ITO, WARD- 2(1), NEW DELHI vs. AJ ENERGY PVT. LTD., DELHI

PER SUDHIR PAREEK, JM

This appeal by the Revenue preferred against the order of Ld.
Commissioner of Income Tax (Appeals)-I, New Delhi, [hereinafter referred to as the Ld. CIT(A)] vide order dated 08.08.2017 pertaining

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to Assessment Year 2014-15. The Revenue has raised the following ground of appeal:
“1. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of Rs. 2,56,44,000/- made by the AO u/s 68 of the Income Tax Act, 1961. On account of unexplained cash credits in the form of share application money.
2. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in deleting addition of Rs. 5,12,880/- made by the AO being commission paid for taking accommodation entries.
3. The appellant craves leave for reserving the right to amend, modify, alter, add or forego any ground(s) of appeal at any time before or during the hearing of this appeal.”

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application money amounting to Rs. 2,56,44,000/- as detailed under:
Sr.
No.
Name of the Shareholder
Amount (in Rs.)
1
M/s Pooja Equity Advisor Pvt. Ltd.
20,00,000/-
2
M/s Parnav Sport Academy Pvt. Ltd.
23,00,000/-
3
M/s Prathvi Coal Pvt. Ltd.
2,44,000/-
4
M/s South Asia Portfolios Pvt. Ltd.
51,00,000/-
5
M/s JSR Trading Pvt. Ltd.
40,00,000/-
6
M/s Mangal Kalas Services Pvt. Ltd.
70,00,000/-
7
M/s Gama Instrumentation Pvt. Ltd.
25,00,000/-
8
M/s Sorus Power Pvt. Ltd.
18,00,000/-
9
M/s Pummy Garment Pvt. Ltd.
7,00,000/-

Total
2,56,44,000/-

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issued u/s 133(6) of the Act, were received through speed post in which notices u/s 133(6) were already received back un-served.
4. Aggrieved by the same, the assessee/appellant preferred an appeal before the Ld. CIT(A), which was allowed and deleted the addition made by the Ld. AO.
5. In the instant appeal preferred by Revenue assailing the deletion of addition of Rs. 2,56,44,000/- and Rs. 5,12,880/- made by the Ld. AO before us.
6. Heard rival submissions and perused the material available on record. The Ld. DR in the course of hearing submitted that the inquiry conducted u/s 133(6) did not yield results as such companies are not found on their addresses and also the summon issued to the directors of these companies remained uncomplied and Ld. CIT(A) by way of impugned order, deleting the addition in question simply relying upon the explanation given by the assessee
/ appellant that the balance sheets and other details related to PAN and Return of Income etc., and also other paper compliance details filed by the said investor companies. The Ld. DR also submitted that the Ld. CIT(A) failed to appreciate that money / funds were ITA No.- 6338/Del/2017

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transferred to above 9(nine) companies on same day through RTGS has not examined, or verified. Even trail of source was not explained and CIT(A) not looked into this from the angle of creditworthiness & genuineness of the investor and more so, when these investors companies found to be shell companies, which is apparent from the account of each of these companies furnished by the assessee.
7. The Ld. DR also submitted that it is for the assessee to explain the creditworthiness of assessee and genuineness of the transaction including the source.
8. Per contra, the Ld. AR while relying upon the impugned order, submitted that in the course of assessment proceedings of necessary documents and details were submitted before the Ld. AO and response to the notices issued to the assessee / appellant, he produced information and documents as listed below to prove the identity, genuineness and creditworthiness of the parties from whom share application money were received.

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Sr
.
no .
Name of the investor company

Investmen t in shares
Documents Filed
Net worth
P.B.
Pg.
No.
1
M/s Gamma
Insturmentat ion Pvt. Ltd.
AAACG43629
25,00,000
Copy of:
a. Confirmation b. Bank statement c. Application form for shares d. ITR
3.09
crores
50-
53
2
M/s
Sorus
Power
Pvt.
Ltd.
AAPCS2574M
18,00,000
Copy of:
a. Confirmation b. Bank statement c. Application form for shares d. ITR
2.74
crores
58-
61
3
M/s Pummy
Garments
Pvt. Ltd.
AAFCP5340J
7,00,000
Copy of:
a. Confirmation b. Bank statement c. Application form for shares d. ITR
2.77
crores
55-
57
4
M/s
Pooja
Equity
Advisor Pvt.
Ltd.
AADCP4625J
20,00,000
Copy of:
a. Confirmation b. Bank statement c. Application form for shares d. ITR,
Audit
Report,
Balance
Sheet, P & L
A/c
26.78
crores
64-
67
5
M/s Parnav
Sport
Academy
Pvt. Ltd.
AAFCP2723H
23,00,000
Copy of:
a. Confirmation b. Bank statement c. Application form for 13.45
crores
68-
70

