DEPUTY COMMISSIONER O F INCOME TAX, RAIPUR vs. BALAJEE LOHA PVT. LTD., RAIPUR

आदेश / O R D E R Per Arun Khodpia, AM:

The captioned appeal is filed by the department against the Commissioner of Income Tax (Appeals), NFAC, Delhi, [in short Ld. “CIT(A)”] for the Assessment Year 2014-15 dated 10.06.2024, which in turn arises from the order of Assistant Commissioner of Income Tax, Circle-3(1), Raipur u/s 143(3) of I. T. Act, dated 27.12.2016.

2 ITA No. 356/RPR/2024 DCIT vs Balajee Loha Pvt. Ltd., Raipur 2. The grounds of appeal raised by the department are as under: 1. Whether on the facts and in the circumstances of the case, and in law, the ld. CIT(A) was justified in deleting the additions of Rs.11,54,65,000/- made by the Assessing Officer u/s 68 of the I T Act, 1961 ?

3.1 While making the addition on account of share application and share premium receipt by the assessee during the year under consideration, Ld. AO observed that the assessee company had issued fresh shares to Giriraj Infotech Pvt. Ltd. (GIPL) and Wave Promoters Pvt. Ltd. (WPPL) for Rs.14,70,00,000/- out of which an amount of Rs.11,54,65,000/- has been received during the year under consideration.

3 ITA No. 356/RPR/2024 DCIT vs Balajee Loha Pvt. Ltd., Raipur Ld. AO observed that GIPL, Raipur (formerly known as Vizcom Solutions Pvt. Ltd.) and WPPL are Kolkata Based Companies. On further verification, it is revealed from ROC that both these shareholders companies have changed the place of their registered office from Kolkata to Raipur. In view of the aforesaid material, assessee was requested to furnish information qua the aforesaid investors. Necessary information are furnished by the assessee, the same has been considered by the Ld. AO and have observed that the shareholder companies do not possess creditworthiness to invest the amount shown in their names, in fact the inflow of share-application money into the books of assessee company has to be seen in the perspective of money-laundering through Share- capital route in which unaccounted money available with the promoters/ directors/ family members and their associates is routed back into the books of accounts in the garb of share-application money through extensive money-laundering process without payment of due taxes.

3.2 Ld. AO further noted that during the year under consideration, investor M/s GIPL has shown the income u/s the head miscellaneous receipt for Rs.19,860/- only, with no business activities. Similarly, the second investor, i.e., WPPL had declared the return of income at Rs.10,860/- for AY 2014-15, without any business activities.

4 ITA No. 356/RPR/2024 DCIT vs Balajee Loha Pvt. Ltd., Raipur 3.3 Ld. AO further noticed that two directors of GIPL i.e., Shri Ajoy Das and Shri Sushil Jana, are replaced by Shri Mohan Lal Agrawal, who is one of the Director of Balajee Group of Companies, and following the same pattern the initial director of WPPL namely Shri Shyam Sunder Agrawal and Shri Ashit Mullick are replaced by Shri Jai Prakash Agrawal, who is one of the Directors of Balajee group of companies. Thus, these two investor companies is now pertains to Balajee Group.

3.4 Before Ld. AO, the assessee submitted that during the year under consideration, it had issues 24,50,000 shares at a face value of Rs.10 per share and premium of Rs. 50/- per share, as against book value of Rs.63.90 per share. Copy of valuation certificate under rule 11UA of Income Tax Rules is also furnished before the Ld. AO, along with list of shareholders to whom fresh shares have been allotted, including details like their address, number of shares issued and amount of shares including share premium, so as to establish the identity / creditworthiness of the investors and genuineness of the transactions. Certain documents are also furnished before the Ld. AO, such as copy of bank statements, Audited Balance Sheet / Profit & Loss account, copy of Income Tax return, Share Application Form, Memorandum of Article and Association, Certificate of Incorporation etc. of the investor companies. In addition, the

5 ITA No. 356/RPR/2024 DCIT vs Balajee Loha Pvt. Ltd., Raipur assessee submitted copy of assessment order of M/s GIPL for the AY 2011-12, wherein the capital of Rs.23.21Cr was raised and the assessment was completed u/s 143(3) of the Act. Copy of Assessment order of M/s WPPL for AY 2008-09, wherein the capital of 15.59 Cr. was raised and assessed u/s 143(3) was also furnished before the Ld. AO.

3.5 Before Ld. AO, assessee submitted that all the necessary primary information / documents required to substantiate the identity and creditworthiness of the investors and genuineness of the transactions are furnished, which is further supported with assessment u/s 143(3) of the Act of the investor companies, wherein such shareholders have raised their capital and was accepted by the concerned Assessing Officers, therefore, the assessee had duly discharged its onus cost upon it to prove the presence of essential ingredient, to be looked into before invoking the provisions of 68 of the Act i.e., identity and creditworthiness of the shareholders and genuineness of the transaction. The addition, therefore, shall not be made in its case, unless the evidence submitted by the assessee have otherwise been proved wrong. It is also submitted that the premium charged by the assessee on the shares was justified in terms of book value of shares, which is higher than the amount received by the assessee.

6 ITA No. 356/RPR/2024 DCIT vs Balajee Loha Pvt. Ltd., Raipur 3.6 Ld. AO considered the submissions of the assessee, however, are not found it satisfactory, therefore, after considering various judicial pronouncements have concluded the assessment with the following observations:

3.4 In the light of above discussion, it follows that the identity, creditworthiness or genuineness of the transaction is not established by merely showing that the transaction was through banking channels or by account payee instrument. It would be incorrect to State that the onus to prove the genuineness of the transaction and .creditworthiness of the creditor stands discharged in all cases if payment is made through banking channels. Certificate of incorporation of company, payment by banking channel, etc. cannot in all cases tantamount to satisfactory discharge of onus. It has been elaborately established .in the preceding paras that the assessee had failed to discharge its onus in proving the identity, creditworthiness and genuineness of the share applicants··and hence the share application money credited in its books is treated as undisclosed income charged to tax u/s 68 of the Act.

