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Income Tax Appellate Tribunal, DELHI BENCH ‘E’, NEW DELHI
Before: Sh. Amit ShuklaDr. B. R. R. Kumar
2 Nimbus Multicommodity Brokers Pvt. Ltd. Bipin Agarwal ITA Nos. 925 to 929/Del/2021 Nimbus Project Ltd. ORDER
Per Dr. B. R. R. Kumar, Accountant Member:
1. The present appeals have been filed by the assessee and the assessee against the orders of the ld. CIT(A), Kanpur-4 dated 19.07.2021.
2. Since, the issues involved in all these appeals are identical, they were heard together and being adjudicated by a common order.
3. In following grounds have been raised by the assessee:
“1. The Commissioner of Income-tax (Appeals) - 4, Kanpur (hereinafter referred to as the CIT(A)) erred in upholding the action of the Deputy Commissioner of Income tax, Central Circle, Noida (hereinafter referred to as the Assessing Officer)in issuing notice under section 153 A of the Act. The appellants contend that on the facts and in the circumstance of the case and in law, the notice issued under section 153A is ab initiovoid inasmuch as the jurisdictional conditions for the issue of the said noti ce have not .been complied with and consequently, the assessment framed is bad in law and needs to be quashed. The appellants further, contend that on the facts and in the circumstances of the case and in law, the CIT(A) erred in confirming the action of the Assessing Officer in assuming jurisdiction and framing the assessment order under section 153 A of the Act.
3 Nimbus Multicommodity Brokers Pvt. Ltd. Bipin Agarwal ITA Nos. 925 to 929/Del/2021 Nimbus Project Ltd.
2. The Assessing Officer and the appropriate authority under section 153D erred in not properly complying with the provisions of section 153D of the Act. The appellants contend that on the facts and in the circumstances of the case and in law, the Assessing Officer and the appropriate authority under section 153D ought to have appropriately complied with the provisions of section 153D of the Act and having not so complied, the entire assessment proceedings are bad in law and thus, the impugned assessment order needs to be quashed.
3. The CIT(A) erred in upholding the action of the Assessing Officer in making an addition of Rs 34,00,000 under section 68 of the Act, being unsecured loan obtained from Kaypee Mercantile Private Limited on the ground that that the appellants have failed to prove the identity, creditworthiness and genuineness of the lender and therefore, the loan obtained is unexplained. The appellants contend that on the facts and in the circumstances of the case and in law, the impugned addition is made on patently erroneous facts and law, and hence, not tenable; thus, requires to be deleted. Further, the said loan has been repaid during the year under reference and hence, the impugned addition ought not to have been made by the Assessing Officer. The appellants further, contend that the appellants have paid interest Rs. 2,06,137 on the said loan which has been allowed by the Assessing Officer and thus, the Assessing Officer has fallen in error in making addition of the impugned loan under reference received from Kaypee Mercantile Private Limited.
4. The CIT(A) erred in upholding the action of the Assessing Officer in charging interest under sections 234A, 234B and 234C of the Act, respectively.
4 Nimbus Multicommodity Brokers Pvt. Ltd. Bipin Agarwal ITA Nos. 925 to 929/Del/2021 Nimbus Project Ltd. The appellants contend that the Assessing Officer ought not to have charged impugned interest under sections 234A, 234B and 234C inasmuch as - (a) the Assessing Officer has not given an opportunity to the appellants before charging the said interest as required by ;the principles of nature justice. (b) the charging of interest is not in accordance with law.”
A search & seizure operation u/s 132 of the Income Tax Act, 1961 was conducted on 26.08.2015 at the premises of the assessee comprising IITL Nimbus Group of cases. The assessee was engaged in real estate business in and around NCR.
Consequent to the search operation, notices u/s 153A have been issued to the assessee. In response, the assessee filed its return showing income of Rs.1,78,02,041/- for A.Y. 2010-11, Rs. 3,40,02,769/-for A.Y. 2011-12, Rs. 2,89,00,780/- for A.Y. 2012-13, Rs. 5,88,11,000/- for A.Y. 2013-14 & Rs. 1,13,46,070/-for A.Y. 2014-15. The assessments have been completed u/s 153A making the following adjustments to the income of the assessee.
Addition made by the AO:
A.Y. Head of addition Addition Reference Date of filing of to seized original return material: yes/No Nimbus Projects Ltd. 2010-11 Unsecured loan 34,00,000 No 20.09.2010 2011-12 Unsecured loan 1,50,00,000 No 23.09.2011 2012-13 Unsecured loan 20,90,00,000 No 28.09.2012
5 Nimbus Multicommodity Brokers Pvt. Ltd. Bipin Agarwal ITA Nos. 925 to 929/Del/2021 Nimbus Project Ltd. 2013-14 Share premium 25,50,00,000 No 25.09.2013 2014-15 Share premium 21,00,00,000 No 30.09.2014 Nimbus Multicommodities Brokers Pvt. Ltd . 2012-13 Share premium 2,00,00,000 No 19.09.2012 Bipin Agarwal 2012-13 Unsecured loans 2,50,00,000 No 08.09.2012
7. According to the provisions of Section 143(2), no notice shall be served on the assessee after expiry of 6 months from the end of the F.Y. in which the return is furnished the time limit for issue of notice for the A.Y. 2014-15 stands expired.
At the outset, it was argued by the ld. AR that no incriminating material belonging to the assessee was found and seized during the course of search & seizure operations u/s 132 of the IT Act on Nimbus Group. He relied on the arguments taken before the ld. CIT(A), the crux of the case laws referred in those arguments is as under:
“Delhi High Court has explained the legal position that emerges as under:
(i) "Once a search takes place under section 132, notice under section 153A(1) will have to be mandatorily issued to the person searched requiring him to file returns for six assessment years immediately preceding the previous year relevant to the assessment year in which the search takes place.
(ii) Assessments and reassessments pending on the date of the search shall abate. The total income for such assessment
6 Nimbus Multicommodity Brokers Pvt. Ltd. Bipin Agarwal ITA Nos. 925 to 929/Del/2021 Nimbus Project Ltd. years will have to be computed by the Assessing Officers as a fresh exercise.
(iii) The Assessing Officer will exercise normal assessment powers in respect of the six years previous to the relevant assessment year in which the search lakes place. The Assessing Officer has the power to assess and reassess the 'total income' of the aforementioned six years in separate assessment orders for each of the six years. In other words there will be only one assessment order in respect of each of the six assessment years ‘in which both the disclosed and the undisclosed income would be brought to tax’.
(iv) Although section 153A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the Assessing Officer which can be related to the evidence found, it does not mean that the assessment 'can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this section only on the basis of seized material.
(v) In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in section 153A is relatable to abated proceedings (i.e., those pending on the date of search) and the word 'reassess' to complete assessment proceedings.
7 Nimbus Multicommodity Brokers Pvt. Ltd. Bipin Agarwal ITA Nos. 925 to 929/Del/2021 Nimbus Project Ltd. (vi) In sofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under section 153A merges into one. Only one assessment shall be made separately for each assessment year on the basis of the findings of the search and any other material existing or brought on the record of the Assessing Officer.
