ACIT, CIRCLE 25(1), DELHI vs. VINOD RICE MEAL PVT. LTD. , DELHI

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘H’, NEW DELHI Before Dr. B. R. R. Kumar, Accountant Member Ms. Astha Chandra, Judicial Member ITA No. 2048/Del/2021 : Asstt. Year: 2012-13 ACIT, Vs Vinod Rice Meal Pvt. Ltd., Circle-25(1), 21/18-19, Santosh Road, Holambi New Delhi-110002 Kalan, Delhi-110082 (APPELLANT) (RESPONDENT) PAN No. AACCV0261F Assessee by : Sh. K. Sampath, Adv. & Sh. Manu Gawri, CA Revenue by : Sh. Amit Katoch, Sr. DR Date of Hearing: 14.02.2024 Date of Pronouncement: 04.04.2024

ORDER Per Dr. B. R. R. Kumar, Accountant Member:

The present appeal has been filed by the Revenue against the order of ld. CIT(A)-23, New Delhi dated 17.02.2020.

“1. Whether on the facts and circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of Rs.3,47,00,000/- on account of Share Application Money. The assessee has failed to discharge its onus of proving the creditworthiness of concerned party, and genuineness of transactions in terms of provisions of Sec. 68 of the Act. The amount was shown as received from Livin Infrastructure Ltd. represents the credit entry whose nature and source could not be satisfactorily proved by the assessee during the assessment proceedings and hence it is covered within the mischief of Section 68 of the Act. In the case of Sumati Dayal v/s CIT, the Hon'ble Supreme Court has held that payment of cheque is not conclusive evidence of credit worthiness of the payer and it is only a

2 ITA No. 2048/Del/2021 Vinod Rice Meal Pvt. Ltd. neutral evidence in tax proceedings. Payment by cheque does not per se establish the genuineness of the transactions.”

“Kindly refer to your office letter vide F.No. CIT(A)-23/Remand Roport12017- 18/298 dated 24.12.2018 on the above mentioned subject wherein your good self has directed the AO to make enquiries and send comments.

In this regard it is submitted that information was called u/s 133(6) from M/s Livin Infrastructure Ltd. In response to the same, reply was received from M/s Livin Infrastructure Limited in which it was submitted that Livin Infrastructure Ltd. has done rice trading activity with M/s Vinod Rice Mills Pvt. Ltd. They advanced the money to Vinod Rice Mills Pvt. Ltd. during the

3 ITA No. 2048/Del/2021 Vinod Rice Meal Pvt. Ltd. year under consideration for the purchase of Rice and purchased the rice in succeeding years.

Information u/s 133(6) of the Act was also sought from Livin Infrastructure Ltd. during the scrutiny proceedings. However, during the scrutiny proceedings vide letter dated 11.03.2015 Livin Infrastructure Ltd. had submitted that they subscribed to share capital of M/s Vinod Rice Mills Pvt. Ltd. On perusal of both the replies undersigned observed that there is contradiction in both the replies as follows:

Reply during Amount Paid as Amount Paid as Total amount paid assessment Share application Advance against during A.Y. 2012-13 proceedings amounting to Rs. supply of rice Rs. 7,37,00,000/- amounting to Rs. 3,90,00,000/- Reply during NIL Amount Paid as Total amount paid remand Advance against during A.Y. 2012-13 proceedings Supply of rice Rs. 7,37,00,000/- amounting to Rs. 7,37,00,000/- From the above, it can be concluded that Livin Infrastructure was involved in aggregate transaction of Rs. 7,37,00,000/- with Vinod Rice Mills Pvt. Ltd. during the A.Y. 2012-13. However, no shares were allotted to Livin Infrastructure. Scrutiny assessment of A.Y. 2013-14 was also completed in this charge and during the scrutiny proceedings it was accepted by the department that assessee company has made sale of Rs.7,37,00,000/- to Livin Infrastructure. Also total amount of Rs. 4.67 Cr. was pending for allotment on 31.03.2012 on account of share application money which included Rs. 3.47 crores of Livin Infrastructure. The assessee during the scrutiny of A.Y. 2013-14 submitted that Rs. 3.47 crore has been refunded to Livin Infrastructure in the form of sale of rice and the same has been accepted by department. It can be said from the available records that assessee company has refunded the amount of share application money amounting to Rs.3,47,00,000/- during the A.Y. 2013-14 through sale of rice. Therefore, it is submitted that the issue may be decided on the merits of the case”

