ACIT, CIRCLE-1, BURDWAN, BURDWAN vs. M/S. BARDHAMAN DHARMARAJ PAPER MILL PVT. LTD., BURDWAN

आयकर अपील�य अधीकरण, �यायपीठ – “�व” कोलकाता, IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH “B” KOLKATA Before Shri S.S.Godara, Judicial Member and Dr. A.L. Saini, Accountant Member ITA No. 910/Kol/2019 Assessment Year : 2015-16

ACIT, Circle-1 M/s Bardhman Dharmaraj Burdwan, Court Paper Mill Pvt. Ltd., Compound, Kanchari V/s. Village-Konerpara, Road, P.OI.& Dist. Purba P.O.Kalanabagram, Dist. Burdwan-713101 Purba Burdwan-713124 [PAN No.AAECB 0141 J] .. अपीलाथ� /Appellant ��यथ�/Respondent

ITA No.1187/Kol/2019 Assessment Year : 2015-16

Bardhaman Dharmaraj ACIT, Circle-2, Paper Mills (P) Ltd., C/o Aayakar Bhawan, Subash Agarwal & V/s. Annexe, Court Associates, Advocates, Compound, Burdwan- Siddha Gibson,1, Gibson 713101 Lane, Suite 213, 2nd Floor,Kolkata-700069 [PAN No.AAECB 0141 J] .. अपीलाथ� /Appellant ��यथ�/Respondent Shri Subash Agarwal, Advocate आवेदक क� ओर से/By Assessee Smt. Ranu Biswas, Addl.CIT-DR राज व क� ओर से/By Revenue 17-12-2019 सुनवाई क� तार�ख/Date of Hearing 03-01-2020 घोषणा क� तार�ख/Date of Pronouncement आदेश /O R D E R PER S.S.Godara, Judicial Member:-

ITA No.910 & 1187/Kol/2019 A.Y. 2015-16 ACIT Cir-1/2 Bwn Vs. M/s Bardhaman Dharmaraj Paper Mill Pvt. Ltd. Page 2 The Revenue and assessee have filed their cross-appeal for assessment year 2015-16 against the Commissioner of Income Tax (Appeals)-Burdwan’s common order dated 06.02.2019 passed in case No.138/CIT(A)-BWN/Cir-1/BWN/17-18, involving proceedings u/s 143(3) of the Income Tax Act, 1961; in short ‘the Act’. Heard both the parties. Case file(s) perused.

ITA No.910 & 1187/Kol/2019 A.Y. 2015-16 ACIT Cir-1/2 Bwn Vs. M/s Bardhaman Dharmaraj Paper Mill Pvt. Ltd. Page 3

These grounds relate to the addition made by the Ld. AO to the tune of Rs.3,25,00,000/- u/s 68 by treating the same as unexplained cash credit on account of alleged non-genuine transactions with the 3 companies – namely, Celebration Vintrade Pvt. Ltd., Nice Commotrade Pvt. Ltd., and Samrat Rice Mill Pvt. Ltd. I have looked at the merits of the assessee after perusing the material on record & statement of facts in the appeal. i. M/s Celebration Vintrade Pvt. Ltd. – 21,50,000 shares for Rs.2,15,00,000/- ii. M/s Nice Commotrade Pvt. Ltd. – 7,00,000 shares for Rs.70,00,000/- iii. M/s Samrat Rice Mill Pvt. Ltd. -4,00,000 shares for Rs.40,00,000/- Total: Rs.3,25,00,000/- 4.3. The assessee has contested above additions/ disallowance made in the assessment order. In the case of PEE AAR Securities Ltd. Vs DCIT ITAT, Delhi' A' Bench, the Hou'ble bench has held that assessee had received Rs 80 lakh as share capital subscription from two entities. The AO had good reasons to believe that these were merely accommodation entries as the assessee company simply submitted the names and addresses of the entities who contributed to share capital, and did not furnish any details of source of funds received. Since the assessee is a private limited company which is by law, prohibited from offering its securities for subscription by general public, it is not open to the assessee to contend that it has no clue about the identity of the subscribers to its share capital. Assessee is not able to produce the brains behind these companies and the documents with respect to their financials either. As per the decision of the Tribunal in the case of TG group, these entities as well as other group entities were never involved in any genuine business anyway and were only in the business of providing accommodation entries. It would, therefore, not really appropriate to be swayed by the documents like Pan cards, board resolutions passed by these entities, copies of distinctive share certificates, copies of letters from these two entities confirming the fact of share subscriptions and extracts from the minutes of meeting of the directors. Thus, it is impossible to come to the conclusion that these transactions represent bona fide investment transactions. There is nothing to establish genuineness of the share subscription transactions on the facts of this case. Assessee does not know anything about the investor companies. Onus of the assessee of explaining nature and source of credit does not get discharged merely by filing confirmatory letters or demonstrating that the transactions are done through the banking channels or even by filing the income-tax assessment particulars. Therefore, addition in respect of the alleged share subscription received from the said two companies is upheld. 4.4 It is also worthwhile to refer to the judgment of the Hon'ble High Court in the case of CIT vs. Ruby Traders and Exporters Ltd. [134 Taxman 29 (cal)] wherein it was held that it is incumbent on the assessee to prove and establish the identity of the subscribers, their creditworthiness and the genuineness of the transaction. Once materials to prove these ingredients are produced, it is for the Assessing officer to find out whether on these materials. It is for the Assessing officer to find out as to whether these materials, the assessee as able to establish the ingredients mentioned above.