3.5 In the light of the above discussion, I find no merits in the arguments of the assessee. The legal proposition based on the case laws cited (supra), is clear that the onus lies with the assessee to establish the identity, creditworthiness and genuineness of the cash creditors. The department does not have to establish that the said cash credit was routed through the assessee and ploughed back in its books of accounts. I am therefore to hold that the assessee had failed to offer satisfactory explanation on the nature and source of the share application money credited in its books of account for the relevant assessment year in question and hence the same is treated as undisclosed income of the assessee u/s 68 of the Act. It has been elaborately established in the preceding par that the assessee had failed to discharge its onus in proving the identity, creditworthiness, genuineness of the share applicants. Accordingly the unexplained cash credit of Rs.11,54,65,000/- is added to the total income of the assessee u/s 68 of the Act.

Penalty proceedings u/s 271(1)(c) of the Act are initiated separately.

7 ITA No. 356/RPR/2024 DCIT vs Balajee Loha Pvt. Ltd., Raipur 3.7 Ld. AO, further observed another discrepancy in the P&L of the assessee and had made the following estimated addition:

3.8 Ld. AO, finally concluded the assessment by making the following additions:

8 ITA No. 356/RPR/2024 DCIT vs Balajee Loha Pvt. Ltd., Raipur Less: Allowable Depreciation Rs.3,14,33,840/- Rs.3,14,33,840/- Total Assessed Income Rs.11,11,09,885/-

Total income assessed and rounded to Rs.11,11,09,890/- MATT profit shown at Rs.41,22,113/- is as per return.

Assessed as above u/s 143(3) of the Income-tax Act. Interest levied as per sec.234 A/13/C/D, as applicable, Tax calculation as per ITNS-150 is enclosed which is a part of this order. Issued Demand Notice U/s 156. Penalty u/s27l(l)(c) of I. T. Act,1961 initiated separately.

3.9 Aggrieved with the aforesaid additions, assessee preferred an appeal before the Ld. CIT(A), NFAC, challenging the findings of Ld. AO, wherein the contentions raised by the assessee are considered and found satisfactory by the Ld. CIT(A), therefore, the addition made by the Ld. AO qua the fresh share capital and premium money received by the assessee have been vacated with the following observations: 4.2. Decision on Ground of Appeal No.

4.2.1 Ground no 1 is related to addition of Rs.11,54,65,000/- u/s 68 being fresh share capital money received from two companies named Giriraj lnfotech Pvt Ltd and Wave Promoters Pvt Ltd. I have perused the assessment order and the submissions of the appellant. ln this case, the AO has made addition of share application money amounting to Rs.10,25,00,000/- received by the appellant from M/s Giriraj lnfotech Pvt. Ltd., Raipur (formerly known as Vizcom Solutions Pvt. Ltd.) on

9 ITA No. 356/RPR/2024 DCIT vs Balajee Loha Pvt. Ltd., Raipur the ground that the assessee has not been able to discharge its onus regarding the identity and credit-worthiness of the share applicant company and the genuineness of transaction. The AO has held that the share-applicant company – M/s Giriraj lnfotech Pvt. Ltd 'did not possess the creditworthiness to invest such amounts' as it had not carried out any business activity in this year or in the preceding years. The share- applicant company had shown a returned income of Rs. Nil in A Yrs. 2011-12, 2012- 13 & 2013-14. Even in the assessment year under consideration, the share-applicant company has shown other income of only Rs.19,860/-. The AO has also stated that initially the share-applicant company was a Kolkata based company but thereafter, the directors of the Company have been changed and a Director of the assessee group of companies has now become the Director of the share-applicant company which is now based in Raipur. In view of the above facts, the AO has inferred that the share applicant did not have any actual genuine business activity or any profit making apparatus and was merely rotating the money which was coming through its bank account which showed that this share application money had been managed in connivance with the share applicant company. As regards the genuineness of the transaction, the AO has admitted that this money was received through banking channels but the AO has held that the assessee has failed to discharge its onus regarding the genuineness of the transaction also. The AO has cited several case laws which lay down the position that the onus lies on the assessee to establish the identity and credit worthiness of the share applicant and the genuineness of the transaction. The AO has also cited case laws which lay down the position that identity of the creditor cannot be proved by merely submitting PAN number, ITR, Registration from the ROC when enquiries conducted by the AO show that the share applicant is not existing at the address given or the AO has adverse information about the share applicant. It has also been held that filing of confirmation of the share applicants by the assessee will not serve the purpose of establishing the identity of the creditor when letter issued by the AO has been returned back unserved. On this basis, the AO has held that the assessee has failed to establish the identity, credit worthiness and genuineness of the share application money received by the assessee from M/s Giriraj

10 ITA No. 356/RPR/2024 DCIT vs Balajee Loha Pvt. Ltd., Raipur lnfotech Pvt. Ltd. and has added this amount as unexplained cash credit u/s 68 of the I. T. Act.

4.2.2 In reply, the appellant has stated that it had discharged its onus u/s 68 with respect to the identity, credit worthiness of the share-applicant company and the genuineness of the transaction by submitting PAN number of the share-applicant company, MOA and Certificate of Incorporation issued by the ROC, bank statements, audited financial statements, income tax return, copy of assessment order u/s 143(3) of the share-applicant company and copy of the Valuation Certificate under Rule 11UA. The appellant has stated that the shares of face value of Rs.10/- has been subscribed at a premium of Rs.50/- which is backed by the book value per share of the appellant at Rs.63.90 thereby justifying the share premium charged. The appellant has further stated that the source of the share application money received by it from the share applicant M/s Giriraj lnfotech Pvt. Ltd. (GIPL) is the share capital of Rs.23.21,54,000/- raised by GIPL in Financial Year 2010-11. In support of this, the appellant has submitted copy of audited financial statements of the share applicant (GIPL). The appellant has informed that the PCIT- 1, Raipur had passed in the case GIPL an order u/s 263 for A.Y. 2011-12 on 29.03.2019 setting aside the earlier order u/s. 143(3) and directing the AO to verify the source of share capital Rs.23.21.54.000/- in the case of GIPL. The appellant has informed that the share applicant M/s Giriraj lnfotech Pvt. Ltd. has opted for the Vivad-se-Viswas Scheme to avoid any future litigation and has offered the entire share capital received by it of Rs.23,21,54,000/- as income and has paid due taxes on it to settle the matter permanently. The appellant has submitted copies of Form No. 1, Form No. 2, Form No. 3, Form No. 4 & Form No. 5 in the case of M/s Giriraj Infotech Pvt. ltd. with respect to its share capital of Rs.23,21,54,000/- received in A.Y. 2011-12. The appellant has submitted that M/s Giriraj InfoTech Pvt. Ltd. has subscribed to the shares of the assessee company from its share capital and since due taxes have been paid by M/s Giriraj InfoTech Pvt. Ltd. on its share capital, the source of share application money of Rs.6,37,00,000/- in the hands of the appellant, received from M/s Giriraj Infotech Pvt. Ltd. stands fully