4 ITA No. 2048/Del/2021 Vinod Rice Meal Pvt. Ltd. 6. A further remand report was received by the ld. CIT(A) from the Assessing Officer vide letter dated 09.09.2019, which is reproduced below: “In this regard, as directed by your goodself, Inspector of this charged was directed to conduct enquiries in the case of M/s Livin Infrastructure limited at premise 43/19A, East Azad Nagar, New Delhi on 03/09/2019. The desired report has been submitted by the Inspector on 04/09/2019. The same is enclosed herewith for your ready reference. As reported by ITI name of the company has been changed and now the company is known by the name and style of M/s Shinkolite Finance Ltd. and is engaged in the business of finance. Further, it has also been reported that during the A.Y. 2012-13, M/s Vinod Rice Mills Pvt. Ltd. has received total sum of Rs. 7.37 crore through banking channel from M/s Livin Infrastructure Ltd. He further reported that share application money received during the A.Y. 2012-13, M/s Vinod Rice Mills Pvt. Ltd. has not allotted any shares but the share application money has been refunded in the next year. On perusal of the report of the ITI as well as submission filed by the assessee in response to this office notice u/s 133(6) of the I.T. Act that during the year, though the assessee had advanced Rs.7.37 crore to M/s Vinod Rice Mills, its income as per ITR was only Rs.4,38,880/-. Moreover, as per balance sheet as on 31/03/2012, the revenue from operations was Rs.15,55,17,234/- and assets shown by the assessee was of Rs.18,07,93,142/-and the amount of advance/loan was Rs.7.37 crore. Keeping in view of the above, it is requested to consider the above mentioned facts before deciding the appeal. 7. The inspector’s report given to the ld. CIT(A) is reproduced below:

“Report in the case of M/s Livin Infrastructure Ltd. As directed by ACIT, Circle-26(2), I visited the premise 43/19A, East Azad Nagar, New Delhi on 03/09/2018 at 05:30 pm. The director of the company

5 ITA No. 2048/Del/2021 Vinod Rice Meal Pvt. Ltd. was not available, as per telephonic conversation with Sh. Loveleen Malhotra (Director), it was gathered that the name of the company has been changed to M/s Shinkolite Finance Ltd. and during the A.Y. 2012-13, M/s Vinod Rice Mills Pvt. Ltd. has received total sum of Rs. 7.37 crore through banking channel from M/s Livin Infrastructure Ltd. Further, he also informed that against the share application money received during the A.Y 2012-13, M/s Vinod Rice Mills Pvt. Ltd. has not allotted any shares but the share application money has been refunded in the next year. Further, he also told me that the said information has already been furnished to the AO in response to the notice u/s 133(6) of the Act.

There was no key person present at the premise except receptionist, Miss Sonika, who stated to be working in the company from 4 months only and has no information regarding the transactions with M/s Vinod Rice Mills Pvt. Ltd. Further, she told me that the company M/s Livin Infrastructure Ltd deals with finance sector and earlier used to do rice trading also.”

“Assessment for the A.Y. 2012-2013 has been completed u/s 143(3) of The Income Tax Act, 1961 on 25.03.2015. Returned income of Rs.1,38,90,467/- has been assessed at Rs.4,85,90,470/-. Following additions have been made:-

SI. No. Particulars Amount(Rs) 1 Returned Income 13890467.00 2. Add:- Addition on account of Share 34700000.00 Application Money 3. Taxable Income 48590467.00 4. Taxable income R/off to Rs 48090470.00

The assessee company was having Share Application Money pending allotment remaining outstanding amounting to Rs 46700000.00 as at 31.03.2012. During the course of assessment proceedings the assessee company was asked to give a chart of opening balance of Share Application

6 ITA No. 2048/Del/2021 Vinod Rice Meal Pvt. Ltd. Money, received during the year, paid back during the year and closing balance of Share Application Money as on 31.03.2012.

On the fixed date of hearing i.e. 04.03.2015, the assessee company filed details of three companies, from whom it had received Share Application Money, along with the other details. Out of these three companies, from whom the assessee company had received Share Application Money during the A.Y. 2012-2013, one share applicant was “Livin Infrastructure Limited". The assessee company received Share Application Money Rs 36700000.00 from “Livin Infrastructure Limited” during the A.Y. 2012- 2013. In the letter filed on 04.03.2015, the assessee company filed following documents in respect of Share Application Money amounting to Rs 3,67,00,000/- received from "Livin Infrastructure Limited" in order to substantiate the genuineness of the sum received:-

Particulars Documents Filed Livin Infrastructure Ltd. a) Share Application Form 43/19A, East Azad Nagar, b) Confirmation from "Livin Infrastructure Delhi. Limited". PAN - AAACR7209M c) Copy of Resolution of Board of Directors of “Livin Infrastructure Limited" dated 16.03.2012. d) Relevant portion of copy of Bank Statement of assessee company reflecting the sums received from “Livin Infrastructure Limited’’. e) Relevant Portion of Copy of Bank Statement of “Livin infrastructure Limited" reflecting the payments made to assessee company. f) Copy of Audited Balance Sheet of ‘Livin Infrastructure Limited” as at 31.03.2012. g) Copy of Certificate of Incorporation of ‘Livin Infrastructure Limited”. h) Copy of PAN of "Livin Infrastructure Limited”.

