ITO WD 5(3)(1), MUMBAI vs. RAJENDRA MINERAL RESOURCES P.LTD, MUMBAI

सुनवाईकीतारीख/ : 06.07.2018 Date of Hearing घोषणाकीतारीख / : 03.10.2018 Date of Pronouncement आदेश / O R D E R

Per Sandeep Gosain, Judicial Member:

2. Since the issues raised in these two appeals are identical, therefore, for the sake of convenience, these appeals are clubbed, heard and disposed of by this consolidated order.

(AY 2012-13) 3. First of all we take up revenue‟s appeal in (AY 2012-13) on the grounds mentioned herein below:- 1(a). On the facts and in the circumstances of the case, the Ld. CIT(A) erred in directing the deleting thedisallowance of Rs 2,60,00,000/- made u/s 69 of the Income tax Act, 1961 on the ground that the transaction of investment of share application money

Rajendra Mineral Resources Pvt. Ltd has been routed through banking channels and the source of investment cannot be doubted.

1(b). On the facts and in the circumstances of the case, the Ld. CIT(A) erred in holding that the AO is at liberty to tax the amount of the share application money received by the assessee company in the hands of the share holders if their creditworthiness is not proved.

1(c). On the facts and in the circumstances of the case, the Ld. CIT(A) failed to appreciate that the assessee had failed to discharge its initial onus to establish the identity, creditworthiness of the share applicants and the genuineness of the transaction.

1(d). On the facts and in the circumstances of the case, the Ld. CIT(A) failed to appreciate that the Hon'ble Delhi High Court has in the case of Onassis Axles (P) v. CIT(2014) 364 ITR 53 (Delhi)(HC) upheld the addition of share application money made u/s 68 on the ground that cash had been deposited in the accounts on the same day and the share applicants lacked resources and, hence, the Ld. CIT(A) erred in holding that the AO is at liberty to tax the amounts in the hands of the respective shareholders if their creditworthiness is not proved.

Rajendra Mineral Resources Pvt. Ltd 2. The appellant prays that the order of the Ld. CIT(A) be set aside and the order of the A.O. be restored.

Aggrieved by the order of AO, assessee preferred appeal before Ld. CIT(A) and Ld. CIT(A) after considering the case of both the parties,partly allowed the appeal of the assessee and restricted the additions to Rs. 10 lakhs.

Now before us, the revenue has preferred the present appeal by raising the above grounds.

Ground No. 1(a) to 1(d) 3. Since all the grounds raised by the revenue are inter connected and inter related and relates to challenging the order of Ld. CIT(A)in deleting the disallowance of Rs 2,60,00,000/- made u/s 68 of the Income Tax Act, 1961 on the ground that merely the transaction of investment of „share application money‟ has been routed through banking channels and thus the source of investment cannot be doubted. Therefore, we thought it fit to dispose of the same by this common order.

Rajendra Mineral Resources Pvt. Ltd share. During the year, the company allotted 3,79,000 equity shares of Rs. 10 each out of which 54,000 shares were allotted at a premium of Rs.490/- per share and rest of them at par. The balance shares hadbeen allotted to Mrs. Shobha Jain, wife of the director. It was also noticed by the AO that the assessee company had introduced an amount of Rs. 2,64,60,000/- as share premium and Rs. 37,90,000/- as share capital. On detailed investigation for examining thegenuineness of transaction, necessary details were called for from the assessee so as to prove the identity, creditworthiness and genuineness of the transactions in all the 27 different parties. Ld. DR submitted that the result of the enquiries conducted by the AO are enumerated in Para No. 3.5 to 3.14 and the enquiries carried out from the respective parties are at para no. 3.15 to 3.16 of the order of Assessment.It was also submitted that the AO after carrying out detailed enquiries, summarized the entire facts at para No. 3.17 of its order, which is reproduced below:- 3.17 Now to summarize the above discussion the following facts are enumerated:

Rajendra Mineral Resources Pvt. Ltd (i) The assessee has not submitted valid and acceptable basis for thevaluation of shares. A few sheet of papers have been filed which are unsigned and uncertified. The past performance and the financial standing of the assessee company do not justify the share premium it has charged.

(ii) The board resolutions to invest in shareq of the coal mine were taken on26.03.2012 and on the same date it was decided to issue shares at a premium and this resolution is signed by the chairman on 31 .03.2012. This is very doubtful.

(iii) Within 5 days of the Board Resolution share application were received and shares were also issued. This smacks of unreal situation.

(iii) The share subscribers are all having bank accounts in a particular branch of a particular area i.e. Mandavi, Mumbai and in particular banks namely Indian Bank and Dena Bank. This is too much of a coincidence. In fact there are only two branches from which the money has been routed.