11 ITA No. 356/RPR/2024 DCIT vs Balajee Loha Pvt. Ltd., Raipur explained. Without prejudice to the above. the appellant has also stated that it had informed the AO that both the share applicant company and its Directors are based in Raipur. The appellant has stated that the AO did not conduct any inquiry and has made addition without bringing any material on record to show that the source of the share application money is not properly explained. The appellant has stated that after the assessee submitted PAN number, certificate of incorporation, audited books of accounts, bank statements, copy of assessment order etc., the onus shifted from the assessee to the AO to disprove the genuineness of this cash credit. The appellant has emphasized that when the primary onus cast by the Act on the assessee u/s 68 stood discharged: thereafter it was open to the department to take recourse to Sec. 131 or Sec. 133(6) of the I. T. Act to disprove the facts stated by the assessee which has not been done in this case. In this context, the appellant has cited judgement of the jurisdictional bench of the Hon'ble High Court of Chhattisgarh in the case of Pawan Kumar Aggarwal vs. ITO (Tax case of 24 of 2011). The appellant has also distinguished its case from the case laws cited by the AO, case by case, and has cited several case laws in its favour to show that the share application money received by it was explained.

4.2.3 The facts of this issue are that the assessee received share application money of Rs.10,25,00,000/- from M/s Giriraj lnfotech Pvt. Ltd. during the year under consideration. The share premium charged by the appellant has not been disputed by the AO. The source of the share application money in the hands of the appellant was the share capital money received by Mis Giriraj Infotech Pvt. Ltd. in AY. 2011-12 of Rs.23,21,5400/- which has been brought to tax by the Department by passing an order uls 263 dated 29.03.2019. Against this order u/s. 263, appeal (no. ITA No. 83/RPRl2019) was filed by GIPL in ITAT, Raipur. M/s Giriraj lnfotech Pvt. Ltd. has offered this share capital of Rs.23,21,54,000/- to tax by opting for the Vivad se Viswas Scheme by filing Form No.1 & 2 on 28.11.2020. In response the PCIT-1. Raipur has issued Form No.3 on 01.03.2021. Thereafter, the share-applicant company has paid due taxes on this amount and uploaded Form No.4, after which the PCIT-1, Raipur

12 ITA No. 356/RPR/2024 DCIT vs Balajee Loha Pvt. Ltd., Raipur has issued Form No.5 to M/s Giriraj lnfotech Pvt. Ltd. for A.Y. 2011-12 on 10.02.2023, certifying that the assessee has paid the required tax arrears. The ITAT Raipur has allowed M/s. Giriraj InfoTech Pvt. Ltd. to withdraw its appeal by order dated 29.07.2021. The above facts show that the source of the share application money received by the appellant from M/s Giriraj InfoTech Pvt. Ltd. has been duly taxed in the hands of M/s Giriraj InfoTech Pvt. Ltd in A.Y. 2011-12 and this matter has attained finality. Therefore the nature and source of the share application money received by the appellant from M/s Giriraj InfoTech Pvt. Ltd. stands explained. When the source of the share application money has been taxed in the hands of the share applicant company and the matter has attained finality; upholding this addition u/s 68 in the hands of the appellant amounts to taxing the same amount twice; which is illogical and illegal. Further, appellant has submitted that the same set of issues were there in the case of assessee's sister concern M/s Balajee Structure (India) Private Limited before the honorable CIT(A), which have been concluded in the favour of the company. Appellant has enclosed copy of order of the sister concern in the submissions. In view of the above discussion, the addition made by the AO u/s. 68 of share application money received from M/s. Giriraj InfoTech Pvt. Ltd. is directed to be deleted.

4.2.4 Similarly the AO has made addition of share application money amounting to Rs.1.29,65.000/- received by the appellant from Wave Promoters Pvt Ltd. Raipur on the ground that the assessee has not been able to discharge its onus regarding the identity and credit-worthiness of the share applicant company and the genuineness of transaction. The AO has held that the share-applicant company - Wave Promoters Pvt Ltd 'did not possess the credit-worthiness to invest such amounts' as it had not carried out any business activity in this year or in the preceding years. The share- applicant company had shown a returned income of Rs.16,970/- in AY 2013- 14. Even in the assessment year under consideration, the share-applicant company has shown other income of only Rs.10,860/-. The AO has also stated that initially the share-applicant company was a Kolkata based company but thereafter, the directors of the Company have been changed and a Director of the assessee group of companies

13 ITA No. 356/RPR/2024 DCIT vs Balajee Loha Pvt. Ltd., Raipur has now become the Director of the share-applicant company which is now based in Raipur. In view of the above facts, the AO has inferred that the share applicant did not have any actual gem1ine business activity or any profit making apparatus and was merely rotating the money which was coming through its bank Account which showed that this share application money had been managed in connivance with the share applicant company. As regards the genuineness of the transaction, the AO has admitted that this money was received through banking channels but the AO has held that the assessee has failed to discharge its onus regarding the genuineness of the transaction also. The AO has cited several case laws which lay down the position that the onus lies on the assessee to establish the identity and credit worthiness of the share applicant and the genuineness of the transaction. The AO has also cited case laws which lay down the position that identity of the creditor cannot be proved by merely submitting PAN number, ITR, Registration from the ROC when enquiries conducted by the AO show that the share applicant is not existing at the address given or the AO has adverse information about the share applicant. It has also been held that filing of confirmation of the share applicants by the assessee will not serve the purpose of establishing the identity of the creditor when letter issued by the AO has been returned back unserved. On this basis, the AO has held that the assessee has failed to establish the identity, credit worthiness and genuineness of the share application money received by the assessee from Wave Promoters Pvt Ltd, and has added this amount as unexplained cash credit u/s 68 of the I.T. Act.