7 ITA No. 2048/Del/2021 Vinod Rice Meal Pvt. Ltd. FACTS AS NARRATED IN THE ASSESSMENT ORDER

a) Notices u/s 133(6) were issued by Learned Assessing Authority to parties to confirm the transactions of Share Application Money.

b) The notice u/s 133(6) sent to “Livin Infrastructure Limited" was received back un-served with the remark of postal authorities “Left".

c) Further a letter dated 12.03.2015 was filed in the office of DCIT Circle 26(2), New Delhi, giving confirmation of “Livin Infrastructure Limited" along with the bank statement of SBI. But no ITR was furnished.

a) On 13.03.2015, Director of the company Shri Vinod Kumar, along with the AR of the assessee, appeared and was asked to produce the director “Livin Infrastructure Limited" and the case was adjourned to 16.03.2015. Shri Vinod Kumar even did not know the name of director of “Livin Infrastructure Limited". There was no compliance on 16.03.2015.

b) It was presumed by the Learned Assessing Authority that the assessee had no explanation to offer. Despite the opportunity given, the assessee had failed to produce the Principal Officer of “Livin Infrastructure Limited" for verification of transactions.

c) Notice u/s 133(6) was issued to SBI, the banker of “Livin Infrastructure Limited" to verify the transaction. The statement of bank account was received from SBI and on perusal of that bank statement, it was noticed that, money was transferred in account of “Livin Infrastructure Limited" from another bank account in the same bank and thereafter the amount was immediately transferred to the assessee company by RTGS.

FACTS AS PER THE ASSESSEE COMPANY

a) The notice no - F.No. DCIT / Cir.26(1)&26(2) / 95/133(6)/2014-15 dated 05.03.2015 u/s 133(6) calling for information from “Livin Infrastructure Limited" was served on the assessee company by hand at its office premises situated at 701, 7th Floor, D-Mall, Netaji Subhash Place, Delhi -110034.

8 ITA No. 2048/Del/2021 Vinod Rice Meal Pvt. Ltd.

b) The notice u/s 133(6) calling for information from “Livin Infrastructure Limited" was handed over by the assessee to “Livin Infrastructure Limited” with a request to comply with the same.

c) Thus the assessee company was very much in touch with the share applicant “Livin infrastructure Limited".

d) The date for compliance of notice u/s 133(6) was fixed for 11.03.2015 by the Learned Assessing Authority.

e) On 11.03.2015, “Livin Infrastructure Limited”, in response to notice no - F.No.DCIT/Cir.26(1) &26(2)/95/133(6)/2014-15 dated 05.03.2015 u/s 133(6) calling for information in the matter of assessee company, sent a letter dated 11.03.2015 by “Speed Post” confirming the transactions undertaken by it with the assessee company during the F.Y. 2011-2012 along with the supporting documents. The said letter was sent through speed post vide receipt no - ED560540275IN from GPO, Delhi-110006. The said letter was received by the office of the Learned Assessing Authority on 12.03.2015.

To substantiate the above fact, following documents are being enclosed:-

i) A copy of letter dated 11.03.2015 sent by “Livin Infrastructure Limited” along with the enclosures in response to notice u/s 133(6) of The Income Tax Act, 1961.

ii) Copy of tracked report of speed post sent by "Livin Infrastructure Limited" as downloaded from website of Department of Post, Ministry of Communication & Information Technology proving the dealing of the reply u/s 133(6).

iii) A copy of notice F. No.DCIT/Cir.26(1) & 26(2) / 95/133(6)/2014-15 dated 05.03.2015 u/s 133(6) calling for information from “Livin Infrastructure Limited" in the matter of assessee company.

9 ITA No. 2048/Del/2021 Vinod Rice Meal Pvt. Ltd. f) Thus on 12.03.2015 the confirmation of “Livin Infrastructure Limited” along with the bank statement of SBI was not filed by the assessee company but by the “Livin Infrastructure Limited” through speed post as mentioned above.

On the basis and in the light of above mentioned facts, the Share Application Money amounting to Rs 34700000.00 received from “Livin Infrastructure Limited" has been added u/s 68 of The Income Tax Act, 1961 as unexplained cash credit.

OTHER FACTS OF THE CASE

10 ITA No. 2048/Del/2021 Vinod Rice Meal Pvt. Ltd. 6. The assesses company has not allotted any shares against the said share application money Rs 34700000.00 and the same has been refunded to “Livin Infrastructure Limited" during the A. Y. 2013-2014.

“Where the shares are issued by a Private Limited Company, the onus would be stringent for the reason that the public issue cannot be made by a private limited company and the capital is received through private placement normally to known persons i.e. the relatives and friends at directors. The onus would be rendered even more stringent when there is evidence available impeaching the credentials of the “investor companies" and their “directors" who have admittedly been carrying on the activity of providing accommodation entries through the medium of these “companies”.

“In the case of share capital received by a private limited company, the transactions partake the character of cash credits. Therefore, the assessee's burden to establish the genuineness of funds shown in the guise of share capital subscription and the creditworthiness of the investor is at par with the cash credits. Even if it is presumed, for the sake of argument, that the assessee company has no contact or relationship with them, it is necessary to examine as to how the “investors’1 came to know of the requirements of funds by the assessee company in the absence of a public issue or any advertisement by the assessee company. For accepting the identity and the availability of funds in their hands in their own capacity, it is necessary to have at least some idea, if not complete details, of the actual “business” in which they are said to be engaged.“

11 ITA No. 2048/Del/2021 Vinod Rice Meal Pvt. Ltd. “The share capital has been raised through private placement and not through a public issue, which means that all the subscriber of share capital were personally known to the assessee company and the assessee company, therefore, must be aware of their whereabouts. As such the claim of the assessee that the said transactions were through account payee cheques and is a genuine transaction is not acceptable. In the case of Sumati Daval vs. CIT. the Hon’ble Supreme Court has held that payment of cheque is not conclusive evidence of credit worthiness of the payer and it is only a neutral evidence in tax proceedings. Payment by cheque does not per se establish the genuineness of the transactions.