(iv) Field inquiries reveal that majority of parties are unavailable and those whoare available are poor people with little creditworthiness notwithstanding the fact that the assessee is able to furnish their confirmations and self serving affidavits.

Rajendra Mineral Resources Pvt. Ltd (v) The analysis of bank statement of the share subscribers reveals that thereare transactions of big amounts in a short period of time. There are no regular transactions. 6osits and withdrawal are of matching amounts almost in all cases which is unusual.

(vi) There are many instances in the bank accounts of the share subscribers that cheque has been deposited and matching amount has been withdrawn in cash or cash has been deposited and matching figure cheque has been issued.

(vii) The unusual pattern of deposits and withdrawal in the bank accounts of the share subscribers prompted the AO to issue summons uls.131 of the Act so that they can be examined whether they are doing regular and genuine business or are only helping in the rotation of funds from one account to another to hide the real source of funds.

(viii) The unusual banking transaction in the all the accounts of the share subscribers also indicate that they are only providing accommodation entries and are not into any real business. This was the reason that the AO wanted to examine the share subscribers under oath. This is also pertinent to mention that almost all of the bank accounts have been opened in the middle of Rajendra Mineral Resources Pvt. Ltd the year 2011 i.e. in the middle of the relevant accounting year.

(ix) The assessee company was afforded many opportunities - as many as six - citing the above reasons to produce the share subscribers however the assessee deliberately did not produce any of them for they were afraid that the real facts will be revealed.

(x) The assessee could furnish copy of confirmed accounts and other detailsbut failed to produce the share subscribers only with the intention to prevent the AO from extracting truth from them on examination under oath. It is also seen that the confirmations have been filed of firms whereas the shares have been allotted to individuals.

(xi) The field inquiries conducted by the AO reveal that the share subscribers are mostly poor people who do not know anything about mining business in a foreign company like Indonesia and will, in general, do not risk their hard earned money to invest in an unknown entity.

(xii) There were no personal contacts of the assessee company with the share subscribers and it is a mystery as to how come they know about a company which is going to invest money in a coal mining firm who in Rajendra Mineral Resources Pvt. Ltd turn is going to invest in a foreign company that too at such a very small period of time of 4 to 5 days.

(xiii) One of the share subscribers namely Smt. Premshila Gupta has stated under oath that she fell prey to hawala dealers and her signature were obtained at one go in all of the cheque leaves of the bank and she was given an amount of Rs.1800/- for the signatures. She narrated similar incidents in other family members who have done it.

(xiv) The assessee requested for the statement of Smt. Premshila Gupta and it was also given to it by the AO however the assessee did not offer any comments on the same and it was completely silent on the issue.

(xv) Given the above facts of the case it is held that the object of the assessee company was not to attract genuine investors by pegging the premium at realistic level but to bring in large amounts of unaccounted funds in the guise of share premium.

(xvi) It is also pertinent to mention that given the facts and circumstances of the case the AO was duty bound to examine all the share subscribers as he is the at the cutting edge of the whole structure of the Income-tax to find out facts related to an assessee whose case is selected for scrutiny because at his I her finding the appellate authorities will evaluate the case. Sadly

Rajendra Mineral Resources Pvt. Ltd though, he has been denied this rightful act by the assessee.

Ld. DR submitted that the AO had summarized the entire facts in para no. 3.17 of its order as mentioned above, wherein different reasons/points were raised for reaching to the conclusion that the share capital and premium introduced by the company in its books during the relevant financial year are sham and the assessee has failed to prove the identity, creditworthiness and genuineness of the transaction thereby rendering the amount of share capital and share premium of Rs. 2,70,00,000/- as unexplained cash credit and subsequently, additions were made u/s 68 of the I.T. Act. It was further submitted by Ld. DR that Ld. CIT(A) without discussing the facts and even without mentioning the reasons/grounds raised by the AO, had adopted a short-cut method and simply relied upon the judgment in the case of Lovely Exports Pvt. Ltd. had partly allowed the appeal of the assessee and deleted the additions. Ld. DR also relied upon the judgment of Hon‟ble Delhi High Court in the case of CIT Vrs. M/s N. R. Portfolio Pvt.

