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Income Tax Appellate Tribunal, MUMBAI BENCHES, ‘J’ MUMBAI
Before: Shri Joginder Singh, & Shri Manoj Kumar Aggarwal
आदेश / O R D E R Per Joginder Singh(Judicial Member) The Revenue is aggrieved by the impugned order dated 20/06/2016 of the Ld. First Appellate Authority, Mumbai, in deleting the addition of Rs. 32,66,78,600/- made on account of share premium and consequent addition made under section 68 of the Act, ignoring the decision from Hon'ble Apex Court in the case of Lovely Exports Pvt. Ltd. 216 CTR 195, CIT vs. Nr Portfolio Pvt. Ltd. and CIT vs. Nova Promotors & Finlease Pvt. Ltd. (2012) 342 ITR 169/206 from Hon'ble Delhi High Court.
During hearing of this appeal, Shri Rajendra Kumar, learned DR, explained that the assessee received share capital/share premium from sixteen entities by inviting our attention to the finding recorded in para 4.2 (page 4 of the assessment order). It was pleaded that notices under section 133(6) were issued to which there was no reply from the concerned parties and in some cases such notices were returned back and in some cases service was effected but still there was no reply/no compliance from such parties. It was explained that these were loss making companies and there
M/s R & Business Infra Projects Pvt. Ltd. was no earning during the year or earlier and the book value of the assessee in books of account was negative. Our attention was further invited to page 6 and 15 of the assessment order. Reliance was placed upon the decision from Hon'ble Delhi High Court in 342 ITR 169(Del), 222 Taxmann 15 (Del), 367 ITR 306 (Del). Our attention was also invited to page 19 (para 4.9 of the assessment order) and further to page 26 (para 7), page 27 and page 31 (para 11) and the table mentioned in the impugned order. It was empathetically argued that additional evidence was filed before the learned CIT(A) which is violation of Rule 46A of the Rules as no opportunity was provided to the Assessing Officer to rebut the additional evidence filed by the assessee. It was explained that substantial amount was received by the assessee as fresh capital which is based on additional evidence and the learned CIT(A) conveniently ignored the same.
On the other hand, the learned counsel for the assessee, Shri Ratan Kumar Samal, fairly agreed that substantial amounts was received by the assessee and the impugned additional evidence was not filed before the learned Assessing
M/s R & Business Infra Projects Pvt. Ltd.
Officer. However, the learned counsel defended the order of the learned CIT(A) by further fairly admitting that the learned First Appellate Authority did not call remand report from the learned Assessing Officer. Reliance was placed upon the decision from Hon'ble Madras High Court in M/s. V R Global Energy Pvt. Ltd. vs. Income Tax Officer (Tax Case (Appeal)
NO. 246 of 2017) and another decision in CIT vs. Electro Polychem Ltd. (294 ITR 661). In reply, the learned DR explained that the learned Assessing Officer vide letter dated 5.03.2015 called the details, which were not filed and, thus, there is a failure on the part of the assessee and again show cause notice was given on 19.03.2015. It was explained that the finding of the learned CIT(A) is based upon additional evidence for which no opportunity was given to the learned Assessing Officer.
We have considered the rival submissions and perused the material available on record. The facts in brief are that the assessee company is engaged in the business of civil construction and sub-contracting, received an amount of Rs. 32,66,78,000/-on account of share issued to sixteen parties.
The details of which are mentioned in para 4.1 onwards of M/s R & Business Infra Projects Pvt. Ltd. the assessment order. The learned Assessing Officer issued notice to the assessee to prove the nature and source of the cash entry found in the books and issued a letter dated 15.03.2015 asking the details regarding share premium by the assessee. This letter is reproduced at page 3 onwards of the assessment order. Further, notices under section. 133(6) of the Act were issued to all the sixteen parties, from whom share premium was received and replies were not filed as has been mentioned in para 4.2 onwards of the assessment order.
The learned Assessing Officer has specifically mentioned in para 4.4 onwards that credit worthiness of the investors, genuineness and nature of transaction was not proved by the assessee. At page 6 of the assessment order the learned Assessing Officer has specifically mentioned as under:
“The assessee has not provided any details regarding the source of income of all the investing companies, copy of their ITR, balance sheet, P & L, COI for last five years of these companies and whether they have financial capacity and their bank statements showing payment of such premium in the assessee company, which was specifically asked vide letter dated 9.03.2015. The investing parties not replied to the notices issued under section 133(6) of the Act, 1961 and in such a situation the only way of getting relevant information was from the assessee. But as seen from the M/s R & Business Infra Projects Pvt. Ltd. discussion above, the assessee has completely failed to provide the relevant details and discharge its primary onus…..”