By making the above observations the Learned Assessing Authority has attempted to prove the following facts:-

i) That the assessee company had no relationship with the Share Applicant "Livin Infrastructure Limited” and it was not a known person to the assessee company.

ii) The assessee company could only claim that the transaction was through account payee cheque and the whereabouts of “Livin Infrastructure Limited” were not known to the assessee company.

i) Sumati Davat Vs. Commissioner of Income Tax 1995 AIR 2109, 1995 SCO Supl. (2)453:- By quoting the above judgment the Learned AO has stated that the payment of cheque is not the conclusive evidence of creditworthiness of the payer and it is only a neutral evidence in tax proceedings. Payment by cheque does not per se establish the genuineness of the transactions.

12 ITA No. 2048/Del/2021 Vinod Rice Meal Pvt. Ltd. ii) Ridhi Sidhi Commercial Co.. Limited vs. ACIT[1998] 62 TTJ 710 (Del):- “It was observed that the initial onus of proving the identity of the share holders and establishing the fact that the share holder had in fact .contributed the share capital, lies, on the assessee”.

iii) a) Shankar Industries Vs. CIT [1978] 114 ITR 689 (Cal.): b) C. Kant & Co. Vs. CIT [1980] 126 ITR 63 (Cal.) and CIT Vs. Precision Finance Private Limited [1994] 208 ITR 465 (Cal.):- “It is necessary for the assessee to prove the transaction which results in a credit in its books of accounts. Such proof includes proof of the identity of its creditors, the capacity of such creditors to advance money and lastly, the genuineness of the transactions. Merely, giving names of the creditors is not enough.”

iv) A. Govindarajulu Mudaliar Vs. CIT (1958) 34 ITR 807 (SC):- “That where the assessee fails to prove satisfactorily the source and nature of certain amount received during the accounting year, the Assessing Officer is entitled to draw the inference that the receipts are of an assessable nature.”

v) Nizam Wool Agency Vs. CIT (1992) 193 ITR 318 (Ail):- “That mere payment by an account payee cheques is not sacrosanct nor can it make a non genuine transaction genuine.”

vi) CIT Vs. Korlay Trading Co. Limited [1998] 230 ITR 820 (Cal.):- “That mere filing of income tax file numbers of the creditors is not enough to prove the genuineness of the credits.”

vii) a) Bharati Private Limited vs. CIT [1978] 111 ITR 951 (Cal.) and b) CIT Vs. United Commercial & Industrial Co. Private Limited [1991] 187 ITR 596 (Cal.):- “That mere tiling of confirmatory letters does not discharge the onus that ties on the assessee."

viii) CIT Vs. V. M. Ganppathi Mudaliar [1964] 53 ITR 623:- “Once it is held that an amount credited in the accounts books of the assessee is the income of the assessee it is not necessary for the department to locate its exact source.”

13 ITA No. 2048/Del/2021 Vinod Rice Meal Pvt. Ltd. ix) CIT Vs. Devi Prasad Vishwanath Prasad [1969] 72 ITR 194:- “The question again assumes that it was for the ITO to indicate the source of the income before the income could be held taxable and unless he did so, the assessee was entitled to succeed. That it is not, in our judgement, the correct legal position. Where there is an explained cash credit, it is open to the ITO to hold that it is the income of the assessee and no further burden lies on the ITO to show that income is from any particulars source, It is for the assessee to prove that even if the cash credit represents income it is income from a source which has already been taxed.”

x) a) Commissioner of Income Tax Vs. Nova Promoters and Finlease Private Limited [2012] 342 ITR 169 (Delhi), b) Commissioner of Income Tax Vs. N.R. Portfolio Private Limited 206 (2014) DLT 97 (DB)(Del) and Commissioner of Income Tax vs. MAF Academy P. Ltd. 206 (2014) DLT 277(DB) (Del):- By refereeing to these cases the Learned AO has mentioned that the following cases have already been referred earlier in the above mentioned decisions of Delhi High Court:-

a) Commissioner of Income Tax Vs. Sophia Finance Limited [1994] 205 ITR 98 b) Commissioner of Income Tax Vs. Divine Leasing and Finance Limited [2008] 299 ITR 268 c) Commissioner of Income Tax Vs. Lovely Exports Private Limited [2008] 319 ITR

9.1 By placing reliance on all the above mentioned decision of various Hon'ble Courts, the AO has attempted to prove the following facts:-

a) That mere filing of income tax file numbers of the creditors is not enough to prove the genuineness of the transactions.

b) That mere payment by account payee cheque is not the conclusive evidence to prove the genuineness of the transactions.

c) That mere filing of confirmatory letters does not discharge the onus that lies on the assessee.

14 ITA No. 2048/Del/2021 Vinod Rice Meal Pvt. Ltd.

d) Onus of proving the identity of the shareholder, Creditworthiness and establishing the genuineness of the transactions lies on the assessee.

e) If the assessee is not able to prove the source and nature of certain credit satisfactorily the Assessing Officer is entitled to draw the inference that the receipts are of the nature of income.

f) If an amount is held to be the income of the assessee it is not necessary for the AO to locate the exact source.

g) When there is an unexplained cash credit, it is open to the ITO to hold that it is the income of the assessee, the burden lies on the assessee to prove that the said cash credit represented the income from a source which has already been taxed.