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shares d. ITR
6
M/s Prathvi
Coal
Pvt.
Ltd.
AABCI4748P
2,44,000
Copy of:
a. Confirmation b. Bank statement c. Application form for shares d. ITR, computation
Audit Report,
Balance
Sheet, P & L
A/C
5.04
crores
(including share applicatio n)
71-
89
7
M/s
South
Asia
Portfolios
Pvt. Ltd.
AABCS5265M
51,00,000
/-
Copy of:
a. Confirmation b. Bank statement c. Application form for shares d. ITR e. Statement of Balance
Sheet and P
& L
35.69
crore
90-
93
8
M/s
JSR
Trading Pvt.
Ltd.
AAMCS9588G
40,00,000
/-
Copy of:
Confirmation
PAN Card
Bank statement
Application form for shares
ITR
7.07. crore
94-
101
9
M/s Mangal
Kalas
Services Pvt.
Ltd.
AAPCM5895J
70,00,000
/-
Copy of:
a. Confirmation b. PAN Card c. Bank statement d. Application form for shares
ITR
29.70
crore
102
-
111

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authorizing to subscribe equity shares
4
M/s
Pooja
Equity
Advisor
Pvt. Ltd.
AADCP4625J
Rs. 20,00,000/- 
Copy of the reply submitted in response to notice u/s 133(6)

Copy of statement of bank account

Copy of details of transaction made with AJ Energy Pvt. Ltd.

Copy of resolution authorizing to subscribe equity shares

Copy of acknowledgment of ITR

Copy of Audited
Financial Statements

Copy of memorandum and articles of association
318-
348
5
M/s
Pranav
Sport Academy
Pvt. Ltd.
AAFCP2723H
Rs. 23,00,000/- 
Copy of the reply submitted in response to notice u/s 133(6)

Copy of statement of bank account

Copy of resolution authorizing to subscribed equity shares

Copy of confirmation letter

Copy of certificate of incorporation

Copy of memorandum and articles of association
248-
285
6
M/s
Prathvi
Coal Pvt. Ltd.
AABCI4748P
Rs. 2,44,000/-

Copy of the reply submitted in response to notice u/s 133(6)

Copy of details of transaction made with AJ Energy Pvt. Ltd.

Copy of statement of bank account

Copy of acknowledgment of ITR

Copy of Audited
Financial Statement

Copy of memorandum
202-
247

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and articles of association

Copy of confirmation letter
7
M/s South Asia
Portfolios
Pvt.Ltd.
AABCS5265M
Rs. 51,00,000/- 
Copy of the reply submitted in response to notice u/s 133(6)

Copy of confirmation letter

Copy of statement of bank account

Copy of acknowledgement of ITR

Copy of audited financial statements

Copy of resolution authorizing to subscribe equity shares

Copy of memorandum and articles
286-
317
8
M/s
JSR
Trading Pvt. Ltd.
AAMCS9588G
Rs. 40,00,000/- 
Copy of the reply submitted in response to notice u/s 133(6)

Copy of ledger account

Copy of statement of bank account

Copy of statement of bank account

Copy of acknowledgement of ITR
114-
117

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2
M/s Sorus Power Pvt. Ltd.
AAPCS2574M
Rs.
2,74,00,000/-
Rs. 18,00,000/-
3
M/s Pummy Garments Pvt.
Ltd.
AAFCP5340J
Rs.
2,77,00,000/-
Rs. 7,00,000/-
4
M/s Pooja Equity Advisor Pvt.
Ltd.
AADCP4625J
Rs.
26,78,00,000/-
Rs. 20,00,000/-
5
M/s Pranav Sport Academy
Pvt. Ltd.
AAFCP2723H
Rs.
13,45,00,000/-
Rs. 23,00,000/-
6
M/s Prathvi Coal Pvt. Ltd.
AABCI4748P
Rs.5,04,00,000/-
Rs. 2,44,000/-
7
M/s South Asia Portfolios
Pvt.Ltd.
AABCS5265M
Rs.
35,69,00,000/-
Rs. 51,00,000/-
8
M/s JSR Trading Pvt. Ltd.
AAMCS9588G
Rs.
7,07,00,000/-
Rs. 40,00,000/-
9
M/s Mangal Kalas Services
Pvt.ltd.
AAPCM5895J
Rs.
29,70,00,000/-
Rs. 70,00,000/-
Total