4.1 In the light of the above, we are expected to analyze section 68 of the Act. As per the provisions of section 68 of the Act, the assessee is expected to offer an explanation with respect to the nature and source of cash credits to the satisfaction of the Assessing Officer. For ready reference section 68 of the Act is reproduced hereunder:-
“68. Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year : Provided that where the assessee is a company (not being a company in which the public are substantially interested), and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee-company shall be deemed to be not satisfactory, unless— (a) the person, being a resident in whose name such credit is recorded in the books of such company also offers an explanation about the nature and source of such sum so credited; and (b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory: Provided further that nothing contained in the first proviso shall apply if the person, in whose name the sum referred to M/s R & Business Infra Projects Pvt. Ltd. therein is recorded, is a venture capital fund or a venture capital company as referred to in clause (23FB)of section 10.”
4.2 As per section 68 of the Act, onus is upon the assessee to discharge the burden so cast upon. First burden is upon the assessee to satisfactorily explain the credit entry contained in his books of accounts. The burden has to be discharged with positive material (Oceanic Products Exporting Company vs CIT 241 ITR 497 (Kerala.). The legislature had laid down that in the absence of satisfactory explanation, the unexplained cash credit may be charged u/s 68 of the Act. Our view is fortified by the ratio laid down in Hon’ble Apex Court in P. Mohankala (2007)(291 ITR 278)(SC).
A close reading of section 68 and 69 of the Act makes it clear that in the case of section 68, there should be credit entry in the books of account whereas in the case of 69 there may not be an entry in such books of account. The law is well settled, the onus of proving the source of a sum, found to be received/transacted by the assessee, is on him and where it is not satisfactorily explained, it is open to the Revenue to hold that it is income of the assessee and no further burden lies on the Revenue to show that income is from any other
M/s R & Business Infra Projects Pvt. Ltd. particular source. Where the assessee failed to prove satisfactorily the source and nature of such credit, the Revenue is free to make the addition. The principle laid down in Ganpati Mudaliar (1964) 53 ITR 623/A. Govinda Rajulu Mudaliar (34 ITR 807)(SC) and also CIT vs Durga Prasad More (72 ITR 807)(SC) are the landmark decisions.
The ratio laid down therein are that if the explanation of the assessee is unsatisfactory, the amount can be treated as income of the assessee. The ratio laid down in Daulat Ram Rawatmal 87 ITR 349 (SC) further supports the case of the assessee. In the case of a cash entry, it is necessary for the assessee to prove not only the identity of the creditor but also the capacity of the creditor and genuineness of the transactions. The onus lies on the assessee, under the facts available on record. A harmonious construction of section 106 of the evidence Act and section 68 of the Income Tax Act will be that apart from establishing the identity of the creditor, the assessee must establish the genuineness of the transaction as well as the creditworthiness of the creditors.
In CIT vs Korlay Trading Company Ltd. 232 ITR 820 (Cal.), it was held that mere mention of file number of creditor will not M/s R & Business Infra Projects Pvt. Ltd. suffice and each entry has to be explained separately by the assessee (CIT vs R.S. Rathaore) 212 ITR 390 (Raj.). The Hon’ble Guwahati High Court in Nemi Chandra Kothari vs CIT (264 ITR 254)(Gau) held that transaction by cheques may not be always sacrosanct. In the present appeal, the assessee has not discharged the onus cast upon it as provided under section 68 of the Act as the necessary details called by the learned Assessing Officer were not filed. The ratio laid down in ACIT vs Rajeev Tandon 294 ITR (AT) 219 (Del.), which was confirmed by Hon’ble High Court , in 294 ITR 488, supports the case of the Revenue. Identical ratio was laid down in CIT vs Anil Kumar 392 ITR 552 (Del.), wherein it was held that mere identification of the donor and movement of gift through banking channel is not sufficient to prove the genuineness of gift.
4.3 Uncontrovertedly, we note that the learned Assessing Officer calls the details vide letter dated 05.03.2015 and again vide show cause notice dated 19.03.2015. It is also uncontroverted fact that the assessee filed additional evidence before the learned CIT(A) and no remand report was sought from the learned Assessing Officer. In the absence of M/s R & Business Infra Projects Pvt. Ltd. non-reply to the show cause notice/notices, the learned Assessing Officer was prevented to examine the factual matrix. Thus, without going in too much deliberation and merits of the appeal, this is a clear cut case of violation of Rule 46A of the Rules. Thus, in all fairness, we deem it appropriate to remand this appeal to the file of the learned Assessing Officer. The assessee is directed to furnish the necessary evidence to substantiate its claim. The assessee be given opportunity of being heard. Thus, the appeal of the Revenue is allowed for statistical purposes.
Finally, the appeal of the Revenue is allowed for statistical purposes.
This Order was pronounced in the open court in the presence of Ld. representatives from both sides at the conclusion of hearing on 23/08/2018.