GROUNDS OF APPEAL

In the present case the assessee company has proved all the three ingredients required for proving a cash credit as genuine in terms of the parameters required to be met in accordance with section 68 of The Income Tax Act, 1961,

The cash creditor “Livin Infrastructure Limited” is a legal entity incorporated under the Companies Act, 1956 enjoying the status of Artificial Juridical Person.

The cash creditor “Livin Infrastructure Limited” hold a valid PAN issued by the Income Tax Department thus enjoys the identity conferred on it by the Govt.

15 ITA No. 2048/Del/2021 Vinod Rice Meal Pvt. Ltd. Nowhere in the course of assessment proceedings or assessment order. The Learned AO has conflicted the identity of the “Livin Infrastructure Limited” and therefore the same stands proved.

All the payments have been received through account payee cheques / RTGS issued from the CA No - 32217318997 maintained with State Bank of India, SME BR Church Mission Road, Fatehpuri, Delhi.

Copy of bank statement has directly been sourced by the Learned AO by calling for the information u/s 133(6) from the State Bank of India, Fatehpuri, Delhi. At the time of receipt of credit the cash creditor was having enough creditworthiness to invest into the assessee company.

a) The share applicant is neither an entry operator nor an accommodation provider. b) The share applicant is not a stranger to the assessee company. c) Apart from investment in the share application money the share applicant was having other business dealings with the assessee company. The cash creditor “Livin Infrastructure Limited'’ also advanced a sum of Rs.3,90,00,000.00 to assessee company against supply of rice which the Learned AO has accepted. d) No shares have been allotted to the share applicant and the money received during A. Y. 2012-2013 has been refunded back during A. Y. 2013-2014. e) The assessment u/s 143(3) of The income Tax Act, 1961 has been completed by the same Assessing Authority, wherein the refund of share application money in question has been accepted by the Learned Assessing Authority.

f) Thus the genuineness of the transaction is proved beyond doubt.

16 ITA No. 2048/Del/2021 Vinod Rice Meal Pvt. Ltd. 4. During the course of assessment proceedings, the assessee company has filed all the requisite documents including confirmatory letter from cash creditor required to be fled in order to prove a transaction of cash credit as genuine. The list of documents submitted has been mentioned in the statement of facts and the same is not being reproduced for the sake of brevity.

17 ITA No. 2048/Del/2021 Vinod Rice Meal Pvt. Ltd. acknowledged by the Learned Assessing Authority in its assessment order, in the 1st Para of Page No - 2 of the assessment order.

18 ITA No. 2048/Del/2021 Vinod Rice Meal Pvt. Ltd. Infrastructure Limited". Except issuing one notice u/s 133(6), The Learned AO did not pursue the matter further to arrive at the Identity, Creditworthiness and Genuineness of the Share Application Money received by assessee company from “Livin Infrastructure Limited”. Instead of taking necessary steps which it was liable to take verify the genuineness of the transaction it directed assessee to produce the director within a period of three days.

“Wherein the Hon’ble Apex Court has opined that it is the duty of the Assessing Authority to examine the source of income of the alleged creditor to find out-whether they were creditworthy or were such who could advance the alleged loans. There was no effort made to pursue the so-called alleged creditors. The assessee, therefore, could not do any further."

The assessee further places reliance on the decisions of Hon’ble Jurisdictional Delhi High Court in the matter of Commissioner of Income Tax Vs. Nova Promoters & Finlease (P) Limited.

Wherein the Hon’ble High Court has opined that “where there exists material to implicate the assessee in a collusive arrangement with persons who are self-confessed “accommodation entry providers.” The ratio of Orissa Corporation will not apply in the present case neither the share applicant “Livin Infrastructure Limited” is an entry provider or accommodation provider nor there is any adverse information from DIT or any other authorities of any collusive arrangements with the person who are self-confessed “accommodation entry providers.”

19 ITA No. 2048/Del/2021 Vinod Rice Meal Pvt. Ltd. 14. Further reliance is placed on the judgment of Hon’ble Supreme Court In the matter of Lovely Exports Private Limited [2008] 319 ITR (ST.) 5 (SC) Wherein the Hon’ble Supreme Court held 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. The facts of case of Lovely Exports have also been thoroughly discussed in the decision of Hon’ble Jurisdictional Delhi High Court in the matter of Nova Promoters and Finlease Private Limited, wherein the Hon’ble Delhi High Court has held that when the necessary details such as PAN No. / Income Tax Ward No. of the share applicants have been furnished to the Assessing Officer, the burden gets shifted to the Assessing Officer to investigate into the creditworthiness of the share applicants, which he failed to discharge. Same facts are applicable to the case of assessee company. Except issuing notice u/s 133(6), the Learned AO has not taken any further step to investigate into the creditworthiness of share applicants "Livin Infrastructure Limited" and therefore the ratio laid down in the case of Lovely Exports is squarely applicable to the assessee company. 15. Further reliance is placed on the decision of Hon’ble Jurisdictional Delhi High Court in the matter of Commissioner of Income Tax Vs. Divine Leasing and Finance Limited Delhi High Court 299 ITR 268 [2008] Wherein the Hon’ble High Court has thoroughly summed up the question of applicability of section 68 to the share application moneys and it has stated: “In this analysis, a distillation of the precedents yields the following propositions of law in the context of Section 68 of the IT Act. The assessed has to prima facie prove (1) the identity of the creditor/subscriber; (2) the genuineness of the transaction, namely, whether it has been transmitted through banking or other indisputable channels; (3) the creditworthiness or financial strength of the creditor/subscriber. (4) If relevant details of