(vii) Completed assessments can be interfered with by the Assessing Officer while making the assessment under section 153A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment.
Hon'ble Bombay High Court in the case of CIT vs. Continental Warehousing Corporation (Nhava Sheva) Ltd. (58 taxmann.com 78) wherein it has been held as under:
"31. We, therefore, hold that the Special Bench's understanding of the legal provision is not perverse nor does it suffer from any error of law apparent on the face of the record. The Special Bench in that regard held as under:
“48. The provision under section 153A is applicable where a search or requisition is initiated after 31.5.2003. In such a case the AO is obliged to issue notice u/s 153A in respect of 6 preceding years, preceding the year in which search etc. has been initiated . Thereafter he has to assess or reassess the total income of these six years. It is obligatory on the part of the AO to assess or reassess
8 Nimbus Multicommodity Brokers Pvt. Ltd. Bipin Agarwal ITA Nos. 925 to 929/Del/2021 Nimbus Project Ltd. total income of the six years as provided in section 153A(1)(b) and reiterated in the 1 s t proviso to this section. The second proviso states that the assessment or reassessment pending on the date of income which was vested in him earlier independent of the search and which came to an end due to initiation of the search.
The provision contained in section 132(1) empowers the officer to issue a warrant of search of the premises of a person where any one or more of conditions mentioned therein is or are satisfied, i.e. a) summons or notice has been issued to produce books of account or other documents but such books of account or documents have not been produced, b) summons or notice has been or might be issued, he will not produce the books of account or other documents mentioned therein, or c) he is in possession of any money or bullion etc. which represents wholly or partly the income or property which has not been and which would not be disclosed for the purpose of assessment, called as undisclosed income or property. We find that the provision in section 132 (1) does not use the word "incriminating document". Clauses (a) and (b) of section 132(1) employ the words "books of account or other documents". For harmonious interpretation of this provision with provision contained in section 153A, all the three conditions on satisfaction of which a warrant of search can be issued will have to be taken into account.
Having held so, an assessment or reassessment u/s 153A arises only when a search has been initiated and conducted. Therefore, such an assessment has a vital link with the initiation and conduct of the search. We have mentioned that a search can be authorized on satisfaction of one of the three conditions enumerated earlier. Therefore, while interpreting the provision contained in section 153A, all these conditions will have to be taken into account.
9 Nimbus Multicommodity Brokers Pvt. Ltd. Bipin Agarwal ITA Nos. 925 to 929/Del/2021 Nimbus Project Ltd. With this, we proceed to literally interpret to provision in 153A as it exists and read it alongside the provision contained in section 132(1).
The provision comes into operation if a search or requisition is initiated after 31.5.2003. On satisfaction of this condition, the AO is under obligation to issue notice to the person requiring him to furnish the return of income of six years immediately preceding the year of search. The word used is "shall" and, thus, there is no option but to issue such a notice. Thereafter he has to assess or reassess total income of these six years. In this respect also, the word used is "shall" and, therefore, the AO has no option but to assess or reassess the total income of these six years. The pending proceedings shall abate. This means that out of six years, if any assessment or reassessment is pending on the date of initiation of the search, it shall abate. In other words pending proceedings will not be proceeded with thereafter. The assessment has now to be made u/s 153A (1)(b) and the first proviso. It also means that only one assessment will be made under the aforesaid provisions as the two proceedings i.e. assessment or reassessment proceedings and proceedings under this provision merge into one. If assessment made under sub-section (1) is annulled in appeal or other lega l proceedings, then the abated assessment or reassessment shall revive. This means that the assessment or reassessment, which had abated, shall be made, for which extension of time has been provided under section 153B.
The question now is what is the scope of assessment or reassessment of total income u/s 153A (1) (b) and the first provision? We are of the view that for answering this question, guidance will have to be sought from section 132(1). If any books of 10 Nimbus Multicommodity Brokers Pvt. Ltd. Bipin Agarwal ITA Nos. 925 to 929/Del/2021 Nimbus Project Ltd. account or other documents relevant to the assessment had not been produced in the course of original assessment and found in the course of search in our humble opinion such books of account or other documents have to be taken into account while making assessment or reassessment of total income under the aforesaid provision. Similar position will obtain in a case where undisclosed income or undisclosed property has been found as a consequence of search. In other words, harmonious interpretation will produce the following results:-
a) In so far as pending assessments are concerned, the jurisdiction to make original assessment and assessment u/s 153A merge into one and only one assessment for each assessment year shall be made separately on the basis of the findings of the search and any other material existing or brought on the record of the AO.
(b) In respect of non-abated assessments, the assessment wilt be made on the basis of books of account or other documents not produced in the course of original assessment but found in the course of search, and undisclosed income or undisclosed property discovered in the course of search.
54. It may be mentioned here that Ld. Counsel for All Cargo Global Logistics Ltd. was questioned about the scope of pending assessments as it was his contention that all six assessments are to be made, if necessary, on the basis of undisclosed income discovered in the course of search. He was specifically questioned about the jurisdiction of the AO to make original assessment along with assessment u/s 153A, merging into one. However he took an evasive view submitting that this question need not be decided in his case although the question of jurisdiction u/s 153A was vehemently
11 Nimbus Multicommodity Brokers Pvt. Ltd. Bipin Agarwal ITA Nos. 925 to 929/Del/2021 Nimbus Project Ltd. pressed on account of which ground No. 1 in the appeal for assessment year 2004-05 was admitted as additional around. He also wanted the additional ground to be retained in ca se of any future contingency."
The ld. AR submitted that during the year under consideration, the Assessing Officer had not accepted the income offered by assessee and made the addition which was not based on any incriminating documents found during the course of search action. This fact can be verified form the assessment order, wherein the Assessing Officer had not mentioned anything about the incriminating documents seized during the course of search action. The addition has been made merely on the basis of so called investigation report received from Kolkata. In spite of extensive search proceedings carried out at the premises of the appellant, no incriminating e vidence whatsoever was found.
It was further argued that now a well decided judicial principal that the assessments made under section 153A without any incriminating material being found during the search action are not in accordance with law and the consequential result is that the return/original assessments which have acquired finality are to be reiterated. Therefore, it is submitted that the additions made by the AO otherwise than on the basis of incriminating evidences found during the course of search are bad in law and deserve to be deleted.
12 Nimbus Multicommodity Brokers Pvt. Ltd. Bipin Agarwal ITA Nos. 925 to 929/Del/2021 Nimbus Project Ltd. 11. In the light of the above arguments, we have perused the order of the ld. CIT(A).