4.2.5 In reply, the appellant has stated that it had discharged its onus u/s 68 with respect to the identity, credit worthiness of the share-applicant company and the genuineness of the transaction by submitting PAN number of the share-applicant company, MOA and Certificate of Incorporation issued by the ROC, bank statements. Audited financial statements, income tax return, copy of assessment order u/s 143(3) of the share-applicant Company and copy of the Valuation Certificate under Rule 11UA. The appellant has stated that the shares of face value of Rs.10/- has been subscribed at a premium of Rs.50/- which is backed by the book value per share of the

14 ITA No. 356/RPR/2024 DCIT vs Balajee Loha Pvt. Ltd., Raipur appellant at Rs.63.90 thereby justifying the share premium charged. The appellant has further stated that the source of the share application money received by it from the share applicant Wave Promoters Pvt ltd is the share capital of Rs.23,21,54,000/- raised by GIPL in Financial Year 2010-11. In support of this, the appellant has submitted copy of audited financial statements of the share applicant (GIPL). The appellant has submitted copies of Form No. 1, Form No. 2, Form No. 3, Form No. 4 & Form No. 5 in the case of M/s Giriraj Infotech Pvt. Ltd. with respect to its share capital of Rs.23,21,54,000/- received in A.Y. 2011-12. The appellant has submitted that M/s Giriraj lnfotech Pvt. ltd. has subscribed to the shares of the assessee company from its share capital and since due taxes have been paid by M/s Giriraj lnfotech Pvt. Ltd. on its share capital, the source of share application money of Rs.6,37,00,000/- in the hands of the appellant, received from M/s Giriraj lnfotech Pvt. Ltd. stands fully explained. Without prejudice to the above, the appellant has also stated that it had informed the AO that both the share applicant company and its Directors are based in Raipur. The appellant has stated that the AO did not conduct any inquiry and has made addition without bringing any material on record to show that the source of the share application money is not properly explained. The appellant has stated that after the assessee submitted PAN number, certificate of incorporation, audited books of accounts, bank statements, copy of assessment order etc., the onus shifted from the assessee to the AO to disprove the genuineness of this cash credit. The appellant has emphasized that when the primary onus cast by the Act on the assessee u/s 68 stood discharged; thereafter it was open to the department to take recourse to Sec. 131 or Sec. 133(6) of the I. T. Act to disprove the facts stated by the assessee which has not been done in this case. In this context, the appellant has cited judgement of the jurisdictional bench of the Hon'ble High Court of Chhattisgarh in the case of Pawan Kumar Aggarwal vs. ITO (Tax case of 24 of 2011). The appellant has also distinguished its case from the case laws cited by the AO. case by case and has cited several case laws in its favour to show that the share application money received by it was explained.

15 ITA No. 356/RPR/2024 DCIT vs Balajee Loha Pvt. Ltd., Raipur 4.2.6 The facts of this issue are that the assessee received share application money of Rs.12,29,65,000/- from Wave Promoters Pvt. Ltd. during the year under consideration. The share premium charged by the appellant has not been disputed by the AO. The appellant has made submissions, the relevant part of that is reproduced below:-

Further, in regard to the source of investment made by M/s Wave Promoters Private Limited it is to submit that the said amount has been invested out of the funds received on 22.07.2013 from Shri Hanuman Loha (P) Ltd. of Rs.1,22,00,000 and from M/s Balajee Steels of Rs.12,65,000/- on account of loans and advances given. The investor company has given loan to M/s Hanuman Loha Pvt. Ltd. of Rs.9,22,00,000/- and Rs.1,01,80,0001- to M/s Balajee Steels in preceding assessment years. The repayment received from the said parties were further transferred to M/s Balajee Loha Pvt. Ltd. on 22.07.2013 and shares were issued to the M/s Wave Promoters Pvt. Ltd. on 26.07.2013. Summary of the nexus of the amount utilized in investing in the shares of the assesse company is as under:-

Particulars Total Advance given by M/s Amount paid to M/s Amount Invested in Wave Promoters Pvt. Ltd. in Wave Promoters Pvt. shares of M/s Balajee preceding assessment years Ltd. on 22.07.2013 Loha Pvt. Ltd. on 22.07.2013 by M/s Wave promoters pvt. Ltd. Hanuman 9,22.00,000/- 1.22,00,000/- 1.22,00,000/- Loha (P) Ltd. Balajee Steels 1,01,80,000/- 12,65,000/- 7,65,000/-

The above-mentioned facts are evident from the copy of confirmation of account along with ITR. relevant extract of bank statements of M/s Hanuman Loha (P) Ltd. and M/s Balajee Steels enclosed in our previous submission dated 06.05.2023. Copy of all tl1e

16 ITA No. 356/RPR/2024 DCIT vs Balajee Loha Pvt. Ltd., Raipur said documents is once again enclosed herewith for your ready reference. Kindly refer annexure 3. Also, copy of relevant extract of tax audit report of M /s Hanuman Loha Private Ltd. evidencing the repayment made top M/s Wave Promoter Pvt. Ltd. is enclosed herewith for your reference. Kindly refer annexure 4.

That from the above facts the "Source of Source" of the assesse company also remains explained so far as investment from Wave Promoters (P) Ltd is concern. Since vide its earlier written submissions and this written submissions the assesse has duly proved the identity, creditworthiness and genuineness of the transactions done with two shareholders, the share capital money received during the year may kindly be treated as explained and the addition made by the AO deserves to be deleted."

The source of the share application money in the hands of the appellant was the loan received back by Wave Promoters Pvt Ltd. Which was given to Hanuman Loha (P) Ltd. and Balajee Steels in earlier years. The source of share application money received from Wave Promoters Pvt Ltd. Stands explained by way of amount received back from two parties in earlier years. The share applicant has explained the source of money which was given to appellant by way of share application. From these facts the “Source of Source" of the assesse company also remains explained so far as investment from Wave Promoters (P) Ltd is concerned.

Therefore the nature and source of the share application money received by the appellant from Wave Promoters Pvt Ltd. stands explained. In view of the above discussion, the addition made by the AO u/s. 68 of share application money received from Wave Promoters Pvt Ltd. is directed to be deleted. Ground no. 1 is allowed.