20 ITA No. 2048/Del/2021 Vinod Rice Meal Pvt. Ltd. the address or PAN identity of the creditor/subscriber are furnished to the Department along with copies of the Shareholders Register, Shared Application Forms, Share Transfer Register etc. it would constitute acceptable proof or acceptable explanation by the assessed. (5) The Department would not be justified in drawing an adverse inference only because the creditor/subscriber fails or neglects to respond to its notices; (6) the onus would not stand discharged if the creditor/subscriber denies or repudiates the transaction set up by the assessed nor should the AO take such repudiation at face value and construe it, without more, against the assessed. (7) The Assessing Officer is duty-bound to investigate the creditworthiness of the creditor/subscriber the genuineness of the transaction and the veracity of the repudiation.” Thus the mere fact that the cash creditor fails or neglects to respond of notices of department, the department will not be justified in drawing the adverse inference only because of that reason. 16. Various decisions of Hon'ble Delhi High Courts and Supreme Court referred to by the Learned Assessing Authority are not applicable to the assessee company for the following reasons:- a) That the assessee company has not merely filed the income tax file numbers but in addition the other supporting documents have also been filed.

b) The assessee company’s claim to the genuineness to the share application money received by it is not based only on filing of Income Tax Numbers, mere receipt of payment by account payee cheques or mere filing of confirmatory letters. It has filed income tax numbers, confirmatory letters and other supporting documents in addition to response to notice s/s 133(6) by the share applicant company.

c) The decisions of Delhi High Court cases in the matter of i. Commissioner of Income Tax Vs. Nova Promoters and Finlease Private Limited [2012] 342 ITR 169 (Delhi).

21 ITA No. 2048/Del/2021 Vinod Rice Meal Pvt. Ltd. ii. Commissioner of Income Tax Vs. N.R. Portfolio Private Limited 206 (2014) DLT 97 (DB)(Del) and iii. Commissioner of Income Tax Vs. MAP Academy P. Ltd., 206 (2014) DLT 277(DB) (Del) are not applicable to the case of assessee company due to the following reasons:-

i) The subscriber to the share application money is neither “entry operator" nor “accommodation entry provider”.

ii) The share applicant is known to the assessee company and it has other business dealings with the assessee company apart from investment in share application money.

iii) No adverse information with regard to the share applicant has been received by the Learned Assessing Authority from DIT (Inv.) or any other authority. iv) Sham Application Money has been refunded during the succeeding financial year and no shams have been allotted against the said sham application money. The assessment for the succeeding financial year 2012- 2013 has also been completed u/s 143(3) by the same assessing authority. Prayer:- It is hereby most humbly prayed that the addition made u/s 68 of The Income Tax Act, 1961 is not tenable at law and is liable to be deleted.

VINOD RICE MILLS PRIVATE LIMITED 21/18-19, SANOTH ROAD, HOLAMBI KALAN, DELHI - 110082 LIST OF ENCLOSURES SI. No. Particulars 1 Copy of Assessment order passed u/s 143(3) of The Income Tax Act, 1961 for the A.Y. 2013-2014 2 Copy of CA No - 32217318997 maintained with State Bank of India, SME BR Church Mission Road, Delhi, Fatehpuri, Delhi - 110006 3 Copy of Notice No F.No. DCIT/Cir. 26(1) & 26(2)95/133(6)72014- 15/ dated 05.03.2015 being information called for u/s 133(6) of The Income Tax Act, 1961 served on assessee company and handed over by it to Livin Infrastructure Limited. 4 Copy of the Reply filed by Livin Infrastructure Limited on 11.03.2015.

22 ITA No. 2048/Del/2021 Vinod Rice Meal Pvt. Ltd. This has a reference to our hearing dated 04.10.2016, wherein the submission placed on record, were examined by your honour. During the course of examination the appellant was confronted with the following queries:-

A) REASON FOR NON PRODUCTION OF DIRECTOR OF CASH CREDITOR LIVIN INFRASTRUCTURE LIMITED:- The AR of the assessee company along with the director Shri Vinod Kumar appeared before the Learned Assessing Authority on the second half of 13f1 March, 2015. During the course of hearing the assessee company was directed to produce director of Livin Infrastructure Limited on 16.03.2015. 13th March, 2015 happened to be Friday and 16 th March, 2015 happen to be very next working day i.e. Monday.

The grievance of the assessee company is that it was not granted sufficient time to produce the cash creditor which was a third party. At such a short notice it was not possible to produce the cash creditor.

In the mean time reply to notice u/s 133(6), confirming the transaction had been dispatched by Livin Infrastructure Limited.

B) STATEMENT OF ACCOUNT REFLECTING REPAYMENT OF SHARE APPLICATION MONEY DURING F.Y. 2012-2013:- In the succeeding financial year 2012-2013, the said share application money has been refunded to Livin Infrastructure Limited.