8. Discussion & decision on legal Grounds of these cases by the Ld. CIT(A):
8.1 Ground nos. 1 & 2 for all the assessment years pertain to legal challenge to the notice u/s 153A of the Act. It is also submitted by the ld. A.R. of the appellant that order u/s 153A of the Act is invalid in absence of incriminating material found as a result of search for these relevant assessment years in appeals. Appellant also placed reliance on the following case laws: i. CIT v. Kabul Chawla (2016] 380 ITR 573/(2015) 234 Taxman 300/61 taxmann.com 412 (Delhi), ii. All Cargo Global Logistics Limited Vs. DCIT [2012] 18 ITR 106, iii. ACIT, Central Circle-16, New Delhi vs. Vinita Chaurasia, dated 05.10.2018, iv. ACIT, Central Circle-4, New Delhi vs. M/s. Moolchand Steels Pvt. Ltd., ITA No. 2544/DEL/2015 dated 10.10.2018 etc. 8.2 Undersigned has carefully considered the submission and the case laws cited by the appellant. However, considering the express provisions of section 153A of the Act, undersigned would like to differ with the submission of the appellant, because section 153A of the Act clearly provides the power to AO to assess/reassess the cases of person searched u/s 132(1)
13 Nimbus Multicommodity Brokers Pvt. Ltd. Bipin Agarwal ITA Nos. 925 to 929/Del/2021 Nimbus Project Ltd. of the Act for immediately six preceding years. Section 153A of the Act does not provide existence of incriminating material as essential requirement. In the opinion of the undersigned, the action u/s 132/132A of the Act would automatically trigger the provisions of section 153A of the Act for computation of total income of the appellant. This provision does not restrict the Assessing Officer to take action in those cases where assessment has already been completed. Since, the AO has rightly exercised his powers to assess/reassess the case u/s 153A of the Act. The undersigned finds no force in the submission of the appellant and therefore, this ground is dismissed.
8.3 The contention of the id. A.R. is also not acceptable after placing reliance on following judicial pronouncements: In the case of E.N. Gopakumar Vs. CIT (2016) 75 taxmann.com 215 (Kerala)], Hon'ble Kerala High Court held that assessment proceedings generated by issuance of a notice under section 153A(1)(a) can be concluded against interest of assessee including making additions even without any incriminating material being available against assessee in search under section 132 on basis of which notice was issued under section 153A(1)(a).
The above order has been passed after considering cases of: i. CIT vs. Kabul Chawla [2016] 380 ITR 573/(2015) 234 Taxman 300/61 taxmann.com 412 (Delhi),
14 Nimbus Multicommodity Brokers Pvt. Ltd. Bipin Agarwal ITA Nos. 925 to 929/Del/2021 Nimbus Project Ltd. ii. CIT vs. Continental Warehousing Corpn. (Nhava Sheva) Ltd. [2015] 374 ITR 645/232 Taxman 270/58 taxmann.com 78 (Bom.), iii. Principal CIT vs. Kurele Paper Mills (P.) Ltd. [2016] 380 ITR 571 (Delhi), iv. CIT vs. Lancy Constructions [2016] 383 ITR 168/237 Taxman 728/66 taxmann.com 264 (Kar.) v. CIT vs. ST Francies Clay Decor Tiles [2016] 240 Taxman 168/70 taxmann.com 234 (Ker.) and vi. CIT vs. PromyKuriakose [2016] 386 ITR 597 (Ker.)
Further, in the case of CIT Vs. Raj Kumar Arora [2014] 52 taxmann.com 172 (Allahabad/2014) 367 ITR 517 (Allahabad)- Hon'ble Allahabad High Court held that Assessing Officer has power to reassess returns of assessee not only for undisclosed income found during search operation but also with regard to material available at time of original assessment.
Similarly, in the case of CIT Vs. Kesarwani Zarda Bhandar Sahson Alld. of 2014 (Allahabad), Hon'ble Allahabad High Court held that Assessing Officer has power to reassess returns of assessee not only for undisclosed income found during search operation but also with regard to m aterial available at time of original assessment.
Also, in the case of CIT Vs. St. Francis Clay Decor Tiles (385 ITR 624)-Hon'ble Kerala High Court held that notice issued under section 153A-return must be filed even if no incriminating documents discovered during search.
In the case of CIT Vs. Anil Kumar Bhatia (24 taxmann.com 98, 211 Taxman 453, 352 ITR 493)- Hon'ble Delhi High Court held that jurisdiction of AO under 153A is to assess total income for the year and not restricted to seized material Post search reassessment in respect of all 6 years can be made even if original returns are already processed u/s 143(1)(a) - Assessing Officer has power u/s 153A to make assessment for all six years and compute total income of assessee, including undisclosed income, notwithstanding that returns for these years have already been processed u/s 143(1)(a). Even if assessment order had already been passed in respect of all or any of those six assessment years, either under section 143(1)(a) or section 143(3) prior to initiation of search/requisition, still Assessing Officer is empowered to reopen those proceedings under section 153A without any fetters and reassess total income taking note of undisclosed income, if any, unearthed during search.
In the case of Filatex India Ltd Vs. CIT (49 taxmann.com 465)- Hon'ble Delhi High Court held that during assessment under section 153A, additions need not be restricted or limited to incriminating material, found during course of search.
8.4 In view of the detailed discussion mentioned here-in-above and considering the judicial pronouncements cited here -in- above, legal grounds of appeal of the appellant are hereby dismissed for all assessment years.
16 Nimbus Multicommodity Brokers Pvt. Ltd. Bipin Agarwal ITA Nos. 925 to 929/Del/2021 Nimbus Project Ltd. 12. At the end of the arguments, the ld. AR submitted that owing to the different ratio laid down by the different Hon’ble High Courts, the legal issue would not be pressed if the matter is decided on merits of the case. Since, the Bench decided on merits of the case, the jurisdictional/legal issue is not required to be adjudicated.
Discussion & decision on merits of these cases:
A.Y. 2010-11, A.Y. 2011-12 and A.Y. 2012-13 pertain to addition of Rs.34,00,000/-, Rs.1,50,00,000 and Rs.20,90,00,000 respectively on account of unsecured loans received from M/s. Kaypee Mercantile Pvt. Ltd. and M/s. Cindy Goods & Supply Pvt. Ltd. A.Y. Amount Nature Received from 2010-11 34,00,000 Unsecured Loan Kaypee Mercantile Pvt. Ltd. 2011-12 1,50,00,000 Unsecured Loan Cindy Goods & Supply Pvt. Ltd. 2012-13 20,90,00,000 Unsecured Loan Cindy Goods & Supply Pvt. Ltd. for A.Y. 2010-11 Kaypee Mercantile Pvt. Ltd.:
With regard to Kaypee Mercantile Pvt. Ltd., the revenue alleged that before remitting the funds to the assessee, the lender received funds of similar amounts. The lender had no capacity to lend the money since no sufficient balance is being
17 Nimbus Multicommodity Brokers Pvt. Ltd. Bipin Agarwal ITA Nos. 925 to 929/Del/2021 Nimbus Project Ltd. maintained by the lender in its bank statement. Further, the assessee and lender has been asked to explain the source of funds received by the lender which is thereafter given to the assessee, no details were furnished. The revenue further held that these companies are paper companies of known accommodation entry operations. The revenue also relied on the letter of the Deputy Director (Inv.), Unit-II, Kolkata in response to the commission issued u/s 131(1)(d) dated 14.10.2015. Hence, the identity, creditworthiness and the genuineness of the source of funds could not be explained.