ITA No.910 & 1187/Kol/2019 A.Y. 2015-16 ACIT Cir-1/2 Bwn Vs. M/s Bardhaman Dharmaraj Paper Mill Pvt. Ltd. Page 4 It is significant to note that the company, which is a private limited company, has no track record or asset base is asking for astronomically high premium per share defying all commercial and financial prudence and logic. There was no noticeable business activity or book value/Earning per share which can justify the very high share premium. It is also observed that when summons u/s 131 of the Income Tax Act, 1961 was issued to the directors of the assessee company to examine the basis of premium and also when the assessee company was requested to produce the directors of the investor Company for verifying their identify, genuineness of transaction and their creditworthiness for such investments, neither the directors of assessee company appeared nor the directors of the investor company appeared. Thus, the facts and circumstances of the case suggest that the assessee company has failed to corroborate the creditworthiness of the investor's despite reasonable opportunity. 4.5 In this context, it is relevant to quote the judgment of Ld. ITAT Bench in the case of M/s Bisakha Sales Pvt. Ltd. Vs CIT -11, Kolkata in ITA No. 1493/K0l/2013, the relevant excerpt of which is reproduced as under "A perusal of the order of the Ld. CIT further shows that there are a number of companies in this regard, doing the business of money laundering under the guise of share capital introduction .... Allegedly various documents in respect of share capital introduction are also placed before the AO ….. Tax avoidance is an accepted principle. Any person is entitled to adjust its affairs in such manner as to minimize tax liability. However, the methodology and acts done in such cases of capital formation is not tax avoidance. It is more in the nature of tax evasion by money laundering. These transactions have in effect three limbs. The first limb is the creation of the shell companies with substantial share capital which is balanced with inventories in the form of shares in other shell companies. The second limb is the transfer of such shell companies to persons who desire to use such substantial share capital companies for converting their unaccounted money into accounted funds and use such shell companies to do legitimate business. The third limb is when the shell companies after being taken over, the assets in the form of inventories are encashed whereby the unaccounted monies are laundered and brought into the company for conducting the legitimate business." A perusal of the Balance sheet and Profit & Loss account in the case of the assessee shows that the share application monies received by the assessee along with the premium are represented in the Balance sheet in the form of current assets being the unquoted equity shares in other such companies. That is the share application money received by the assessee is used for making further investments in other such similar shell companies from whom cash is taken and rerouted through cheques. These shell companies which are acquired by the interested third parties purchase these companies at a fractional amount of the value of the shares. That means a company whose share value is Rs.10/-, the share is issued at a premium of Rs.490/- total value of the share becomes Rs.500/-. This contains first portion of the unaccounted cash brought in or converted through the accommodation entry. Now this 500 rupees shared is purchased by the third party or the interested person in taken over the company of the purpose of utilizing its capital. It may be two rupees or three rupees per share. Here the purchase price is even below the face value of the shares or at the face value. The premium is in effect the bonus. The premium already introduced sits in the liability side as a