Copy of account of Share Application Money along with the copy of account of Livin Infrastructure Limited in the books of assessee company for the F.Y. 2012-2013, is being enclosed herewith for your kind perusal.

C) ASSESSMENT STATUS FOR THE A.Y. 2013-2014:- The refund of Share Application Money has been duty examined, verified and accepted by the same assessing authority during the course of assessment proceedings for A. Y. 2013-2014.

Copy of assessment order passed u/s 143(3) of The Income Tax Act, 1961 has already been submitted and the same is placed on record.

23 ITA No. 2048/Del/2021 Vinod Rice Meal Pvt. Ltd. The appeal has been filed against the addition of Rs.3,47,00,000.00 u/s 68 of The Income Tax Act, 1961. The reason for addition was failure of the appellant company to produce the director of Share Applicant company M/s Livin Infrastructure Limited.

Now the appellant company has been granted one more opportunity to produce the director of share applicant company before your honour.

It is to bring to your kind notice that the name and address of the share applicant company has been changed as follows:-

SI. No. Particular Remade 1 Old Name of Share Livin Infrastructure Limited Applicant Company

SI.No. Particular Remark 2 Old Address of Share 43/19A, EastAzad, Nagar, Delhi- Applicant Company 110051 3 New Name of Share Shinkolite Finance Limited Applicant Company 4 New Address of Share 24, First Floor, Hargovind Enclave, Applicant Company Vikas Marg, New Delhi, East Delhi- 110092

It is most humbly prayed that the further correspondence to the share applicant company be made at the new address with the new name.

We hereby enclose the following documents:-

a) Copy of Master Data of Livin Infrastructure Limited as downloaded from official website of MCA. b) Copy of List of Director of Livin Infrastructure Limited c) Copy of PAN of Livin Infrastructure Limited d) Copy of Master Data of Shinkolite Finance Limited as downloaded from official website of MCA.

The appeal has been Filed against the addition of Rs.3,47,00,000.00 u/s 68 of The Income Tax Act, 1961.

24 ITA No. 2048/Del/2021 Vinod Rice Meal Pvt. Ltd. It is to bring to your kind notice that the name of the cash creditor company has been changed w.e.f. 28.02.2017 and the details thereof are as follows:-

SI.No. Particular Remark 1 Old Name Livin Infrastmcture Limited 2 New Name Shinkolite Finance Limited 3 Address 43/19A, East Azad, Nagar, Delhi- 110051

We hereby enclose the following documents:-

a) Copy of Master Data of Livin Infrastructure Limited as downloaded from official website of MCA. b) Copy of List of Director of Livin Infrastructure Limited. c) Copy of PAN of Livin Infrastructure Limited. d) Copy of Master Data of Shinkolite Finance Limited as downloaded from official website of MCA. e) Copy of certificate of Incorporation pursuant to change of name from Livin Infrastructure Limited to Shinkolite Finance Limited.

RECEIPT OF RS.7,37,00,000.00 FROM LIVIN INFRASTRUCTURE LIMITED DURING THE AY 2012-13:-

a. We hereby affirm the finding of the Learned ACIT Circle-26(2), New Delhi that the assessee company has received a sum of Rs 7.37 crore from Shinkolite Finance Limited (previously known as Livin Infrastructure Limited), 43/19A, East Azad Nagar, New Delhi, PAN-AAACR-7209-M through banking channels during the AY 2012-13.

b. Out of the total sum Rs 7,37,00,000.00 received from Shinkolite Finance Limited (previously known as Livin Infrastructure Limited) during AY 2012-13, Rs. 3,90,00,000.00 have been received as Advance From Customer and Rs.3,47,00,000.00 have been received as Share Application Money.

25 ITA No. 2048/Del/2021 Vinod Rice Meal Pvt. Ltd. c. We hereby affirm that the assessee company has not allotted any shares against the said amount and the Share Application Money and advance from customer has been refunded to Shinkolite Finance Limited (previously known as Livin Infrastructure Limited) during the succeeding A Y 2013-14.

d. During the AY 2013-14 the whole amount of Rs.7,37,00,000.00 has been adjusted against the sale of rice made to Shinkolite Finance Limited (previously known as Livin Infrastructure Limited).

REFUND OF RS 7.37.00.000.00 TO SHINKOLITE FINANCE LIMITED (PREVIOUSLY KNOWN AS LIVIN INFRASTRUCTURE LIMIED DURING AY 2013-14:-

a. During the AY 2013-14 the assessee company made sales of rice amounting to Rs.10,45,10,006.00 to Shinkolite Finance Limited (previously known as Livin Infrastructure Limited).

b. The sum of Rs. 7,37,00,000.00 received from Shinkolite Finance Limited (previously known as Livin Infrastructure Limited), was appropriated against the sale of rice for Rs. 10,45,10,006.00 made to Shinkolite Finance Limited (previously known as Livin Infrastructure Limited) during AY 2013-14, and balance Rs. 3,08,10,006.00 was received through banking channels during the AY 2013-14. Copy of account of Shinkolite Finance Limited (previously known as Livin Infrastructure Limited) for the AY 2013-14, as appearing in the books of the assessee company, reflecting the sales made by it to Shinkolite Finance Limited (previously known as Livin Infrastructure Limited) and adjustment of Advance From Customer Rs3,90,00,000.00 and Share Application Money Rs.3,47,00,000.00 against the said sales, is being enclosed herewith.