Aggrieved the assessee filed appeal before the ld. CIT(A).
With regard to the Kaypee Mercantile Pvt. Ltd., the ld. CIT(A) duly considered the report of the Inspector of the Kolkata Investigation Unit which is as under:
As directed by the DDIT(Inv.), Unit-2(2), we visited the place at the given address. No office of such entity has been found there. No signboard in the name of such company was noticed anywhere in the building. We enquired with the local inhabitants but nobody could give any information about the said company. Thus, the company has not been found to exist at the given address.
The report also indicates that summons could not be served.
The ld. CIT(A) held that the total income in the ITR for the relevant assessment year of the lender company was Rs.45,540/- and since the credits preceded the debits
18 Nimbus Multicommodity Brokers Pvt. Ltd. Bipin Agarwal ITA Nos. 925 to 929/Del/2021 Nimbus Project Ltd. in the bank account on the same dates, the creditworthiness of the lender cannot be considered as genuine. The ld. CIT(A) has relied on the judgments of various Courts which are as under:
CIT Vs Maithan International 375 ITR 123 (Cal.) B.R. Petrochem (P.) Ltd. Vs. ITO 81 taxmann.com 424 (Madras) Rick Lunsford Trade & Investment Ltd Vs. CIT 2016-TIOL- 207-SC-IT Navodava Castle Pvt. Ltd. Vs. CIT 230 Taxman 268 (SC) PCIT Vs. Vikram Singh (2017) 85 taxmann.com 104 (Del.) CIT Vs. N.R. Portfolio Pvt. Ltd. in 1019/2100 (Del.) Pragati Financial Management Pvt. Ltd. Vs. CIT in C.A. 887 & 998 of 2016 & others CIT vs. Nova Promoters & Finlese (P) Ltd. 342 ITR 169 (Del.) CIT vs. D.K. Garg 84 taxmann.com 257 (Del.) and many other judgments which have been duly perused. In nutshell, the ld. CIT(A) has confirmed the addition solely based on A. The returned income of the lender company was meager B. There were credits in the bank account before issue of the loan.
19 Nimbus Multicommodity Brokers Pvt. Ltd. Bipin Agarwal ITA Nos. 925 to 929/Del/2021 Nimbus Project Ltd. 19. Before us, during the arguments, the ld. AR submitted that the revenue authorities failed to appreciate the details provided during the proceedings to establish the identity, genuineness and creditworthiness of the transaction undertaken by the assessee with the above mentioned party:
PAN and address of the party Copy of Ledger Confirmation Copy of Bank Statement of appellant Copy of ITRs, Balance Sheet and Profit and loss statement of the lender Copy of Inter Corporate Deposit Agreement between appellant and M/s KMPL Reply to notice issued u/s 133(6) of the Act filed by M/s KMPL Copy of Bank statement of the lender disclosing source of loan Confirmation of accounts of appellant in books of lender etc.
Thus, it was argued that it is clearly evident that the assessee has discharged its onus of proving the requirements of Section 68 of the I.T. Act i.e. identity of party, genuineness of the transaction and creditworthiness of the party by providing extensive evidences. It was further argued that the observation of the revenue that the lender M/s KMPL was bei ng operated by a certain person namely, Mr. Deepak Patawari who was an entry operator is wrong on facts. The AO has not brought anything on record to explain as how such a conclusion was drawn. It was 20 Nimbus Multicommodity Brokers Pvt. Ltd. Bipin Agarwal ITA Nos. 925 to 929/Del/2021 Nimbus Project Ltd. argued that Mr. Deepak Patawari was neither a Director nor a Shareholder in the company. The revenue authorities merely stated that it became evident from the “database” and no reference has been made known to the assessee nor confronted to the assessee whereas the revenue itself accepted that the lender is an established joint stock company listed at Bombay Stock Exchange.
The ld. AR further relied on the following case laws: CIT Vs. Orissa Corporation P. Ltd. 159 ITR 78 (SC) PCIT-4 vs. Hi-Tech Residency Pvt. Ltd. (96 taxmann.com 403) (SC) CIT-1 vs. Apex Therm Packaging Pvt. Ltd. (42 taxmann.com 473) (Guj.) Anand Prakash Agarwal vd. ACIT 6 DTR 191 (All.) CIT vs. Jauharimal Goel 147 Taxman 448 (All.) S. Hastimal vs. CIT 49 1TR 273 (Mad.) Tolaram Daga vs. CIT 59 ITR 632 (Assam) CIT vs. Daulat Ram Rawatmull 87 ITR 349 (SC) Sarogi Credit Corpn. vs. CIT 103 ITR 344 (Pat.) ACIT(Inv.) vs. Shree Ram Hard Coke & Allied Industries 1 MTC 780 ITO vs. M.S. Advance (P.) Ltd. 188 Taxation 181 (Trib.) Vinod Kumar Bhandari vs. ACIT 174 Taxation 49 (Trib.) Addl. CIT vs. Bahri Bros. (P.) Ltd. 154 ITR 244/22 CIT vs. Gangeshwari Metal Pvt. Ltd. (ITA No. 597/ 2012) (Del.) Nemichand Kothari vs. CIT 264 ITR 254 (Gau.)
21 Nimbus Multicommodity Brokers Pvt. Ltd. Bipin Agarwal ITA Nos. 925 to 929/Del/2021 Nimbus Project Ltd. 22. Heard the arguments of both the parties and perused the material available on record.
From the record, we find that the sole reason for confirming the addition was low income tax return in the year of issue whereas it was contended that it is not the case for the subsequent years. During the assessment proceedings, the lender has furnished that all the details in response to the notice issued by the Assessing Officer u/s 133(6). The reply dated 21.12.2017 filed before the AO has been perused. Subsequent to the receipt of the reply from the lender, the AO did not conduct any further enquiry. The report of the DDIT(Inv.), Kolkata relied upon by the ld. CIT(A) and the AO was much before 21.12.2017 i.e. with response to the letter issued by the DDIT(Inv.), Noida on 14.10.2015. It is apparent from the facts on record, while as per the report of 2015, the notice u/s 131 could not be served whereas during the assessment proceedings in 2017, the entire details have been submitted by the assessee. The response to the notice issued u/s 133(6) was full and comprehensive. The amounts have been received by the assessee on 27.07.2009 of Rs.16,00,000/- and Rs.18,00,000/- on 31.07.2009 as ICD bearing interest of 9%. The same has been repaid on 07.01.2014 along with the interest agreed upon. The date of search in the group was conducted on 26.08.2015. Having examined the receipt of loan independently disregarding the date of search, we find that the assessee discharge the onus, proved the receipt and repayment of the loan received along with the interest and the same is also 22 Nimbus Multicommodity Brokers Pvt. Ltd. Bipin Agarwal ITA Nos. 925 to 929/Del/2021 Nimbus Project Ltd. been brought before the Assessing Officer during the assessment proceedings. Hence, the reasons given by the revenue authorities for treating the loan amount u/s 68 is factually and legally not valid. Hence, we hereby direct the addition made be obliterated.