Rajendra Mineral Resources Pvt. Ltd Ltd. (ITA No. 134/2012), wherein it was held that the concept of “Shifting onus” does not mean that once certain facts are provided by the assessee, then in that eventuality, the assessee‟s duties are over. If on verification, or during proceedings, if the AO cannot contact the share applicants or that the information becomes unverifiable, or there are further doubts in the pursuit of such detains then the onus shift back to the assessee. The Hon‟ble High Court while reaching to the said conclusion had relied upon the case of A.GovindarajuluMudaliarVrs. CIT (1958) 34 ITR 807. Ld. DR also relied upon the decision of Hon‟ble Delhi High Court in the case of Onasis Axles Pvt. Ltd. Vrs. CIT (2014) 44 taxmann.com 408 (Delhi), wherein it was held that „Where assessee received certain amount as share application money, in view of fact that amounts used to subscribe to shares were deposited in bank accounts of parties on same day or on proximate days, and pay order given for applying to shares was issued from a far off bank branch, therefore, share application money was to be brought to tax under section 68 of I.T. Act.‟

Rajendra Mineral Resources Pvt. Ltd 5. On the other hand, Ld. AR reiterated the same arguments as were raised by him before Ld. CIT(A) and relied upon the orders passed by Ld. CIT(A). Apart from that, Ld. AR relied upon judgments passed by the Hon‟ble Bombay High Court in the case of CIT vrs. M/s Orchid Industries Pvt. Ltd. 2017 (7) TMI 613 (Bom), wherein it was held that „In view of these voluminous documentary evidence, only because those persons had not appeared before the AO would not negate the case of the Assessee.‟ Ld. AR also relied upon the judgment of Hon‟ble Bombay High Court in the case of CIT vrs.Gagandeep Infrastructure (P) Ltd. (2017) (3) TMI 1263 – Bombay High Court,wherein it was held that „Where revenue urged that assessee company received share application money from bogus shareholders, it was for revenue to proceed by reopening assessment of such shareholders and assessing them to tax and not to add same to assessee‟s income as unexplained cash credit. Ld. AR also relied upon the judgment of Hon‟ble Bombay High in the case of CIT vrs. Creative World Telefilms Ltd. (2011) 15 taxmann.com 183 (Bombay), CIT Vrs. Value

Rajendra Mineral Resources Pvt. Ltd Capital Services Pvt. Ltd (2008) 307 ITR 334 (Del) and CIT Vrs. Winstral Petrochemicals Pvt Ltd. (2011) 10 taxmann.com 137 (Delhi).

by the revenue in para no.

4. (4.1 to 4.2) of it order. The operative portion of the order of Ld. CIT(A) is contained in para no.

4. (4.2) of its order and the same is reproduced below:-

4.2. I have carefully considered the facts of the case and the submissions of the d.AR. I have also gone through the decisions relied on by the AO and the ld.AR. During the course of assessment proceedings the appellant has filed all the details required to prove the identity and creditworthiness of the person, and the genuineness of the transaction in the form of PAN

Rajendra Mineral Resources Pvt. Ltd cards, IT return copies, bank statements, confirmations, allotment of shares, affidavits et cetera and claimed that he has discharged its onus. On the other hand the AO has found these documents as engineered since those who involved in bogus transactions are meticulous inarranging these make- believe documents. Further he recorded a statement from one shareholder Smt. PremshreelaUmesh Gupta and found that she does not have sufficient means to prove her creditworthiness. Since the modus operandi is same in all other cases also the AO has disbelieved the entire transaction and made the disallowance under section 68 of the Act. In my considered opinion, the AO cannot jump to any conclusion on the basis of one person without the examination of all the shareholders and proving that they do not have sufficient means to invest in the appellant company. As was held in several cases that whatever may be the strength of the presumption it cannot replace evidence. As seen from the details filed before the AO, a set of which were also filed before me, I do not find any inconsistency or incoherence so far as the documentation is concerned. With regard to transaction the same has rooted through the banking channels and the source cannot be doubted. If the AO believes that there are matching drawls and the deposits and withdrawals have taken at the fag end of Rajendra Mineral Resources Pvt. Ltd the year, that should not become a strong ground for disbelieving the credits in the hands of the appellant and penalising the appellant in the process. As is held by the Honorable Supreme Court in the case of Lovely Exports Private Limited, the AO is at liberty to bring to tax the amounts in their respective hands if their creditworthiness is not proved. In the instant case, it is evident that the creditworthiness of Smt. PremshreelaUmesh Gupta is not proved as is seen from the statement given by her. Therefore, in my considered opinion only the amount of Rs 10 lakhs standing in the name needs to be disallowed and the remaining amount of disallowance needs to be withdrawn. Accordingly I confirm the disallowance made of Rs 10 lakhs in the case of Smt. PremshreelaUmesh Gupta and direct the AO to withdraw the remaining amount. The ground is partly allowed.

