submitted the aforesaid various documentary evidences that were filed before the ld. AO and requested for consideration of the same by the ld. CIT(A). It was pleaded that the aforesaid documents would duly prove the three necessary ingredients of Section 68 viz. identity of the investors, creditworthiness of the investors and genuineness of the transactions. It was further pleaded that the assessee is no way connected with Shri Shirish C Shah and he had not referred to the name of the assessee per se in any of his statements before the Investigation Wing of the Income Tax Department. It was specifically pleaded that all the aforesaid five concerns are regularly assessed to Income Tax and had disclosed in their audited balance sheet, the amounts invested in the assessee company and that the transactions of making investment in the assessee company were made by account payee cheques / RTGS and the immediate source of credit is also proved by the assessee company. Hence, the source of source was also proved in M/s. Siddhivinayak Filaments P. Ltd. the instant case and that there was no cash deposit in the bank statements of the respective parties prior to the date of making investment in the assessee company. Hence, there is no reason to doubt the genuineness of the transaction in the instant case. It was pleaded that the entire addition made by the ld. AO based on the statement of Shri Shirish C Shah, is nothing but an addition made on the basis of suspicion, surmise and conjecture. 7.3. The ld. CIT(A) appreciated the chart given below which had been culled out from various details filed by the assessee to drive home the point that the entire transactions have been carried out through regular banking channels and creditworthiness of all the parties were proved beyond doubt:- (A) DETAILS OF BANK TRANSACTION FOR SHARE CAPITAL & SHARE PREMIUM s Details of share Bank Details Cheque/ DD Date Amount Remarks, No Applicant etc. if any . 1 Prraneta ING Vysya RTGS/Vysa 17.9.2011 50,00,000 No cash Industries Ltd/ Bank Ltd. h deposit Aadhar Ventures Nariman 1126070325 in bank India Ltd. Point 1 a/c S-574/577 Branch before Belgium A/c No. issuing of Square 508001038 cheque Ring Road, Surat- 395002. PAN:AABCP415 5F M/s. Siddhivinayak Filaments P. Ltd. 2 Dhanush ING Vysya Bank RTGS/Vysa No cash Technologies Ltd. Ltd. h 18.10.2011 50,00,000 deposit 2-AB, Gee DadarT.T. Mumbai 1291700492 in bank GeeEmarald, a/c Nungambakkan before Chennai-600034 issuing of PAN: cheque AABCD3429L No cash deposit in bank a/c before issuing of cheque 3 Speciality ING Vysya RTGS/Vysa 18.10.2011 50,00,000 No cash Papers Bank Ltd. h deposit Ltd. Dadar Branch 1129170458 in bank Moral National Mumbai 3 a/c Highway, Vapi A/cNo.561011013 before Gujarat 89 Issuing PAN:AECS0861Q of cheq lie 4 Emporis ING Vysya Bank RTGS/ 20.09.2011 50,00,000 No cash Projects Ltd. 209, Ltd. Dadar Branch Vvsah deposit in Sarthik-2 Opp. Mumbai 11263701474 bank a/c RajpathClub A/cNo.5610110136 Rs.3000000 before Ahmedabad- 22 27.09,2011 Issuing 380015 RTGS/ of cheque Vysah 11270703287 Rs.2000000 Total Rs. 500000 M/s. Siddhivinayak Filaments P. Ltd. Shri 5 Ganesh ING Vysya Bank NEFT/Vysah 14.11.2011 50,00,000 Spinners Ltd./ Ltd. 11318707156 Vantra Natural Nariman Resources Ltd. Point G.T. Road, Branch , Karnal Mumbai A/ Side, Village cNo.50001 Simla Molana, 1038954 Panipat 132103 PAN: AACCS4221Q (B) SOURCE FOR SHARE CAPITAL & SHARE PREMIUM S. Details of share Contribution's Nature Amount/ Remarks, if No. Applicant Capital as on and amount of Capita 1 any 31.03.2011 fund in the contributed by (preceding F.Y. in Balance sheet the party which contribution to Appellant made) 1 Prraneta Rs. 426992891 Own fund 50,00,000 Own fund of Industries Rs. (he party Ltd/Aadhar 426992891 Rs. Ventures India i. Share 426992891 Ltd. Capital/ which is S- 74/577 Application much higher Belgium Square Rs. than the Ring Road, 225721000/- amount Surat-395002. ii. Reserve received PAN:AABCP415 and 5F Surplus Rs. 201271891 /- M/s. Siddhivinayak Filaments P. Ltd. 2 Dhanush Rs. 2876887931 Own fund 50,00,000 Own fund of Technologies Rs. the party Ltd, 2876887931 Rs. 2-AB, i. Share 2876887931 Gee Capital/ which is GeeEmarald, Application much higher Nungambaldkam Rs. than the Chennai-600034 179426300/- amount PAN: received AABCD3429L ii. Reserve and Surplus Rs. 2697461 631 /- 3 Speciality Papers Rs. 1554048000 Own fund 50,00,000 Own fund of Ltd. Rs. the party Morai National 1749209000 Rs. Highway, Vapi i. Share 1554048000 