ITA No.910 & 1187/Kol/2019 A.Y. 2015-16 ACIT Cir-1/2 Bwn Vs. M/s Bardhaman Dharmaraj Paper Mill Pvt. Ltd. Page 5 reserve an on the asset side as investments in other shell companies. How once the controlling interest is taken, then the balance sheet has to be cleaned. The balance sheet which now holds in current assets the unquoted shares of other shell companies and loans and advances get cleaned by again liquidating these current assets. Now these current assets representing the share application money or the inventories being shares in the unquoted companies are sitting at a premium because these shares have also been applied for and purchased at a premium. How this money was brought back into the company has not been examined. When this has come back has not been examined and who are the people responsible when these transactions took place has not been examined. Here the second round of laundering of unaccounted funds is done. Much less being examined the details are not available nor given. This is because the inventories are also shares of shell companies and no investor worth his salt would acquire the shares of such shell companies at such premium. The question would arise also as to whether any of these shell companies in which the assessee company has made the investment, have also been sold or transferred, In such a case, it becomes more intricate. There is no information as to whether there is a claim of capital loss or there is an offer of capital gains in the returns of income of the assessee how these shares more so the current assets were cleaned form the balance sheet. These are cases of clear human ingenuinity with the clear and contumacious intention to defraud the revenue. It is not the handiwork of one person alone. One person has created the shell another has funded the shell with an intention to launder unaccounted funds and after having acquired the shell has used it for converting its funds also. There is no information as to who are the latest beneficiaries of such shell companies and for what purpose the companies are being used. This is just the reason why the provision of section 56(viib) has been introduced." As another important aspect which should also be borne in mind in this case. These shares were received after paying huge premium by the allottees. These were subsequently transferred at face value or even at discount. This means that on transfer of shares the allotee did not receive any premium. This means that huge amount was received and paid as share premium with full knowledge that there will no recovery or there is no scope of recovery of share premium. This was designed facilitate the transfer of these companies to other persons on payment of nominal discounted value of shares. In other words the value embedded in the share premium, was meant to be transferred under hand, an prima facie it appears that transfer took place upon payment of under hand money. This is a classic case of money laundering and the share premium was being revived and paid to launder back money. This happens at the second lib i.e., when the directors change and company changes hand." Further, the observation of the Hon'ble ITAT Kolkata, in the case of Bishakha Sales Pvt., on non-compliance against summons u/s 131, may be reproduced as under:- ''This also clearly shows the revisionary tactics that are being adopted to wriggle way out of the corner it has put itself into by its own acts and commissions. A peculiarity in such cases that is noticed is that sheaves of paper documents are readily produced but when a summon is issued the responsible persons conveniently disappear. Only the assessee knows the intricacies of its accounts. It is for the assessee to prove its m of share capital/application money introduction and its affairs in respect of its accounts. Merely dumping papers and documents on the table of the assessing authority does not in any way mean compliance. The burden of proof cannot

ITA No.910 & 1187/Kol/2019 A.Y. 2015-16 ACIT Cir-1/2 Bwn Vs. M/s Bardhaman Dharmaraj Paper Mill Pvt. Ltd. Page 6 be shifted on the revenue by cart loads of documents. The documents submitted must be explained. We do understand the predicament of the assessee in so far as if any responsible person appears then he would have to answer many unpleasant questions which could lead to the reopening of assessments in multiple assessment years and multiple assesses. But then what has been created and knotted up by the assessee must be answered and unraveled only by the assessee and none else would know the facts better than the assessee itself." Further, it would be relevant to refer and to place reliance on decisions of the Hon'ble Supreme court on this issue, which are as under: 4.6 CASH CREDIT (Sec. 68) (I) Kale Khan Mohammed Hanif vs. CIT 50 ITR 1 (SC):- "Whether the burden of proving the source of the cash credits is on the assessee?" It seems to us that the answer to this question must be in the affirmative and that is how it was answered by the High Court. It is well established that the ans. of proving the source of a sum of money found to have been received by the assessee is on him. If he disputes liability for tax, it is for him to show either the receipt was not income of that if it was, it was exempt from taxation under the pro visions of the Act. In the absence of such proof the ITO is entitled to treat it as taxable income. (II) Sumati Dayal vs CIT 214 ITR 801 (SC):- As laid down by this court, apparent must be considered real until it is shown that there are reasons to believe that the apparent is not the real and that the taxing authorities are entitled to look into the surrounding circumstances to find out the reality and the matter has to be considered by applying the test of human probabilities. (III) CIT vs Durga Prasad More 82 ITR 540 (SC):- "The law does not prescribe any quantitative test to find out whether the onus in a particular case has been discharged or not. It all depends on the facts and circumstances of each case, in some cases, the onus may be heavy whereas, in others, it may be nominal. There is nothing rigid about it." 4.7 It is also well settled law that onus of proving credits in its book of accounts lies squarely on the assessee and such proof consist of proving the identity of the subscriber or creditor, capacity of such creditor or subscriber to make payment and also to prove the genuineness of the transaction. It is only when the assessee discharges this primary onus, that onus shifts to the Department. Merely establishing the identity of the creditor is ne sufficient. This is the ratio in a large number of decision held by various courts in the following case including Shankar Industries Vs. CIT (1978) 114 ITR 689 (Cal); C. Kant & Co. Vs. CIT, (1980) 126 ITR 63 (Cal); Prakash Textile Agency Vs. CIT, (1980) 121 ITR 890 (Cal); Oriental wire Industries P. Ltd. Vs. CIT, (1981) 131 ITR 688 (Cal); CIT Vs. United Commercial & Industries Co. (P) Ltd., (1991) 187 ITR 596, 599 (Cal); M.A. UnneeriKutti Vs. CIT, (1992) 198 ITR 147,150 (Ker), Special Leave Petition dismissed by the Supreme Court (1993) 201 ITR (St.) 23 (SC); CIT Vs. Precision Finance Pvt. Ltd .. (1994) 208 ITR 465, 470 (Cal). It is also reiterated that the manner of payment by the account payee cheque is also not sacrosanct and this cannot make a bogus transaction as genuine one as held in [CIT Vs. Precision Finance Pvt. Ltd., ($) 208 ITR 465, 470, 471 (Cal). Cf. Nizam Wool AGENCY Vs. CIT, (1992) 193 ITR 318, 320 (All)]