After having gone through the facts of the present case as well as considering the orders passed by revenue authorities, judgments cited and arguments addressed by both the parties, we find that during the assessment proceedings, in order to verify the claim of the assessee, the AO called for various documents to Rajendra Mineral Resources Pvt. Ltd establish the genuineness of share capital introduced and also the „Basis of Share Valuation‟ and conducted enquiries by serving statutory notices to the respective parties and recorded statement u/s 131 of the I.T. Act. The details of enquiries conducted by the AO are contained in para no. 3.8 to 3.11 of its order. The AO also concluded that the “share premium” had been arranged for the assessee by hawala dealers and they have also organized all bank account (25) to be opened in two banks i.e. Indian Bank and Dena Bank and most of the bank accounts have been opened during the mid of year 2011 and there are no regular and normal banking transactions. In some of the banks, the money had been deposited in cash and cheque issued or cheque deposited and money withdrawn. It was also noticed by the AO that before issue of cheque to the assessee, almost similar or matching amount has been deposited either on the same date or in just one or two days before. Therefore, after carrying out detailed investigations, AO summarized the entire facts at para no. 3.17 in its order. After perusal of the order of the AO, we find that the AO had raised 16 points in order to come to the conclusion that the share capital and premium introduced by the company in its Rajendra Mineral Resources Pvt. Ltd books during the relevant financial year are sham and the assessee has failed to prove the identity, creditworthiness and genuineness of the transaction thereby rendering the amount of share capital and share premium of Rs. 2,70,00,000/- as unexplained cash credit and thus additions were made u/s 68 of the I.T. Act. On the other hand in its order, Ld. CIT(A) himself has mentioned that the AO cannot jump to any conclusion on the basis of statement of one person without examination of all the shareholders and has thus deleted the additions qua those persons. In our view, the duty of the CIT(A) and AO are co- terminus and the AO also can do what the AO could do or ought to have done. Therefore, in such circumstances, Ld. CIT(A) could have examined all the shareholders for reaching to any logical conclusion as has been held by the Hon‟ble Supreme Court in the case of CIT Vrs. Kanpur Coal Syndicate (53 ITR 225)(SC). We also find that Ld. CIT(A) although mentioned that from the set of documents, he has not found any inconsistency or Rajendra Mineral Resources Pvt. Ltd incoherence, but at the same time, Ld. CIT(A) has not discussed the details, authentication, veracity and relevance of such documents. The Hon‟ble Supreme Court in the case of Central Board of Trustees Vrs. M/s Indore Composit Pvt. Ltd. (Civil Appeal No. 7240 of 2018 ) has categorically mentioned that the Courts or quasi Judicial authorities need to pass reasoned order in every case which must contain the narration of facts, the issue arising in the case, the submissions argued by the parties, the legal principles applicable to the issues involved and the reasons in support of the findings on all the issues arising in the case. Unfortunately, the Ld. CIT(A) failed to keep in mind these principles and had deleted the part addition while simply relying upon the judgment in the case of Lovely Exports Pvt. Ltd. had partly allowed the appeal of the assessee and deleted the additions without dealing with the reasons /points raised by the AO in para no. 3.17 of its order.

After considering the judgments cited by both the parties, we find that Hon‟ble Apex Court in the case of KapurchandShrimalVrs. CIT 1981 131(ITR) Page 451 has Rajendra Mineral Resources Pvt. Ltd held that the duty of the Tribunal does not end with making a declaration that the assessments are illegal and it is dutybound to issue further directions. The appellate authority has the jurisdiction as well as the duty to correct all errors in the proceedings under appeal and to issue, if necessary, appropriate directions to the authority against whose decision the appeal is preferred to dispose of thewhole or any part of the matter afresh unless forbidden from doing so by the statute and the statute does not say that sucha direction cannot be issued by the appellate authority in a case of this nature.

Therefore, considering the above judgment and keeping in view the interest of justice, we set aside the order of Ld. CIT(A) and remit the matter back to the file of Ld. CIT(A) with a direction to deal with all the points raised by the AO in para no. 3.17 of the assessment order or to take any other steps as mentioned in our order and thereafter pass afresh order . It is needless here to mention that before passing the order, the Ld. CIT(A) shall provide sufficient opportunity of hearing to the assessee. Before parting, we may make it clear that our decision

Rajendra Mineral Resources Pvt. Ltd to restore the matter back to the file of Ld. CIT(A) shall in no way be construed as having any reflection or expression on the merits of the dispute, which shall be adjudicated by the Ld. CIT(A) independently in accordance with law. With these directions, these grounds of appeal filed by the revenue are allowed for statistical purposes.

Ground No. 2 & 3. 7. These ground are general in nature, thus requires no specific adjudication.

ITA No. 3817/Mum/2016 (AY 2012-13) 9. Now we take up assessee appeal filed in for AY 2012-13. Since, we have already decided the appeal of the revenue and set aside the order of Ld. CIT(A) and restore the same back to the file of Ld. CIT(A), therefore we apply the same findings in the present appeal in Rajendra Mineral Resources Pvt. Ltd order to maintain judicial consistency which is applicable mutatis mutandis.