2,56,44,000/-

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reflect proper paper work or documentation by genuineness, creditworthiness, identity are deeper and obtrusive, and he further observed that companies no doubt are artificial or juristic person but they are soulless and are dependent upon the individuals behind them who run manage the said companies. The person behind these companies were not produced by the assessee.
Identity, creditworthiness or genuineness of the transaction is not established by merely showing that the transaction was through banking channel or by account payee instrument. In this regard, the Ld. CIT(A) vide impugned order observed that the assessee /
appellant company provided all the relevant document and found that assessee company discharged its onus and addition made by the Ld. AO on the basis of suspicion cannot be treated as accommodation entries and the same cannot be sustained without bringing adverse materials on records. The relevant para of the impugned order at page 17, reproduced as under:
“ The Assessing Officer has mentioned in the assessment order that appellant company has received share application money from the companies being established entry operators. However, the AO has not given any document or statement to the appellant which could prove that these companies are entry operators. There is no evidence that share application money received by the appellant company from the above mentioned companies are accommodation entries

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after receipt of the cash from the appellant. On going through the documents submitted by the investor companies, it is clearly established that these companies are assessed to tax with the Income Tax Department and they are filing return of income regularly. These investor companies have got their bank account, wherefrom the money was paid to the appellant company as share application money and such investments are reflected in their balance sheets. It is also seen that these companies have not only invested in the appellant company but they have also invested in the shares of other companies and such investments are reflected in their Balance Sheets. The investments have been made out of the share capital or reserve and surplus available with the investor companies. The transaction has been done through banking channel. Therefore, the observations of the AO about the status of company and that the identity, capacity to advance money and genuineness of the transactions were not proved by the appellant is not based on any material and without appreciating the material filed on record. On the basis of documents submitted by the investor companies, it can safely be said that identity of the investor companies, capacity to advance money for share application and genuineness of transaction have been established. Therefore, the observations made by the AO are not supported by any adverse evidence.
It is seen that appellant company has filed documents to prove the genuineness of the share application money received by it. The AO had no documents to support his finding about the accommodation entry alleged to have been received by the appellant. There is no statement with reference to the investor companies that these companies have provided accommodation entries. There was no cash deposit found in the bank accounts of these companies. The AR of the appellant has submitted that the AO has no material in his possession to prove the transaction or the document submitted by the appellant as false. The investment has been confirmed by the investor companies before AO and such confirmations are on record.”

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position of law that once assessee has provided documentary evidence to prove the identity of the share application and creditworthiness of the share applicant and the genuineness of the transaction and the Ld. AO could not met any contrary findings then addition U/s 68 cannot be made by the AO.
14. The Ld. AR vehemently argued that in the case of Nova
Promoters, which is relied upon by the Ld. DR, entry operators as given statement that they have issued cheques and in turn received cash but admittedly no such statement by any entry operator in this case, and also submitted that in the case of Nova Promoters the ratio of decision of lovely exports will be applicable where AO has no material in his possession to show that particular submitted by the assessee are false and cannot be acted upon, then no addition can be made on the hands of the company and remedy is to go after shareholders and in the present case the Ld. AO has absolutely no adverse material against the assessee company in terms of statement, entry provider and confirmation etc. the Ld. AR also submitted that in the case of CIT vs. Nipun Builders & Developers
(P) Ltd. (2013) 30 taxmann.com 292, the addition was confirmed

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when summons issued to subscribers returned unserved, but in the present case notice u/s 133(6) of the Act were duly complied with.
15. The Ld. AR relied upon the judgment 2010 (5) TMI 62, CIT vs.
Victor Electodes Ltd., in which Hon’le Delhi High Court held that there is no legal obligation on the assessee to produce some director or other representative of the applicant companies before the AO.
The relevant para no. 6 to 9 is reproduced as under:
“ 6. The Special Leave Petition filed by the Revenue against the above- referred decision of this Court was dismissed by the Supreme Court vide its decision reported vide 2008 (216) CTR 195 which inter alia reads as under:

"Can the amount of share money be regarded as undisclosed Income under Section 68 of IT Act. 1961? We find no in Special Leave Petition for the simple reason that if the share application money is received by the assessee-company from alleged bogus shareholders, whose names are given to the AO, then the department is free to proceed to reopen their individual assessments in accordance with law. Hence, no infirmity is found with the impugned judgment.
7. It has not been disputed before us that the share application money was received by the assessee company by way of account payee cheques, through normal banking channels. It is not the case of the Revenue that the payment of Share Application Money was not made from the bank account of the applicant companies. Admittedly, copies of application for allotment of share were also provided to the Assessing
Officer. It is not the case of the Revenue that the share applications were not signed on behalf of the applicant companies and were forged documents. It is also not the case of the Revenue that the shares were not actually allotted to the companies.
8. The assessee filed copies of resolution passed by the Board of Directors of applicant companies. besides their bank statements and Income Tax Returns. The addresses of the applicant companies are ITA No.- 6338/Del/2017