Gujarat Capital/ which is PAN: Application much higher AAECSOS61Q Rs. than the 1749209000 amount received ii. Reserve and Surplus Rs. (195261000) Emporis Projects Ltd. Rs. Own fund 50,00,000 Own fund of the 4 209, Sarthik-2 Opp. 1361027511 Rs. 1361027511 party Rs. Rajpath Club 1361027511 which Ahmedabad-380015 i. Share is much higher than Capital/ the amount Application received Rs. 587532000 ii. Reserve and Surplus Rs. 773495511 5 Shri Ganesh Rs. Own fund 50,00,000 Own fund of the Spinners Ltd./ Yantra 2937175438 Rs. 2937175438 party Rs. Natural Resources Ltd. i. Share 2937175438 which G.T. Road, Capital/ is much higher than Karnal Side, Application the amount M/s. Siddhivinayak Filaments P. Ltd. Village Simla Molana, Rs. 554303625 received Panipat 132103 PAN: ii. Reserve AACCS4221Q and Surplus Rs. 2382871813 7.4. The ld. CIT(A) observed that the aforesaid documentary evidences together with the aforesaid tabulation goes to prove that the assessee had discharged the preliminary onus cost on it to prove the genuineness of the transaction by submitting the requisite details with documentary evidences and had discharged its onus of satisfying three necessary ingredients of Section 68 of the Act. The ld. CIT(A) specifically pointed out that the ld. AO had not brought any contrary evidence on record to disprove all these transactions. The ld. CIT(A) also observed that out of the five share holder companies, four companies are public limited companies whose shares are quoted in various stock exchanges. The ld. CIT(A) also placed reliance on the decision of Hon’ble Jurisdictional High Court in the case of Vodafone India Services Pvt. Ltd., vs. Additional CIT reported in 368 ITR 1 (BOM) wherein it was held that the receipt of share capital and share premium was undoubtedly on capital account and there is no express provision in the Act to tax the same. The ld. CIT(A) also took note of the fact that CBDT vide its Instruction No.2/2016 dated 29/10/2016 directed the revenue not to file SLP before the Hon’ble Supreme Court against this High Court order. The ld. CIT(A) further placed reliance on the Co-ordinate Bench decision of this Tribunal in the M/s. Siddhivinayak Filaments P. Ltd. case of ACIT vs. Gagandeep Infrastructure Pvt. Ltd., in dated 23/04/2014 wherein it was held that the amendment in Section 56(2) (viib) of the Act wherein it is proposed to tax the premium received on shares which was in excess of fair market value of the shares, is prospective in nature and applicable only from A.Y.2013- 14 onwards. The said judgment also held that the amendment in proviso to Section 68 of the Act is also applicable only from A.Y.2013-14 onwards. Accordingly, the receipt of share capital and share premium cannot be brought to tax u/s.68 of the Act up to A.Y.2012-13. 7.5. Based on the aforesaid observations, the ld. CIT(A) deleted the addition made u/s.68 of the Act towards share capital and share premium in the sum of Rs.2,50,00,000/-.

transactions. We find that none of these documentary evidences were controverted by the ld. AO by proceeding to make further enquiry in this regard. None of these facts were even denied by the ld. AO or any deficiencies were found thereon by the ld. AO and we also take note of the fact that out of the five investor companies who had invested monies in the assessee company, four of them are public limited companies which are listed in various stock exchanges. We also take note of the fact that the ld. CIT(A) had placed reliance on the co-ordinate bench decision of this Tribunal in the case of Gagandeep Infrastructure supra, wherein it was held that the amendment to Section 56(2)(viib) and proviso to Section 68 of the Act are only prospective in nature and applicable only from A.Y.2013-14 onwards and not earlier. We find that this judgment has been subsequently approved by the Hon’ble Jurisdictional High Court. We find that the Ld. DR vehemently relied upon the decision of Hon’ble Delhi High Court in the case of Navodaya Castles (P) Ltd., reported in 50 taxmann.com 110. We hold that the decision of Hon’ble Jurisdictional High Court would bind this Tribunal. Hence, in view of the aforesaid observations and various decisions of Hon’ble Jurisdictional High Court relied upon by the ld. CIT(A) while granting relief to the assessee, we do not deem it fit to interfere in the said order of the ld. CIT(A). Accordingly, ground No.2 raised by the revenue is dismissed.

M/s. Siddhivinayak Filaments P. Ltd.