ITA No.910 & 1187/Kol/2019 A.Y. 2015-16 ACIT Cir-1/2 Bwn Vs. M/s Bardhaman Dharmaraj Paper Mill Pvt. Ltd. Page 7

CIT vs. Sophia Finance Ltd. [(1993) 113 CTR (Del) FB 472] A Full Bench held in the context of Section 68 of the Act that (i) the assessee has to prima facie prove "(1) the identity of the creditor/subscriber (2) the genuineness of the transaction namely whether it has been transmitted through banking or their indisputable channels, (3) the creditworthiness or financial strength of the creditor/subscriber" ii) If the relevant details of the address and PAN identity if the creditor/subscriber are furnished to the Department along with copies of shareholders register, share application forms, share transfer register etc, it would constitute acceptable proof or acceptable explanation by the assessee. iii) The Department would not be justified in drawing adverse inference only because the creditor/subscriber fails or neglects to respond to its notices. iv) The onus would not stand discharged if the creditor/subscriber denies or repudiates the transaction set up by the assessee nor should the AO take such repudiation at face value and construe it against the assessee. v) The AO is duly bound to investigate the creditworthiness of the creditor/subscriber, the genuineness of the transaction and veracity of the repudiation. It would be relevant to rely on various judicial pronouncements which are relevant to the subject 1. CIT vs. MAF Academy (V) Ltd. 361 ITR 258 Where Hon'ble Delhi Court held that where assessee, a private limited company, sold its shares to unrelated parties at a huge premium and thereupon within short pending of time those shares were purchased back even at a loss share transactions in question were to be regarded as bogus and thus, amount received was to be added as assessee's taxable income under section 68. It was held as follows:- The assessee is a private limited company and in the factual matrix. And the assessee has not been able to discharge the initial onus and has not been able to establish the identity, creditworthiness of the share applicants and the genuineness of the transaction. Therefore, the additions made by the Assessing officer were justified and sustainable. 2. CIT vs. Nivun Builders & Developers (p) Ltd (350 ITR 407):- where Hori'ble High Court held that where assessee failed to prove identity and capacity of subscriber companies to pay share application money, amount so received was liable to be taxed under section 68. 3. CIT vs. Nova Promoters & Finlease (D) Ltd.(342 ITR 169):- Wherein Hon'ble Delhi High Court held that amount received by assessee from accommodation entry provider in garb of share application money, was to be added to its taxable income under section 68. 4. CIT vs. Ultra Modern Exports (D) Ltd. (220 taxman 165):- Where Hon'ble Delhi High Court held that where in order to ascertain genuineness of assessee's claim relating to receipt of share application money, Assessing officer sent notices to share applicants which returned unserved, however assessee still managed to secure documents such as their income tax returns as well as bank account particulars in such circumstances. Assessing officer was justified in drawing adverse inference