In the result, the appeal in ITA 925/Del/2021 for A.Y. 2010-11 is allowed.
ITA No. 926/Del/2021 for A.Y. 2011-12 for A.Y. 2012-13 Cindy Goods & Supply Pvt. Ltd.:
With regard to unsecured loan received from Cindy Goods & Supply Pvt. Ltd., the assessee was asked by the AO vide letter dated 22.09.2017 to furnish the confirmed copy of account, bank statement and copies of ITRs, balance sheet and profit & loss account. In response to the letter, the assessee submitted copy of ITR, Bank statement, confirmation f rom the lender. The assessee also submitted a copy of loan facilitation agreement which is signed by independent witnesses. It was submitted that the lender company was established in 1995 and registered with ROC Kolkata, the Directors being Sh. Mandan Gopal Sharma and Sh. Virendra Tripathy. The substantial shareholder of this company is held by two entities namely, M/s Bonanza Vanijya Pvt. Ltd. and M/s Brijdham Merchandise Pvt. Ltd. The AO held that the enquiry report from DDIT(Inv.), Unit- 2(2), Kolkata reveals that the said companies have been used
23 Nimbus Multicommodity Brokers Pvt. Ltd. Bipin Agarwal ITA Nos. 925 to 929/Del/2021 Nimbus Project Ltd. by different accommodation entry operators to facilitate accommodation entries in different forms to various beneficiary groups. The AO held that these companies are paper companies of known accommodation entry operators.
The AO further held that during the post search proceedings, the statement of Shri Anshul Mittal, one of the directors of Cindy Goods & Services Pvt. Ltd., Pabla Leasing & Finance company and Giri Financial Services Pvt. Ltd. was recorded on 20.10.2015 and he admitted that he is dummy directors of several companies from which the loans/ share applications have been received by the IITL Nimbus Group of companies. Further, other directors of the group company Shri Vipul Kumar, brother of Shri Anshul Mittal during statement u/s 131 of the Act on 20/10/2015 admitted the fact that he is dummy director in the companies controlled and managed by Shri Bipin Aggrwal. The AO held that,
1. On tracing the trail backward to locate the original source of funding in Nimbus group .from such lender companies, it was observed that such funds have been routed through many other paper companies/firms/concerns/individuals which were also raised loans to other group entities as depicted in their bank statements. It has been observed that all such entities involved in layering of funds are located at various addresses in Delhi and Kolkata, which are known for being used for providing various accommodation entries, as revealed during various searches/surveys conducted by Investigation Wing.
24 Nimbus Multicommodity Brokers Pvt. Ltd. Bipin Agarwal ITA Nos. 925 to 929/Del/2021 Nimbus Project Ltd.
2. Nimbus group is actually routing its own unaccounted money under the umbrella of Unsecured Loans and it is nothing but its own unaccounted cash which was generated out of booking of flats with customers in their projects and infused back in the form of unsecured loans.
Hence, it is clear that the assessee group had received funds from these entities is nothing but just a pass through entity whose main work is to provide accommodation entries to Nimbus group. Therefore, on tracing out the source to source of funds, it has been found that the funds have come from another entity. In the written submission dated 17.11.2017, the assessee submitted that ITR and confirmation and bank statement has been filed and the transactions are bonafide.
Further, during the assessment proceedings the, assessee was given an opportunity to furnish its comments on the enquiry report of the investigation unit, Kolkata which was filed on 22.12.2017. Further vide letter, dated 19.12.2017, the assessee was asked to produce the directors/ principal officer of the company for examination on oath. During the statement, it was again reiterated that the details have already been filed and the transactions within the ITTL- Nimbus group for companies are bona-fide and genuine.
Since, the company does not have any physical set up at the given address, the address given is only a postal address and the same address is used as postal address for multiple companies indulging in to the same activity of providing
25 Nimbus Multicommodity Brokers Pvt. Ltd. Bipin Agarwal ITA Nos. 925 to 929/Del/2021 Nimbus Project Ltd. accommodation entries. The directors of the companies are non - existent or even if they exist, they are illiterate or semi illiterate individuals who do not have competence or credibility to operate any investment company. The company is receiving, huge amount as loan and giving the same to other concerns without any apparent motive of conducting any actual business and the directors of the company are not even aware of such huge transactions made by the company for considering the doctrine of business purposes.
In the view of above, it was held that in case of credits in the name of third parties, it is the duty of the assessee to prove identity or credits, capacity of creditor to advance money and genuineness of transaction. In the instant case capacity of creditor could not be proved. Mere filing of confirmation or transaction through banking channel is not enough to prove the genuineness of cash credit and it can be assessed. Creditworthiness must also be proved and the transactions should also invite confidence of normal business principle of profit.
The AO held that with regard to provisions of Section 68, the onus is upon the assessee to prove the three ingredients, i.e., identity, creditworthiness of the person from whom the monies were taken and the genuineness of the transaction and held that assessee has routed its money from one paper based company into another with colouring device of unsecured loan. Therefore, an addition of Rs.1,50,00,000/- is made u/s 68 of the Act.
Aggrieved the assessee filed appeal before the ld. CIT(A).
With regard to the Cindy Goods & Supply Pvt. Ltd., the ld. CIT(A) while confirming the order of the Assessing Officer has duly considered the report of the Inspector of the Kolkata Investigation Unit which is as under:
As directed by the DDIT(Inv.), Unit-2(2), we visited the place at the given address of Cindy Goods & Supply Pvt. Ltd. at Room No. 418A, 4t h Floor, Marshall House, N.S. Road, Kolkata-700001, it has been found that a notice is being hanged indicating the shifting of the said three companies to the new address at 277, B.B. Ganguly Street, 3 r d Floor, Room No. 306, Kolkata-700012. On visiting the new address a signboard at the entrance of the single room office reflecting the names of all the 5 (five) companies has been noticed. It was found that few computers were placed in that room indicating that some accounts were being maintained there. However, no business activity was visible as to be carried out at that place. It was, however, reported by the employee of that office Mr. Vivek Sharma that all the said 5 (five) companies are having their registered office at that address. Thereafter, summonses in the case of all the said companies were served at that address.
The report also indicates that summons was served on 19.10.2015.