3.10 Regarding lump sum addition of 1% out of expense incurred on account of consumption of stores and spares and repair and maintenance.

17 ITA No. 356/RPR/2024 DCIT vs Balajee Loha Pvt. Ltd., Raipur Ld. CIT(A) had partly allowed the contentions of the assessee by vacating the disallowance of Rs.1,59,491/- to the extent of 50%. For the sake of clarity, observations of Ld. CIT(A) qua the lump sum disallowance of Rs.1,59,401/- are culled out as under:

Here it is to be noted that it is matter of fact that there are always few vouchers which are self-made for some unverifiable expenses. The AO has disallowed 1% of expenses on consumption of sores and spares and repair and maintenance. The disallowance is confirmed to the extent of 50 % of Rs.1,59,401/- and balance amount is deleted. This ground is partly allowed.

3.11 As Ld. CIT(A) granted substantial relief to the assessee in the impugned order dated 10.06.2024, which could not considered justified by the revenue, therefore, had carried the matter by way of an appeal before the Tribunal, challenging the deletion of the addition of Rs.

18 ITA No. 356/RPR/2024 DCIT vs Balajee Loha Pvt. Ltd., Raipur 11,54,65,000/- u/s 68 of the Act, which is under consideration in the present case.

19 ITA No. 356/RPR/2024 DCIT vs Balajee Loha Pvt. Ltd., Raipur

20 ITA No. 356/RPR/2024 DCIT vs Balajee Loha Pvt. Ltd., Raipur

21 ITA No. 356/RPR/2024 DCIT vs Balajee Loha Pvt. Ltd., Raipur

22 ITA No. 356/RPR/2024 DCIT vs Balajee Loha Pvt. Ltd., Raipur

5.1 Based on aforesaid written synopsis, it was the submission that the all the necessary documents related to both the investors companies / shareholders are furnished before the revenue authorities, however, Ld. AO has not conducted any enquiry that any of the shareholders so as to decide the identity, creditworthiness of the investors and genuineness of the transactions. It is submitted that the recourse available with the Ld. AO to conduct enquiries u/s 131 or u/s 133(6) of the Income Tax Act are deemed necessary to exercise, therefore, the case of assessee is squarely covered by the judgment of Hon’ble jurisdictional High Court in the case of Pawan Kumar Agrawal vs ITO, Ward 2(2) TAX Case No. 24 of 2011, dated 04.04.2017, the copy of judgment is placed before us at page no. 286 to 288 of the paper book. On this issue, Ld. AR further

23 ITA No. 356/RPR/2024 DCIT vs Balajee Loha Pvt. Ltd., Raipur placed his reliance on the order of Hon’ble Karnatka High Court on the case of G. Subha Devi vs ITO (2018) 102 CCH 0417 Kar HC, in ITA No.94/2016, dated 05.07.2018, page no. 289-290. Regarding the submission of primary evidence, which is not acted upon by the revenue authorities, it was the submission by the Ld. AR that this issue was raised before the Ld. CIT(A) and was acknowledged by considering the submissions of the assessee in the order by Ld. CIT(A), the same was also a supporting contention which led the observations of Ld. CIT(A) to decide the matter in favour of the assessee. Ld. AR further submitted that as there was no specific finding by the Ld. CIT(A), on the issue of no enquiries by the Ld. AO u/s 131 and 133(6), it was prayer seeking liberty to have an adjudication on this issue by way of raising a preliminary objection before us, which is requested to be permitted.

5.2 To strengthen the aforesaid contention, Ld. AR took us through the observations of the Hon’ble Jurisdictional High Court and Hon’ble Karnataka High Court in the aforesaid two cases, wherein the observations and analogy drawn by the Hon’ble Courts are culled out hereunder, for the sake of clarity and better interpretation of the issue:

24 ITA No. 356/RPR/2024 DCIT vs Balajee Loha Pvt. Ltd., Raipur In the case of Pawan Kumar Agrawal vs ITO-2(2) (supra):

25 ITA No. 356/RPR/2024 DCIT vs Balajee Loha Pvt. Ltd., Raipur

In the case of G. Subha Devi vs ITO (supra):

Confirmations in writing produced by agriculturists could not have been rejected by AO without their evidence being recorded. AO had power of a Civil Court by virtue of s. 131. Therefore, he could very well summon those agriculturists and after their examination, he could have believed or discarded evidence given by them. Misplaced apprehension of AO that since confirmations were in same handwriting, therefore, they were not believable was a typical pro-revenue approach, without any foundation. Agriculturists most of whom might have been illiterates, could not have been expected to write their own confirmations to be produced before AO, but as witnesses they could have been certainly summoned by AO for verifying written confirmations given by them and it was only thereafter that AO could have confirmed fact as to whether written confirmations given by them were genuine or fake.

(Para 12)

CIT(A) after having looked into evidence on record was justified in granting relief to assessee, but !TAT without assigning any cogent reasons took a different view of matter and rendered a finding of fact, which was bad and perverse to that extent therefore, required to be quashed and set aside.

(Para 16)

26 ITA No. 356/RPR/2024 DCIT vs Balajee Loha Pvt. Ltd., Raipur 5.3 Ld. AR further submitted that the addition u/s 68 in the present case was made describing the general theory i.e. modus operandi in the case of bogus share capital and premium with any specific findings on the issue. It is the submission that all the directors and shareholders of both the companies were residing at Raipur and complete details were furnished in Audited Financial Statement which are available to the Ld. AO. Ld. AR further enlighten on the issue that the assessee had also received share application and premium from the same shareholders in the earlier years if no additions were made by the Revenue on that count. Ld. AR further submitted that the cases relied upon by the Ld. AO are distinguishable on the facts on which details are furnished before us at page no. 8 to 15 of the paper book mentioning factors for distinguishment of the cases relied upon as compared to the case of assessee. The details so prepared by the assessee are culled out as under:

27 ITA No. 356/RPR/2024 DCIT vs Balajee Loha Pvt. Ltd., Raipur

28 ITA No. 356/RPR/2024 DCIT vs Balajee Loha Pvt. Ltd., Raipur

29 ITA No. 356/RPR/2024 DCIT vs Balajee Loha Pvt. Ltd., Raipur

30 ITA No. 356/RPR/2024 DCIT vs Balajee Loha Pvt. Ltd., Raipur

31 ITA No. 356/RPR/2024 DCIT vs Balajee Loha Pvt. Ltd., Raipur

32 ITA No. 356/RPR/2024 DCIT vs Balajee Loha Pvt. Ltd., Raipur

33 ITA No. 356/RPR/2024 DCIT vs Balajee Loha Pvt. Ltd., Raipur

34 ITA No. 356/RPR/2024 DCIT vs Balajee Loha Pvt. Ltd., Raipur

35 ITA No. 356/RPR/2024 DCIT vs Balajee Loha Pvt. Ltd., Raipur 5.4 Ld. AR further placed his reliance on various judgments which are also part of submissions before the Ld. CIT(A), for the sake of clarity, brief findings in the said judgments, are extracted as under:  Hon'ble Supreme Court in case of CIT Vs Lovely Exports (P) Ltd. (2008) 216 CTR (SC) 195, held that “if the share application money received by the assessee company from alleged bogus shareholders. whose names are given to the A 0. then the department is free to proceed to reopen their individual assessments in accordance wit/1 law. but it can not be regarded as undisclosed income of the assesse company”.

 In the case of Principal Commissioner of Income Tax Vs. Sreeleathers. (2022) 114 CCH 0180 KolHC, it was held that “'it is not enough for the assessing officer to brushed aside the explanation offered by the assessee but he should record reasons in writing as to why the documents which were filed by the assessee along with the reply does not go to establish the identity of the lender or prove the genuineness of the transaction or establish the creditworthiness of the lender”.

 In the case of Principal Commissioner of Income Tax & Ors. Vs. Krishna Devi & Ors (2021) 110 CCH 0009 Del HC, it was held that Reliance placed on the report of investigation wing. Without further corroboration on the basis of cogent material. does not Justify AO's conclusion that the transaction is bogus. sham and nothing other than a racket of accommodation entries.

 In the case of Principal Commissioner of Income Tax Vs. Ami Industries (India) Ltd (2020) 107 CCH 0294 Mum HC, it was held that "Addition u/s 68 is not sustainable where the assessee had discharged its onus of proving identity of the creditors. Genuineness of the transactions and credit- worthiness of the creditors”.

 In the recent judgment of Delhi HC in case of CIT Vs. Vrindawan Farms (P) Ltd ITA 71/2015 pronounced on 12.08.2015 it was held that "If the identity and other details of the share applicants are available, the share application money cannot be treated as undisclosed income in the hands of the Co. The addition, if at all, should be in the hands of the applicants if their creditworthiness cannot be proved."

36 ITA No. 356/RPR/2024 DCIT vs Balajee Loha Pvt. Ltd., Raipur  In case of CIT vs. Oasis Hospitalities Pvt. Ltd. 333 ITR 119 (Del), it was held that "assessee company has filed copies of PAN, acknowledgment of returns of the share applicants and their bank accounts and statements of the relevant period, thus the primary onus was discharged by the assessee The appellant contends that now it is for the AO to disprove the credits by bringing adverse material. In holding a particular receipt as income from undisclosed sources. The fate of the assessee cannot be decided by the revenue on the basis of surmises. Suspicion or probabilities.

 In case of CIT vs. Abdul Aziz (2012) 251 CTR 58 (Chhattisgarh), the Jurisdiction High Court held that where AO had not made any independent enquiry to disprove creditworthiness of the creditors, as established by affidavits and statements of creditors disclosing source of income. Addition made u/s 68 was rightly deleted. In this case also the rejection is based on no evidences and therefore raising of a presumption against the assessee does not arise. An explanation prima facie reasonable cannot be rejected on capricious or arbitrary grounds or on mere suspicion or on imaginary or irrelevant grounds. The AO has arbitrarily disbelieved the identity/creditworthiness without substantiating by any evidence and therefore the addition deserves to be deleted.

 In the case of Namdhari Industrial Traders Pvt. Ltd. Vs. Assistant Commissioner of Income Tax, (2021) 62 CCH 0216, it was held that Addition u/s 68 is not sustainable where the. Assessee has prima facie discharged the onus of establishing identity and creditworthiness of the aforesaid three companies and further in establishing the genuineness of the transaction.

 In the case of Ninestar Merchants Pvt. Ltd vs. /TO, (2021) 61 CCH 0201 KolTrib, it was held that When the assessments of the share applicant companies who have invested in the share capital of the assessee company are completed u/s 143(3). no addition can be made in the hands of the assessee company u/s 68.

 In the case of Bini Builders Pvt. Ltdvs. DCIT, (2021) 62 CCH 0085 MumTrib, it was held that No addition could be made merely on the basis of allegation, suspicion, conjectures or surmises.

 In the case of DCIT vs. R.K. Transport & Constructions Pvt Ltd [ITA. No. 236 to 242/ RPRI 2014), the Jurisdictional Raipur Tribunal has held that the identity of share applicants, genuineness of the share transactions and creditworthiness of the share applicants were established by the various documents like bank statements, balance sheets etc. furnished by the

37 ITA No. 356/RPR/2024 DCIT vs Balajee Loha Pvt. Ltd., Raipur share applicants to the AO in pursuance to the notice issued to them u/s 133(6) of the Act. Accordingly, the Raipur Tribunal dismissed the appeal filed by the Revenue against the order of the CIT(A), deleting the said addition in effect.

 In case of ACIT vs Venkateshwar Ispat Pvt. Ltd., 319 /TR 393 (CG), the Jurisdictional High Court Chhattisgarh has held that "in case of share application money the assesse has produce evidence regarding names, addresses etc. and the shareholders have confirmed the investment. The department is free to proceed to re-open shareholders individual assessment in accordance with law but it cannot be regarded as undisclosed income of the assesse company.".