ITA No.910 & 1187/Kol/2019 A.Y. 2015-16 ACIT Cir-1/2 Bwn Vs. M/s Bardhaman Dharmaraj Paper Mill Pvt. Ltd. Page 8 and adding amount in question to assessee's taxable income under section 68. 5. Rick Lunsford trade & Investment Ltd. vs CIT:- R2016 - TIQL-2007-SC-IT(Supreme Court) wherein Hori'ble Supreme Court dismissed SLP upholding that it is open to the Revenue Department to make addition on account of alleged share capital u/s 68, where the assessee company has failed to show genuineness of its shareholders. 6. CIT vs. Empire Builtech (p) Ltd. (366 ITR 110):- Where Honble Delhi High Court held that in respect of share application money, under section 68 it is not sufficient for assessee to merely disclosed address and identities of shareholders, it has to show genuineness of such individuals or entities. 7. In the case of ITO Ward 9(1) vs. Sohail financials Ltd. ITA No. 4867/Del./2011 Asstt. Year, 2008-09, the Hon'ble ITAT has upheld the addition made by the Assessing officer on account of share application money and share premium as the surrounding Circumstances and test of human probabilities shows that there is no reason to invest by these companies in the shares of the assessee company at such a huge premium. Therefore, the ratio laid down by the Hon Hon'ble Supreme Court in the case laws of Sumati Dayal (214 ITR 801) and Sreelekha Banerjee's case (1963) 49 ITR (SC) 112 squarely applies in the case of the assessee. Respectfully following the above judgments, the order of the A.O. making an addition of Rs.3,25,00,000/- under section 68 read of the Income Tax Act, 1961 is confirmed. 5 Ground of appeal No. 6: Ground of Appeal no 6 pertains to contention of the appellant regarding that the setting off of the addition from the assessed Business Loss, should be made and after that the remaining assessed business loss is required to be carried forward, but the Learned A.O. did not allow the setting off, which was against the applicable provision of the Income Tax Act, 1961. I have considered the submissions made by the A.R. for the appellant and have also perused the facts on record and the assessment order passed by the Assessing Officer. 5.1 Following facts are observed (i) The assessee is engaged in the business of manufacturing Kraft paper. (ii)The appellant has claimed for allowing the set off of the impugned addition made on account of alleged ingenuine transactions(with the three sundry creditors) u/s 68 with the assessed business loss during the relevant financial years (iii) It is seen that the entire amount has been credited in the books of account of the assessee. Therefore, it can be implied that these receipts are in the nature of business receipts. This view is supported by the decision of the Honble Supreme Court in the case of Lakshmichand Baijnath vs. CIT 35 ITR 416 where sums found credited in the books of account of the assessee were treated as business profits Similar view has also been taken by Hon'ble Calcutta High Court in the case of CIT vs Margttret's Hope Tea Co. Ltd. 201 ITR 747 and Mansfield and Sons vs. CIT 48 ITR 254. The Hon'ble Calcutta High Court observed :-

ITA No.910 & 1187/Kol/2019 A.Y. 2015-16 ACIT Cir-1/2 Bwn Vs. M/s Bardhaman Dharmaraj Paper Mill Pvt. Ltd. Page 9 7. A similar question came up before this court in I. T.Ref. No. 5 of 1984 (CIT vs. Hasimara Industries Ltd.), where tile judgement by this Bench was delivered 011 July 25, 1989. There, tile Bench, after, considering the decision in Daulatram Rawatmull v. CIT (1967) 64 ITR 593, observed as follows,' "There is no dispute as to tile fact th at the cash credit account was appearing in tile assessee's tea garden books of account i.e. business books of account. Tile cash credits continued throughout tile accounting period. The assessee's Main activity was tile cultivation, manufacture and sale of tea. For the Assessment Year 1974-75, tile Tribunal on all identical set of facts upheld tile view of tile commissioner of Income Tax (Appeals) that, in such circumstances, the amount included as undisclosed income under Section 68 of tile Act should be treated as business income. Tile principles laid down by this Court in Daulatram Rawatmull v. CIT (1967) 64 ITR 593 will apply to tile facts of tile case too." Further, the Act has also been amended to deny set off of loss for such kind of income but tile amendment is effective from 01.04.2017. In view of the above, the ground of appeal raised by the appellant is allowed and tile A.O. is directed to set-off of business loss amounting to Rs.7,50,93,533/- against the addition made of Rs. 3,25,00,000 pertaining to unexplained cash credits. 6. Ground of appeal I have considered the written submissions of the appellant and also examined the assessment order. I has rightly disallowed the depreciation to the tune of Rs.67,73,103/- since the appellant has claimed excess dep. Therefore, this grounds of appeal is dismissed.”