c. The said sale of rice Rs. 10,45,10,006.00, has been duly accounted for in the books of accounts of the assessee company for the AY 2013-14 and the same has been duly reported in the

26 ITA No. 2048/Del/2021 Vinod Rice Meal Pvt. Ltd. Profit and Loss Account for the AY 2013-14 and consequently the same has been offered for taxation.

d. The assessment for the AY 2013-14 has been completed under section 143(3) of the Income Tax Act, 1961 by Learned DCIT, Circle -26(1), New Delhi vide order dated 29-01-2016, where in the sales for Rs. 10,45,10,006.00 made to Shinkolite Finance Limited (previously known as Livin Infrastructure Limited) have been accepted. Copy of assessment order for the AY 2013-14 has already been placed on the record vide submissions dated 02-06- 2016.

TAXABILITY OF SHARE APPLICATION MONEY FOR RS.3,47,00,000.00 ADJUSTED AGAINST SALE UNDER SECTION 68 OF THE INCOME TAX ACT, 1961:-

a. The Share Application Money Rs 3,47,00,000.00 forming part of Rs.7,37,00,000.00 received during AY 2012-13, has been adjusted against the sale of rice during the AY 2013-14.

b. The sales against which the said sum of Rs.3,47,00,000.00 has been adjusted, have been offered for taxation during the AY 2013-14.

c. The sum which is adjusted against the sale, cannot be taxed under section 68 of the Income Tax Act, 1961.

Your appellant places reliance on the following judgments:-

In the above case Hon’ble Delhi High Court dismissed the appeal of the revenue and confirmed the view taken by Hon’ble Delhi- ITAT which agreed with the CIT(A), who made following observation in its order: -

27 ITA No. 2048/Del/2021 Vinod Rice Meal Pvt. Ltd. “The perusal of the account of the appellant company does not leave any room for doubt that the said amount was nothing but the sale proceeds of the shares which have already been shown by the appellant in the profit & loss account for A. Y. 2003-04. When the sale proceeds of the shares have already been shown by the appellant and the same has also been offered as income, it cannot be brought to tax again in the same A.Y. 2003-04 which is under appeal."

“Having regard to all these facts of this case, I am of the view that all the advances except the advance of Rs. 1,20,000/- received by the assessee on 30.03.2009 having been already adjusted against the sales made by the assessee to the concerned Dealers and the sales so made having been duly accounted for by the assessee, the corresponding advances could not be added to the total income of the assessee under section 68 treating the same as unexplained."

28 ITA No. 2048/Del/2021 Vinod Rice Meal Pvt. Ltd. 10. The Assessing Officer added back amount of Rs.3,47,00,000/- u/s 68 of Income Tax Act in view of following reasons as per the facts narrated by the ld. CIT(A):

(i) Notice u/s 133(6) was issued to M/s. Livin Infrastructure Pvt. Ltd. which was received back un-served with the remarks of remarks of postal authorities "left". The appellant submitted a letter dated 12/03/2015 was filed in this office, giving confirmation of M/s Livin Infrastructure Pvt. Ltd. along with bank statement of SBI. But no ITR was furnished.

(ii) Sh. Vinod Kumar, Director of the company did not know the name of director of Livin Infrastructure Ltd and he was asked to produce the director of Livin Infrastructure Limited vide order sheet dated 13/03/2015 and the Director was not produced.

(iii) The statement of bank account was received from SBI reveals that money was transferred in the A/c of Livin Infrastructure Ltd from another bank account in the same bank and thereafter the amount was immediately transferred to the assessee company by RIGS.

29 ITA No. 2048/Del/2021 Vinod Rice Meal Pvt. Ltd. Livin Infrastructure Ltd. had submitted that they subscribed to share capital of M/s Vinod Rice Mills Pvt. Ltd. On perusal of both the replies, the Assessing Officer pointed out contradiction that while appellant claimed amount was received for share application money, Livin Infrastructure Ltd. claimed the amount was advanced for purchase of rice in subsequent year. However, the fact that Livin Infrastructure Ltd. had given Rs.7,37,00,000/- to the assessee during F.Y. 2011-12 was not disputed by the Assessing Officer.

30 ITA No. 2048/Del/2021 Vinod Rice Meal Pvt. Ltd. Shinkolite Finance Ltd. and is engaged in the business of finance. Further, it was reported by the AO to the ld. CIT(A) that during the A.Y 2012-13, M/s Vinod Rice Mills Pvt. Ltd. has received total sum of Rs. 7.37 crore through banking channel from M/s Livin Infrastructure Ltd. The AO submitted that share application money received during the A.Y 2012-13, M/s Vinod Rice Mills Pvt. Ltd. has not been allotted any shares but the share application money has been refunded in the next year.

Sd/- Sd/- (Astha Chandra) (Dr. B. R. R. Kumar) Judicial Member Accountant Member Dated: 04/04/2024 *Subodh Kumar, Sr. PS* Copy forwarded to: Appellant Respondent CIT CIT(Appeals) DR: ITAT ASSISTANT REGISTRAR