5.5 Apropos, explanation about the source of investment, Ld. AR further submitted that the First investor i.e., GIPL has raised share capital of Rs.21.31 Crores in the AY 2011-12, that the said shareholders has opted for VSVS-2020 and has paid the due tax on total share capital of Rs.23.21 Crores. It was the submission that share capital and premium of GIPL remain unchanged from AY 2011-12 till year consideration i.e., 2014-15. To substantiate the aforesaid facts, Ld. AR drew our attention to page nos. 76 to 79 of the paper book comprising of Audit Balance Sheet of M/s Vizcom Solution Pvt. Ltd. (presently known as GIPL) showing share capital and source of surplus of Rs.23.19 Cr. in the year ended 31.03.2014. Ld. AR also furnished before us year wise details of investment and realization of investment starting from AY 2011-12 and up to AY 2014-15 for GIPL (Formerly known as Vizcom Solution Pvt. Ltd.), the same is culled out as under:

38 ITA No. 356/RPR/2024 DCIT vs Balajee Loha Pvt. Ltd., Raipur

5.6 Based on aforesaid information, it is submitted that the source of GIPL is duly taxed under VSVS-2020, therefore, source of source is duly explained, accordingly the addition made by Ld. AO is rightly vacated by the Ld. CIT(A).

5.7 Regarding, WPPL, Ld. AR submitted that WPPL is received unsecured loan from Shri Hanuman Loha Pvt. Ltd. And M/s Balajee Steels on 22.07.2013 and on the same day the investment was made in the share capital of the assessee company. It is further explained that the amount

39 ITA No. 356/RPR/2024 DCIT vs Balajee Loha Pvt. Ltd., Raipur received from the aforesaid parties was on account of the repayment of loans extended by M/s WPPL to Shri Hanuman Loha and Balajee Steel, therefore, the source of source of such investments by WPPL in the assessee company is duly explained with the identity and creditworthiness of the shareholders and genuineness of transactions.

5.8 Backed by aforesaid submissions, it was the prayer by Ld. AR that the source of source of the share capital + share premium issued by the assessee company are duly explained before the revenue authorities which was rightly appreciated by the Ld. CIT(A), therefore, the addition u/s 68 after considering the various judicial pronouncements had rightly been vacated by the Ld. CIT(A), therefore, the order of Ld. CIT(A) deserves to be sustained and the additions made by the Ld. AO is liable to be struck down.

40 ITA No. 356/RPR/2024 DCIT vs Balajee Loha Pvt. Ltd., Raipur and settled principles in accordance with jurisprudence available on the issue. Factually, there is no doubt that the assessee had furnished various primary documents and evidence necessary to substantiate the basic ingredients, the absence of which give rise to doubt a transaction to bring it within the four corners of provisions of section 68 of the Act. It is settled position of law that if the assessee has prima facie have discharged the onus of establishing identity / creditworthiness of the investor and genuineness of the transaction, which are not refuted by exercising any independent enquiries by the revenue authorities, such evidence cannot be disregarded at the threshold and addition u/s 68 made without invalidating such evidence cannot be sustained.

6.1 On this issue, Hon’ble Jurisdictional High Court in the case of CIT vs Abdul Aziz (supra) have held that, “Where AO had not made any independent enquiry to disprove creditworthiness of the creditors, as established by affidavits of creditors disclosing source of income, addition made u/s 68 was rightly deleted. An explanation prima facie reasonable cannot be rejected on capricious or arbitrary grounds or on mere suspicious or on imaginary or irrelevant grounds”.

41 ITA No. 356/RPR/2024 DCIT vs Balajee Loha Pvt. Ltd., Raipur 6.2 A similar view has been accorded by the Hon’ble Jurisdictional High Court in the case of Pawan Kumar Agrawal vs ITO (supra), with the categorical finding that once the assessee had discharged primary onus u/s 68 of the Act, it was open to the department to take recourse of section 131 or section 133(6) of the Act, if they were to further proceed, that not having done so, the First Appellate Authority was within its jurisdiction to conclude on facts and law, in favour of the assessee.

6.3 In the case of G. Shubha Devi vs. ITO (supra), Hon’ble High Court of Karnataka have drawn a similar finding that the confirmations of Agriculturist could not have been rejected by the Ld. AO without their evidence being recorded. AO had power of a Civil Court by virtue of section 131. Misplaced apprehensions of Ld. AO that the confirmations were in same handwriting, therefore, they were not believable was a typical pro revenue approach, without any foundation. CIT(A) after having looked into evidence on record was justified in granting relief to the assessee.

6.4 As the aforesaid issue, which was there before Ld. CIT(A) also, who had recorded the same in his order taking note of the contention of the assessee, shows that Ld. CIT(A) had an affirmative view towards such

42 ITA No. 356/RPR/2024 DCIT vs Balajee Loha Pvt. Ltd., Raipur submission of the assessee, though there was no categorical finding on issue. Since Ld. AR had raised a preliminary objection, which in our opinion is permissible to be raised before us, thus admitted, in terms of decision of this tribunal in the case of ITO-2, Raigarh Vs. Shri Bishambhar Dayal Agrawal in ITA No. 223/RPR/2016, dated 27.10.2023, following the judgments of various Hon’ble Courts, wherein the observations of the Tribunal are as under:

“11. The Tribunal has taken a pedantic view on the interpretation of Rule 27 by holding that for availing the remedy under the said provision, an application in writing is necessary. In our opinion, this surmise is fallacious and we cannot countenance the same. We agree with Mr. Krishnan that Rule 27, as it stands today, does not mandate for the application to be made in writing. Revenue has not brought to our notice any particular Form notified for filing such an application. Revenue also does not controvert the contention of the Appellant that the draft

43 ITA No. 356/RPR/2024 DCIT vs Balajee Loha Pvt. Ltd., Raipur Appellate Tribunal Rules 2017 proposing to insert a proviso to Rule 27, providing for an application to be made in writing, have not been notified, as yet. Therefore, the reasoning of the Tribunal for rejecting Appellant's contentions is palpably wrong. If the provision does not specify any defined structure for making an application in a particular manner, the Tribunal ought not to have deprived the Appellant of an opportunity to raise a fundamental question of jurisdiction, taking a hyper technical viewpoint. The Tribunal has plainly refused to consider the additional grounds on an erroneous premise which is contrary to the statutory scheme of the Act, that permits the Respondent to urge all grounds in support of the order appealed, as provided under Rule 27. The appeal deserves to be allowed on this short ground and we would have no hesitation in doing so with a consequential direction to ITAT to reconsider the matter afresh on the additional grounds urged by the Appellant…….”