The ld. CIT(A) held that the total income in the ITR for the relevant assessment year of the lender company was too low for the A.Y. 2011-12 and Rs. 140,89,252/- for the A.Y. 2012-13 and since the credits preceded the debits in the bank account
27 Nimbus Multicommodity Brokers Pvt. Ltd. Bipin Agarwal ITA Nos. 925 to 929/Del/2021 Nimbus Project Ltd. on the same dates, the creditworthiness of the lender cannot be considered as genuine. The ld. CIT(A) has relied on the judgments of various Courts which are as under: B.R. Petrochem (P.) Ltd. Vs. ITO 81 taxmann.com 424 (Madras) Rick Lunsford Trade & Investment Ltd Vs. CIT 2016-TIOL- 207-SC-IT Navodava Castle Pvt. Ltd. Vs. CIT 230 Taxman 268 (SC) PCIT Vs. Vikram Singh (2017) 85 taxmann.com 104 (Del.) CIT Vs. N.R. Portfolio Pvt. Ltd. in ITA No. 1018, 1019/2100 (Del.) Pragati Financial Management Pvt. Ltd. Vs. CIT in C.A. 887 & 998 of 2016 & others CIT vs. Nova Promoters & Finlese (P) Ltd. 342 ITR 169 (Del.) CIT vs. D.K. Garg 84 taxmann.com 257 (Del.) and many other judgments which have been duly perused.
Before us, during the arguments, the ld. AR submitted that the revenue authorities failed to appreciate the details provided during the proceedings to establish the identity, genuineness and creditworthiness of the transaction undertaken by the assessee with the above mentioned party:
PAN and address of the party Copy of Ledger Confirmation Copy of Bank Statement of appellant Copy of ITRs, Balance Sheet and Profit and loss statement of the lender
28 Nimbus Multicommodity Brokers Pvt. Ltd. Bipin Agarwal ITA Nos. 925 to 929/Del/2021 Nimbus Project Ltd. Reply to notice issued u/s 133(6) of the Act filed by M/s CG&SPL Copy of Bank statement of the lender disclosing source of loan Confirmation of accounts of appellant in books of lender etc.
Further, it was argued that the lender company is in existence from 1995 and the returned income for the A.Y. 2012-13 was Rs.1,40,89,252/- and it cannot be assumed that any paper company giving accommodation entry would pay tax on the amount of Rs.1,40,89,252/-, the fact itself indicates that it cannot be taken or presumed that the lender company to be a non-existing, bogus company.
Thus, it was argued that it is clearly evident that the assessee has discharged its onus of proving the tenets of Section 68 of the IT act i.e. identity of party, genuineness of the transaction and creditworthiness of the party by providing extensive evidences. It was further argued that the observation of the revenue that the lender M/s CG&SPL was being operated by fictitious person is not on correct facts on record.
Further, the ld. AR brought to our notice that the identity, genuineness and creditworthiness of the lender namely, CG&SPL has been widely examined in detail during the proceedings before the Tribunal in the case of Nimbus India Ltd. for the A.Y. 2013-14 and relied on the order of the Co-ordinate Bench of ITAT.
29 Nimbus Multicommodity Brokers Pvt. Ltd. Bipin Agarwal ITA Nos. 925 to 929/Del/2021 Nimbus Project Ltd. 39. On the other hand, the ld. DR strongly supported the orders of the revenue authorities.
We have gone through the order of the Co-ordinate Bench of ITAT in & 930/Del/2019 in the case of Nimbus India Ltd. Vs. DCIT for the A.Y. 2013-14 and A.Y. 2014-15.
The relevant points with regard to examination of genuineness of Cindy Goods & Supply Pvt. Ltd. by the Tribunal in the above said order is as under:
Para 5 - The AO noted that the company was M/s Cindy Goods & Supply Pvt. Ltd. is concerned, he noted that the said company was incorporated on 21st March, 1995 with its registered office at Kolkata. This company is controlled and managed by the directors Mr. Madan Gopal Sharma and Mr. Virendra Tripathy who holds substantial shares in M/s Bonanza Vanijya Pvt. Ltd. and M/s Brijdham Merchandise Pvt. Ltd., having 49.96% shares each. These directors are also the directors in various other companies based in Kolkata. He noted that in the impugned assessment year, this company has declared income of Rs.11,146/- from business and profession. Its authorized share capital is Rs.4.51 crores and reserves and surplus is Rs.4,50,40,000/-. It has received an amount of Rs.34,37,25,000/- as share premium. From the analysis of the bank statements, he noted that an amount of Rs.5 crore was received from M/s World Resorts Limited on 07th September, 2012 & 930/Del/2019 and Rs.3.50
30 Nimbus Multicommodity Brokers Pvt. Ltd. Bipin Agarwal ITA Nos. 925 to 929/Del/2021 Nimbus Project Ltd. crores on 21st August, 2012 from various unknown entities and finally transferred to assessee company on 03.09.2012. Para 8 - To verify the source of the investment of the above companies, the AO obtained information u/s 133(6) of the Act from the respective banks and noted ITA Nos.929 & 930/Del/2019 that there are back to back transactions of same amount i.e., credit and debit of the same amount on the same dates/following dates with several other deposits and withdrawals. The AO, therefore, confronted the assessee and asked him to explain the identity and credit worthiness of the investor companies and genuineness of the transactions. Rejecting the various explanations given by the assessee and relying on the decision of the Hon'ble Supreme Court in the case of B. Kishore Kumar vs. DCIT, the AO made addition of Rs.29,50,00,000/- to the total income of the assessee being the amount of share capital and share premium of Rs.15 crore received from M/s Pabla Leasing & Finance Pvt. Ltd., and Rs.14,50,00,000/- being the share capital and share premium received from M/s Cindy Goods & Supply Pvt. Ltd. Para 13 - So far as the addition of Rs.15 crores in A.Y. 2013-14 and Rs.2.51 crore in respect of M/s Pabla Leasing & Finance Pvt. Ltd., Rs.14.50 crore from M/s Cindy Goods & Supply Pvt. Ltd. in A.Y. 2013-14 and Rs.18 crore from M/s Giri Financial Services in A.Y. 2014-15 is concerned, the ld. Counsel for the assessee drew the attention of the 31 Nimbus Multicommodity Brokers Pvt. Ltd. Bipin Agarwal ITA Nos. 925 to 929/Del/2021 Nimbus Project Ltd. Bench to the various details of the parties from whom the assessee has received non-cumulative redeemable share capital during the year. Referring to various pages of the paper book, the ld. Counsel for the assessee drew the attention of the Bench to the copies of the income-tax returns, balance sheets, copy of annual reports of the companies, bank statements, copies of the assessment orders of those companies, etc., and submitted that the assessee has discharged the onus cast on it by substantiating the identity and credit worthiness of the creditors and genuineness of the transactions. Para 15 - So far as M/s Cindy Goods & Supply Pvt. Ltd., is concerned, the ld. Counsel for the assessee drew the attention of the Bench to the paper book page 182 which is the copy of notice dated 21.11.2017 issued by the AO u/s 133(6) to M/s Cindy Goods & Supply Pvt. Ltd. Referring to page 183 to 243, the ld. Counsel for the assessee drew the attention of the Bench to the submission of the said company in response to notice u/s 133(6). Referring to page 244 to 246 of the paper book, he drew the attention of the Bench to the copy of the statement of Mr. Vipul