ITA No.910 & 1187/Kol/2019 A.Y. 2015-16 ACIT Cir-1/2 Bwn Vs. M/s Bardhaman Dharmaraj Paper Mill Pvt. Ltd. Page 10 for M/s Nice Commotrade Pvt. Ltd. & dated 10.08.2010 pertaining to M/s Samrat Rice Mill Pvt. Ltd. of ₹40,00,000/-; respectively. We make it clear that the Revenue is fair enough in not disputing the clinching factual aspects of addition of the corresponding fixed assets. Nor there is any evidence that the assessee’s assets do not exist as per physical verification. We are of the view in this factual backdrop that both the lower authorities have erred in law and on facts in treating the above purchase of fixed assets followed payment by way of share capital subscription as an instance of unexplained cash credits u/s. 68 of the Act. This tribunal’s co-ordinate bench’s decision in Income Tax Officer Ward-5(3) vs. M/s Bhagwat Marcom Pvt. Ltd., in ITA No.2236/Kol/2017 decided on 31.07.2019 has taken into consideration the entire case law to conclude that such an instance not involving any cash credits pursuing cannot be treated as unexplained u/s 68 of the Act as under:- “4. The learned DR submitted that the share capital and share premium amount credited in the books of account of the assessee company represented cash credit u/s 68 and since the primary onus to establish the identity and the capacity of the concerned share applicants as well as to prove the genuineness of the relevant transactions was not satisfactorily discharged by the assessee, addition u/s 68 was rightly made by the AO by treating the same as unexplained cash credit. He contended that the Ld.CIT(A) however did not appreciate the facts and circumstances involved in the assessee's case and deleted the addition made by the AO u/s 68 inter alia on the ground that there being no inflow of cash, section 68 was not applicable. He contended that the reliance of the Ld. CIT(A) on the decision of Hon'ble Calcutta High Court in the case of Jatia Investment Co. (supra) to come to this conclusion is clearly misplaced in as much as the facts involved in the said case before the Hon'ble Calcutta High Court were entirely different. He submitted that only notional entries were found recorded in the said case and there was no real transactions involved attracting the provision of section 68. He contended that the facts involved in the present case however are different, in as much as there were real transactions involving issue of share capital in lieu of investment in shares and these transactions having been reflected in the books of account of the assessee with credit made to the share capital and share premium amount section 68 was clearly attracted. In support of this contention, he relied on the decision of Hon'ble Madhya Pradesh High Court in the case of V.I.S.P. (P) Ltd. vs CIT 265 ITR 202 and the decision of Mumbai Bench of this Tribunal in the case of Panna S. Khatau vs ITO rendered vide its order dated 03.07.2015 passed in ITA No. 3596/Mum/2012. The learned DR contended that the relief given by the Ld. CIT(A) to the assessee on the issue under consideration by holding that section 68 is not applicable thus is not justified and the matter should go back to the Assessing Officer for deciding the same afresh on merit in the light of