44 ITA No. 356/RPR/2024 DCIT vs Balajee Loha Pvt. Ltd., Raipur

(i) The assessee before the Hon'ble High Court had, in the proceedings before the Tribunal, filed cross-objections, which involved a delay of 248 days. The cross- objections filed by the assessee were dismissed by the Tribunal, which declined to condone the delay therein involved. On further appeal, it was the claim of the assessee that as it had assailed the validity of the jurisdiction that was assumed by the A.O u/s.153C of the Act, which was purely an issue of law, therefore, there was no justification on the part of the Tribunal in refusing to consider such significant issue. It was the claim of the assessee that as he was under Rule 27 of the Income Tax Appellate Tribunal Rules, 1963, only supporting the order passed by the CIT(Appeals) before the Tribunal, which was already in his favor, thus, there was no necessity for filing of a cross-objection.

(ii) After deliberating on the contentions of the assessee, the Hon'ble High Court found favor with the same. Adverting to the issue as to whether the assessee could have assailed the validity of the jurisdiction u/s.153C of the Act before the Tribunal without filing any cross-objection, the Hon'ble High Court observed that as the assessee wished to raise an issue that was at least prima facie going to the root of jurisdiction to initiate proceedings under Section 153C of the Act, therefore, having regard to the provisions of Rule 27, the Tribunal should have permitted the assessee- respondent to have supported the order of CIT (Appeals) on this ground, even without the necessity of filing any cross-objections. Relying on the judgment of the Hon'ble High Court of Gujarat in the case of Dahod Sahakari Kharid Vechan Sangh Ltd. Vs. CIT (2006) 200 CTR 265 (Guj), the Hon'ble High Court observed that the right that accrued to the assessee respondent under Rule 27 of the Income Tax Appellate Tribunal Rules, 1963 could not have been taken away by the

45 ITA No. 356/RPR/2024 DCIT vs Balajee Loha Pvt. Ltd., Raipur Tribunal by referring to the provisions of Section 253(4) of the Act. The Hon'ble High Court had observed that though the issue as regards the validity of the jurisdiction assumed by the A.O u/s. 153C of the Act was not raised before the CIT(Appeals), but having regard to the provisions of Rule 27 of the Income Tax Appellate Tribunal Rules, 1963, as also the provisions of Section 260A(7) read with provisions of Order XLI Rule 22 of the CPC as interpreted by the Hon'ble Supreme Court in the case of S. Nazeer Ahmed Vs. State Bank of Mysore (2007) 11 SCL 75, the ITAT should not have precluded the assessee from assailing the issue as regards the validity of the jurisdiction assumed by the A.O u/s.153C of the Act in the course of hearing of the appeal instituted by the revenue, even without the necessity of filing any cross- objection. Based on its aforesaid observations, the Hon'ble High Court observed that in terms of Rule 27 of the Income Tax Appellate Tribunal Rules, 1963, the assessee was entitled to support the order of the CIT(Appeals) before the Tribunal even without the necessity of filing any cross-objection. For the sake of clarity, the observations of the Hon'ble High Court are culled out as under (relevant extract) :

"38. In the present case, it is not as if the issue of non-fulfillment of jurisdictional parameters of Section 153C was raised but rejected by the CIT (Appeals). Such an issue was not raised before the CIT (Appeals). Having regard to the provisions of Rule 27 of the Appellate Tribunal Rules, 1963 as also the provisions of Section 260A(7) read with Order XLI Rule 22 of CPC as interpreted by the Hon'ble Supreme Court in S. Nazeer Ahmed (supra) we think that the ITAT should not have precluded the assessees from raising the issue in the appeals instituted by the Revenue, even without the necessity of filing any cross- objections. Accordingly, the additional substantial question of law is

46 ITA No. 356/RPR/2024 DCIT vs Balajee Loha Pvt. Ltd., Raipur required to be answered in favor of the Appellants/assessees and against the Revenue."

(emphasis supplied by us)

47 ITA No. 356/RPR/2024 DCIT vs Balajee Loha Pvt. Ltd., Raipur Income Tax Appellate Tribunal Rules, 1963 as regards the validity of the jurisdiction assumed by the A.O for reopening of his concluded assessment u/s.147 of the Act merits admission.

6.5 In view of the aforesaid decision, the preliminary objections raised by the Ld. AR on an issue which was raised there before the Ld. CIT(A) also, we deem it appropriate to admit the same. Coming to the issue raised at whether disallowance u/s 68 can be made in a case where assessee had furnished all the requisite documents / explanation and had discharged the primary onus cast upon it and adverse opinion is formed and a contrary view have been adopted dehors exercising the powers / recourse u/s 131 or u/s 133(6) of the Act available with the revenue authorities to initiate independent enquiries before arriving at a negative conclusion. On this issue respectfully following the decision of Hon’ble Jurisdictional High Court in the case of Pawan Agrawal(supra), supported with judgment in the case of Abdul Aziz (supra) and G. Subha Devi vs ITO (supra), as all the necessary primary documents (discussed supra) are furnished by the assessee during the course of assessment proceedings to substantiate the identity / creditworthiness of the investors and genuineness of transactions, without negating such documents by way of conducting inquiries under the recourses available in the law, the addition u/s 68 cannot be sustained, thus, we direct to struck down the

48 ITA No. 356/RPR/2024 DCIT vs Balajee Loha Pvt. Ltd., Raipur same. Consequently, ground of appeal No. 1, raised by the revenue in absence of any plausible explanation, contradicting material or decision to dislodge the aforesaid contention of Ld. AR, being bereft of merits, stands rejected.

Order pronounced in the open court on 10/02/2025.

Sd/- Sd/- (RAVISH SOOD) (ARUN KHODPIA) �ाियक सद� / JUDICIAL MEMBER लेखा सद� / ACCOUNTANT MEMBER रायपुर/Raipur; िदनांक Dated 10/02/2025 Vaibhav Shrivastav आदेश की �ितिलिप अ�ेिषत/Copy of the Order forwarded to : अपीलाथ� / The Appellant- DCIT, Raipur 1. 2. ��थ� / The Respondent- Balajee Loha Pvt. Ltd., Raipur 3. The Pr. CIT, Raipur (C.G.) 4. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, रायपुर/ DR, ITAT, Raipur गाड� फाईल / Guard file. 5. // स�ािपत �ित True copy //

आदेशानुसार/ BY ORDER,

(Senior Private Secretary) आयकर अपीलीय अिधकरण, रायपुर/ITAT, Raipur