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recorded in these documents. It is not the case of the Revenue that the copies of Board Resolutions. Income Tax Returns and Bank Statements were not genuine documents. The Assessing Officer did not make any verification in this regard either from the internal record of the Department or from the concerned banks. If he so wanted, he could have called for the Income Tax Returns of the share applicants to ascertain whether the investment made in the assessee company was reflected in their Balance Sheets or not. Nothing prevented the Assessing Officer from summoning the record of the banks on which cheques issued by the applicant companies were drawn. No such course was. however, adopted by him.
9. There was no legal obligation on the assessee to produce some
Director or other representative of the applicant companies before the Assessing Officer. Therefore, failure of assessee to produce them could not, by itself, have justified the additions made by the Assessing Officer, when the assessee had furnished documents, on the basis of which, the Assessing Officer, if he so wanted, could have summoned them for verification. No attempt was made by the Assessing Officer to summon the Directors of the applicant companies. The addresses of these companies must be available on the share applications, Memorandum and Articles of Association and their Income Tax Returns. If the Assessing Officer had any doubt about identity of the share applicants, he could have summoned the Directors of the applicant companies. No such attempt was, however, made by him. Therefore, the Commissioner of Income Tax(Appeals) and the Income Tax Appellate Tribunal, in our view were justified in holding that the identity of share applicants and the genuineness of the transactions had been established by the assessee.
For the reasons given in the preceding paragraphs, no substantial question of law arises for our consideration
The appeal is dismissed.”

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substantial means to invest in the assessee’s company and the Ld.
AO seized certain materials to say that minimal or insubstantial amount was paid as tax by such share applicants and did not carry out a deeper analysis or rather chose to ignore it and in such a circumstances the inferences drawn by the Ld. CIT(A) were not only factual but facially accurate.
17. In the case of CIT vs. Divine Leasing and Finance Ltd., and General Exports and Credits Ltd. 2006 (11) TMI 121, Hon’ble Delhi
High Court held that in the matter of share capital- cash credit- assessee co. has furnished all the necessary details such as PAN
No. etc. of share applicants to prove their genuineness and credit worthiness and the Ld. AO has neither controverted nor disapproved the material filed by the assessee and failed to react to the shifting of the burden to investigate into the creditworthiness of the share applicants and this appeal is dismissed and addition are not justified as part of share capital. Likewise, in the case of CIT vs.
Kamdhenu Steel & Alloys Ltd., 2011(12) TMI 394, Hon’ble Delhi
High Court reiterated that once adequate evidence / material is given, which would prima facie discharge the burden of the ITA No.- 6338/Del/2017
Ltd., 2018 (8) TMI 1552, Hon’ble Delhi High Court relied upon the judgment delivered by the Hon’ble Supreme Court in Commissioner of Income Tax vs. Lovely Exports 301 ITR 218 (SC), held at the relevant extracts have been reproduced in the order of the AO as well as the CIT(A) which disclosed that the share applicants were entering into proper commercial transactions and were not per se forged, bogus or sham investors. In the case Lovely Exports (supra) as mentioned hereinabove, the Hon’ble Supreme Court held that if the share application money is received by the assessee company from alleged bogus shareholders whose name is given to the Ld. AO then the Department is free to reopen individual assessment in accordance with law.
19. After hearing both and bare perusal of the impugned order, the Ld. CIT(A) rightly observed that the assessee / appellant company furnished all necessary documents to prove the genuineness of the transaction and creditworthiness of the ITA No.- 6338/Del/2017

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investor’s companies and on the basis of the foregoing discussion, and following binding judicial precedents mentioned hereinbefore, we find material substance in the submissions advanced on behalf of the assessee / respondent. There is no any ground exists to interfere with the finding given by the Ld. CIT(A) and hence the appeal of the revenue liable to be dismissed, devoid of any substance.
20. Consequently, the appeal of revenue is hereby dismissed.
Order pronounced in the Open Court on 27th March, 2025. (S. RIFAUR RAHMAN)
JUDICIAL MEMBER

Dated: 27/03/2025
Pooja, Sr. PS