ITA No.910 & 1187/Kol/2019 A.Y. 2015-16 ACIT Cir-1/2 Bwn Vs. M/s Bardhaman Dharmaraj Paper Mill Pvt. Ltd. Page 11 relevant details and documents furnished by the assessee before the Ld. C I T ( A ) w h i c h w e r e n o t a v a i l a b l e t o t h e A O . 5. The learned counsel for the assessee, on the other hand, submitted that the shares at premium were issued by the assessee company during the year under consideration to other companies in lieu of the shares held by the said companies and since no cash was involved in these transactions, section 68 was not applicable as rightly held by the Ld. CIT(A) by relying on the decision of Hon'ble Calcutta High Court in the case of Jatia Investment Co. He contended that the ratio of the said decision of the Hon'ble jurisdictional High Court is squarely applicable to the facts of the present case and distinction sought to be made by the learned DR is not correct. He also invited our attention to the voluminous papers placed in the Paper Book and submitted that the same filed before the AO as well as before the Ld. CIT(A) were sufficient to establish the identity and capacity of the concerned share applicants as well as the genuineness of the relevant transactions. He contended that the AO completely overlooked this vital and relevant documentary evidence filed by the assessee while the Ld. CIT(A) considered and appreciated the same in the right perspective to arrive at the conclusion that the primary onus to establish the identity and capacity of the concerned share applicants as well as genuineness of the relevant transactions having been established by the assessee on evidence, addition made by the AO us 68 was not sustainable on merit also. He, therefore, strongly supported the impugned order passed by the Ld. CIT(A) giving relief to the assessee on this i s s u e a n d u r g e d t h a t t h e s a m e d e s e r v e s t o t h e u p h e l d . 6. We have considered the rival submissions and also perused the relevant material available on record. It is observed that its shares were issued by the assessee company during the year under consideration it premium to certain companies in lieu of the shares held by the said companies and there was thus no inflow of cash involved in these transactions. The said transactions were entered into in the books of account of the assessee company by way of journal entries and it did not involve any credit to the cash amount. The learned DR at the time of hearing has not brought anything on record to rebut or controvert this position. He however has contended by relying on the decision of Hon'ble Madhya Pradesh High Court in the case of V.I.S.P. (P) Ltd. (supra) as well as the decision of Mumbai Bench of his Tribunal in the case of Panna S. Khatau (supra) that section 68 was still applicable in the present case involving credit to the share capital and share premium amount. It is however observed that the acts involved in the case of V.I.S.P. (P) Ltd. were different in as much as the liability in question in the aid case represented trading liability of the assessee accruing as a result of purchases made by the assessee luring the relevant year and since the said liability was found to be a bogus liability, addition made by the AO was held to be s u s t a i n a b l e b y t h e H o n ' b l e M a d h y a P r a d e s h H i g h C o u r t . 7. In the case of Panna S. Khatau (supra) cited by the learned DR, both section 68 and 56(2)(vi) were held to be applicable by the Tribunal but no concrete or cogent reasons were given to justify the applicability of section 68 to the credits not involving any receipt or inflow of cash in the relevant year .

ITA No.910 & 1187/Kol/2019 A.Y. 2015-16 ACIT Cir-1/2 Bwn Vs. M/s Bardhaman Dharmaraj Paper Mill Pvt. Ltd. Page 12 Moreover, the view taken by the Tribunal in the said case is contrary to the decision of Hon'ble Calcutta High Court in the case of Jatia Investment Co. (supra) relied upon by the Ld. CIT(A) to give relief to the assessee on issue under consideration in the present case. In the said case, the three NBFCs had taken loans from proprietary concern belonging to the same group. Since the said loans were required to be liquidated as per the RBI guidelines and there was no cash available with the NBFCs to repay the loans, the shares held by the three NBFCs were transferred to a partnership firm namely Jatia Investment Co., and the amount receivable against the said sale of shares was adjusted by the NBFCs against the loan amount payable to proprietary concern. The partnership firm of M/s. Jatia Investment Co. thus received shares from the three NBFCs and also took over the loans payable by the said NBFCs to the proprietary concern. These transactions were entered into in its books of account by the partnership firm through cash book by debiting the investment in shares and crediting the loan amount f the proprietary concern. This credit appearing in the books of account of the partnership firm, M/s. Jatia Investment Co. was treated by the AO as unexplained cash credit u/s 68 and on confirmation of the same, when the matter reached to the Hon'ble Calcutta High Court, it is held by their lordship that when the cash did not pass at any stage and since the respective parties did not receive cash nor did pay any cash, there was no real credit of cash in the cash book and the question of inclusion of the amount of the entry as unexplained cash credit could not arise. In our opinion, the ratio of this decision of the Hon'ble Jurisdictional High Court in the case of Jatia Investment Co. (supra) is squarely applicable in the facts of the present case and the Ld. CIT(A) was fully justified in deleting the addition made by the AO u/s 68 by holding that t h e s a i d p r o v i s i o n w a s n o t a p p l i c a b l e . ” We adopt the detailed reasoning mutatis mutandis to hold that both the learned authorities have erred in law and on facts in treating the sum in issue of ₹3.25 crores as unexplained cash credits. The same is directed to be deleted. Necessary computation shall follow as per law. The assessee succeeds in its former grievance whereas the Revenue’s sole substantive ground and main appeal ITA No.910/Kol/2019 fails.