Kumar, Director of M/s Cindy Goods & Supply Pvt. Ltd., whose statement was recorded by the AO u/s 131 of the IT Act wherein he has admitted to have invested in the assessee company. Referring to page 165 to 167 of the paper book, he drew the attention of the Bench to the order passed u/s 143(3) in the case of M/s Cindy Goods & Supply Pvt. Ltd., wherein the AO has considered the 32 Nimbus Multicommodity Brokers Pvt. Ltd. Bipin Agarwal ITA Nos. 925 to 929/Del/2021 Nimbus Project Ltd. investment made by the said company at Rs.38,20,21,000/- as on 01.04.2010 and 36,92,01,000/- as on 31.03.2011 for computing the disallowance u/s 14A of the Act r.w. Rule 8D of the IT Rules. Referring to various pages of the paper book, he submitted that this company has shown continuous profit which is Rs.1,40,89,252/- for A.Y. 2012-13, Rs.75,37,804/- for A.Y. 2013-14 and Rs.11,81,118/- for A.Y. 2015-16. He submitted that while the AO has accepted the amount received from Intellectual ITA Nos.929 & 930/Del/2019 Securities Pvt. Ltd. as genuine which is also a Kolkata based company and from whom the shares were received at a premium of Rs.90 per share, however, he disbelieved the capacity of the said investor companies for the impugned assessment year and issue of shares at a premium. He submitted that for A.Y. 2015-16, the AO, in the order passed u/s 143(3), has accepted the amount received from M/s Pabla Leasing & Finance Pvt. Ltd., and no addition has been made. Similarly, in the case of M/s Cindy Goods & Supply Pvt. Ltd., the AO has accepted an amount of Rs.3,50,00,000/- in the order u/s 143(3) and no addition has been made. Therefore, the addition made by the AO and sustained by the CIT(A) is not justified. Para 26 - We have heard the rival arguments made by both the sides, perused the orders of the AO, CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the AO, in the instant case, made addition of 33 Nimbus Multicommodity Brokers Pvt. Ltd. Bipin Agarwal ITA Nos. 925 to 929/Del/2021 Nimbus Project Ltd. Rs.29,50,00,000/- to the total income of the assessee being the amount of Rs.14,50,00,000/- from M/s Cindy Goods & Supply ITA Nos.929 & 930/Del/2019 Pvt. Ltd., and Rs.15 crores from M/s Pabla Leasing & Finance Pvt. Ltd., on account of non-genuine share premium/share capital. Similarly for A.Y. 2014-15, the AO made an addition of Rs.20,51,00,000/- being an amount of Rs.2,51,00,000/- received from M/s Pabla Leasing & Finance Pvt. Ltd. and Rs.18 crores from Giri Financial Services Pvt. Ltd. treating the same as non-genuine and by invoking the provisions of section 68 of the IT Act. We find the ld.CIT(A) upheld the addition so made by the AO. It is the submission of the ld. Counsel for the assessee that the assessee has filed the requisite details such as copy of the bank account, copy of the Income-tax returns, copy of confirmations, details of allotment of shares, etc. before the AO to substantiate the identity and credit worthiness of the investor companies and the genuineness of the transaction. It is also his submission that the directors of the investor companies were produced before the AO whose statements were recorded u/s 131 in which they have confirmed to have invested in the shares of the assessee company. It is also his submission that in the preceding and subsequent assessment years, such share capital at high premium has been accepted by the AO in the order passed u/s 153A/143(3) and no adverse view has been taken. Further, it is also his submission that such non-cumulative non- participating optionally convertible redeemable preference
34 Nimbus Multicommodity Brokers Pvt. Ltd. Bipin Agarwal ITA Nos. 925 to 929/Del/2021 Nimbus Project Ltd. shares were redeemed to the investor companies in the F.Y. 2014-15 much before the search and, therefore, under the facts and circumstances of the case no addition is called for. Para 28 - A perusal of the submission filed by the assessee which has been reproduced at para 19 of this order shows that the AO, in the order passed u/s 143(3) has accepted an amount of Rs.3,50,00,000/- received by the assessee from M/s Cindy Goods & Supply Pvt. Ltd. towards share capital and share premium and no addition has been made. ….Therefore, the allegation of the AO that these companies are paper companies without doing any business and these companies are existing only for being used by different accommodation entry operators to facilitate accommodation entries in different forms to various beneficiary groups is factually incorrect in view of the orders passed in case of these investor companies in preceding and subsequent years.
We find that the Co-ordinate Bench of the ITAT has duly considered the identity of the company and found it to have been incorporated in the year 1995, the amounts have been accepted as genuine during the assessments completed u/s 143(3), the returned income range from Rs.1.4 crores, Rs.75 lacs, Rs.11 lacs for the A.Y. 2012-13, A.Y. 2013-14 and A.Y. 2015-16 respectively proving that the lender company cannot be considered as a accommodation entry provider/paper company. The company has duly responded to notices issued
35 Nimbus Multicommodity Brokers Pvt. Ltd. Bipin Agarwal ITA Nos. 925 to 929/Del/2021 Nimbus Project Ltd. u/s 133(6) to the revenue authorities. Further, the Director of the company namely, Mr. Vipul Kumar has confirmed the investments made in the assessee company during the statement recorded u/s 131 of the IT Act by the AO. Hence, keeping in view, the facts narrated above, we find that the observation of the revenue authorities holding that the identity, genuineness and creditworthiness of the lender company could not be proved is contrary to the facts on record. Hence, the addition made by the revenue authorities is liable to be obliterated.
In the result, the appeal of the assessee in for A.Y. 2011-12 and ITA No. 927/Del/2021 for A.Y. 2012-13 is allowed.
ITA No. 928/Del/2021 for A.Y. 2013-14 for A.Y. 2014-15
During the A.Y. 2013-14 and A.Y. 2014-15, the assessee company issued 8% non-convertible, non-participating compulsory remediable preference shares to the companies whose details are furnished as under:
For the A.Y. 2013-14 Sl. Name of the No. of shares Share Cap Share Total No. investor Premium 1. Giri Financial 3700000 37000000 148000000 185000000 Services Pvt. Ltd.
2. Pabla Leasing 2000000 20000000 80000000 100000000 Finance Pvt. Ltd. Total 255000000 For the A.Y. 2014-15 Sl. Name of the No. of shares Share Cap Share Total No. investor Premium 1. Giri Financial 900000 9000000 36000000 45000000 Services Pvt. Ltd.
Pabla Leasing 3300000 33000000 132000000 165000000 Finance Pvt. Ltd. Total 42000000 168000000 210000000 45. The AO held that Giri Financial Services Pvt. Ltd. is a private limited company in corporate on 19.01.1995 and registered at ROC Kolkata. The earlier Directors were Sh. Ramesh Kumar and Sh. Ranjan Kumar whereas the present Directors are Sh. Vipin Kumar, Sh. Madan Gopal Sharma, Sh. Anshul Mittal and Sh. Virendera Tripathi. The AO held that the investor company was found to have received monies in the form of share capital and share premium received mainly from M/s Strong Vinimay Pvt. Ltd. and M/s Murlidhar Dealcom Pvt. Ltd.