ITA No.910 & 1187/Kol/2019 A.Y. 2015-16 ACIT Cir-1/2 Bwn Vs. M/s Bardhaman Dharmaraj Paper Mill Pvt. Ltd. Page 13 “7.1 It is seen from the return of income that the assessee has claimed the depreciation of Rs.4,49,24,859/-. It was claimed considering opening WDV, addition during the year, deduction during the year. It is noticed that the assessee has taken WDV as on 01.04.2014 for Rs.30,61,41,844/-. However, on verification on fixed asset schedule prepared as per IT Rule for AY 2014- 15, it is seen that the WDV of fixed asset as per schedule prepared as per IT Rule was Rs.27,74,98,360/- as on 31.03.2014. Therefore, the same should have been carried over to AY 2015-16 and the WDV as on 01.04.2014 should have been shown at Rs.27,74,98,360/-. Since there was mistake in taking WDV as on 01.04.2014, the schedule of depreciation for AY 2015-16 has been revised as per the provision IT Rule. Depreciation Balance on Addition Sale/return Total Rate in Depreciation Balance on 01.04.14 % 31.03.15 Land & land 41,35,644 -* 41,35,644 - -- 41,35,644 development Shed & 6,07,13,773 2,53,253 6,09,67,026 10 60,96,702* 5,48,70,324 building Plant & 17,27,86,854 67,29,025* 17,95,15,879 15 2,66,93,202* 15,28,22,677 Machinery Misc. fixed 2,20,497 -- 2,20,497 15 33,074 1,87,423 assets Electrical 3,89,23,727 2,104 91,831 3,88,34,000 15 58,25,100 3,30,08,900 installation Computer 1,12,245 1,12,245 60 67,347 44,898 Furniture & 18,900 18,900 10 1,890 17,010 fixture Air 1,25,120 1,25,120 15 18,768 1,06,352 conditioner Weight 4,16,895 64,923 4,81,818 15 72,273 4,09,545 bridge Motor cycle 44,705 44,705 15 6,706 37,999 Total 27,74,98,360 70,49,305 91,831 28,44,55,834 3,88,15,062 24,56,40,772 *The disallowance made above on account of addition to shad and building and plant and machinery has been considered while recasting the above schedule. 7.2 Considering the above depreciation on account of fixed assets allowed to the assessee at Rs.3,88,15,062/-. Since the assessee has claim depreciation on fixed assets of Rs.4,49,88,165/- the balance amount of Rs.67,73,103/- disallowed as excess depreciation and added to the total income of the assessee. The amount of disallowance of Rs.67,73,103/- includes disallowance of depreciation on account of addition to shad and building and addition to plant and machinery. Since the assessee has concealed particular of income penalty proceeding is initiated separately.

ITA No.910 & 1187/Kol/2019 A.Y. 2015-16 ACIT Cir-1/2 Bwn Vs. M/s Bardhaman Dharmaraj Paper Mill Pvt. Ltd. Page 14 8. The Revenue’s appeal ITA No.910/Kol/2019 is dismissed and assessee’s cross-appeal ITA No.1187/Kol/2019 is partly allowed in above terms. Order pronounced in the open court 03/01/2020 Sd/- Sd/- (लेखा सद य) (�या)यक सद य) ( A.L.Saini) (S.S.Godara) (Accountant Member) (Judicial Member) Kolkata, *Dkp *दनांकः- 03/01/2020 कोलकाता । आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. आवेदक/Assessee-M/s Bardhaman Dharmaraj Paper Mill Pvt. Ltd. Villge-Konerpara,P.O. Kalanabagram, Dist. Purba Burdwan-713124/C/o Subash Agarwal & Associates, Advocates Siddha Gibson,1, Gibson Lane, Suite-213 2nd Floor, Kolkata-69 2. राज व/Revenue-ACIT,Circle-1, Court Compound, Kanchari Road, P.O. & Dist. Purba Burdwan-713101/ACIT, Cir-2, Aayakar Bhawan, Annexe, Court Compound, Burdwann-713101 3. संबं5धत आयकर आयु6त / Concerned CIT Kolkata 4. आयकर आयु6त- अपील / CIT (A) Kolkata 5. �वभागीय �)त)न5ध, आयकर अपील�य अ5धकरण, कोलकाता / DR, ITAT, Kolkata 6. गाड= फाइल / Guard file. By order/आदेश से, /True Copy/ सहायक पंजीकार आयकर अपील�य अ5धकरण, कोलकाता ।