With regard to Pabla Leasing Finance Pvt. Ltd., the AO held that the investor company received monies mainly from M/s Fling Management Consultant Pvt. Ltd. and M/s Orient Commodeal Pvt. Ltd. which are having same address and common Directors. The AO further held that the statement of Sh. Amit Bagri has been recorded by the Investigation Unit Kolkata wherein Sh. Amit Bagri admitted that these companies have been used for providing entries to the various beneficiary companies on the commission basis. The AO held that during
37 Nimbus Multicommodity Brokers Pvt. Ltd. Bipin Agarwal ITA Nos. 925 to 929/Del/2021 Nimbus Project Ltd. the post search proceedings, the statement of Sh. Anshul Mittal was recorded on 20.10.2015 wherein Sh. Anshul Mittal admitted that he is a dummy Director of several company from which the loans and share capital has been received by Nimbus Group of company. It was also held that Sh. Vipin Kumar brother of Sh. Anshul Mittal has also admitted in the statement recorded u/s 131 that he was a dummy Director in the companies controlled and managed by Sh. Vipin Agarwal.
47. The AO was in receipt of report from the DDIT(Inv.), Unit- 2(2), Kolkata with regard to the above two investors company namely, Giri Financial Services Pvt. Ltd. and Pabla Leasing Finance Pvt. Ltd. The report of the DDIT(Inv.) with regard to these two entities which have contributed to 8% non- convertible, redeemable preference shares is as under:
“As directed by the DDIT(Inv.), Unit-2(2), we visited the given addresses of Pabla Leasing & Finance Pvt. Ltd. and Giri Financial Service Pvt. Ltd. The entities have not been found at the given addreses. On visiting the spot at the given address of the Intellectual Securities Pvt. Ltd., Padma Estates Pvt. Ltd…….. it has been found that a notice been hanged indicating the shifting of the said three companies to a new address at 277, B.B. Ganguly Street, 3rd Floor, Room No. 306, Kolkata-700012. On visiting the new address a signboard at the entrance of the single room office reflecting the names of all the 5 (five) companies has been noticed. It was found that few computers were placed in that room indicating that some accounts were being maintained there. However, no business activity was visible as to be carried out at that place. It was, however, reported by the employee of that office Mr. Vivek
38 Nimbus Multicommodity Brokers Pvt. Ltd. Bipin Agarwal ITA Nos. 925 to 929/Del/2021 Nimbus Project Ltd. Sharma that all the said 5 (five) companies are having their registered office at that address. Thereafter, summonses in the case of all the said companies were served at that address. ”
The AO held that the onus of proving the identity and creditworthiness of investors and genuineness of transactions is on to the assessee company. The financials of these purportedly Investor Company is so weak such that it files its ITRs at negligible or negative incomes and that its turnover is also not very significant. The AO summarized his conclusions as under:
“i. In view of these observations, the AR vide questionnaire dated 19.12.2017 was required to produce the representatives/ directors/ contact persons of these purported investor companies for their examination otherwise the onus of proving identity of such persons, the genuineness of such transactions and creditworthiness of such investor parties shall lie on the assessee, failure to do which would convince the revenue authorities to make adverse inference that ail these purported share capital/premium investments are sham and nothing but accommodation entries. ii. Further, it cannot be believed that investors invest their crores of rupees in a non-listed company without any return and the recipient company even does not have the particulars/contact details, of such investors. Further, creditworthiness of investors is not proved since the source of funds with company purported investors remains highly suspicious. Moreover the assessee company also failed to produce even a single document in respect of due diligence and valuation report to justify the premium to support his contention. Also, there is no reason to believe that the assessee is not able to trace the 39 Nimbus Multicommodity Brokers Pvt. Ltd. Bipin Agarwal ITA Nos. 925 to 929/Del/2021 Nimbus Project Ltd. investors for personal deposition since had the investor been genuine; they would have been in contact of the assessee.
Further, during the assessment proceedings the, assessee was given an opportunity to furnish its comments on the /enquiry report of the investigation unit, Kolkata which was filed on 22.12.2017. Further vide letter dated 19.12.2017, the Assessee was asked to produce the directors/ principal officer of the company for examination on oath. During the statement, it was again reiterated that the details have already been filed and the transactions within the ITTL Nimbus group for companies are bona-fide and genuine. Since, the company does not have any physical set up at the given address, the address given is only a postal address and the same address is used as postal address for multiple companies indulging in to the same activity of providing accommodation entries. The directors of the companies are non-existent or even if they exist, they are illiterate or semi illiterate individuals who do not have competence or credibility to operate any investment company. The company is receiving huge amount as loan and giving the same to other concerns without any apparent motive of conducting any actual business and the directors of the company are not even aware of such huge transactions made by the company for, considering the doctrine of business purposes.
In the view of above, it is held that in case of credits in the name of third parties, it is the duty of the assessee to prove identity or credits, capacity of creditor to advance money and genuineness of transaction. In the instant case capacity of creditor could not be proved. Mere filing of confirmation or transaction through banking channel is not enough to prove the genuineness of cash credit and it can be assessed. Creditworthiness must also be proved and the 40 Nimbus Multicommodity Brokers Pvt. Ltd. Bipin Agarwal ITA Nos. 925 to 929/Del/2021 Nimbus Project Ltd. transactions should also invite confidence of normal business principle of profit.
Secondly, when the account of the assessee Company and the transactions are doubted by the AO, then to prove the genuineness of such transactions assessee has to go some steps further of its own to prove the genuineness of transactions by direct and corroborative evidences and must establish the capacity to invest/ advance such funds by such person. “
Holding thus, the AO made addition of the 8% non- convertible, preference shares received by the assessee u/s 68 of the IT Act.
50. Aggrieved the assessee filed appeal before the ld. CIT(A).
51. Before the ld. CIT(A), the ld. AR submitted that the matter is covered by the order of the ITAT in the case of Nimbus India Ltd. However, the ld. CIT(A) held that since the facts of every case are different in many respects including the statement given by the concern persons who have managed the en tries and also since the issue has not reached finality as yet, the decisions of the case has been taken based on the judgments of the various Hon’ble Courts.
52. The relevant portion of the order of the ld. CIT(A) on this aspect is as under:
“10.1 Ground no. 3 to 5 pertain to addition of Rs.28,50,00,000/- & Rs.21,00,00,000/- for A.Y. 2013-14 & A.Y.
41 Nimbus Multicommodity Brokers Pvt. Ltd. Bipin Agarwal ITA Nos. 925 to 929/Del/2021 Nimbus Project Ltd. 2014-15 respectively on account of issue of 8% non- cumulative preference share, as per following table:
S. Name of the A.Y. 2013-14 A.Y. 2014-15 No. Creditor Share Share premium Share Share Capital @ Rs. @ Rs. 40/- per Capital @ premium @ Rs. 10/- per share Rs. 10/- per 40/- per share share share 1. M/s Pabla 2,00,00,000 8,00,00,000 3,30,00,000 13,20,00,000 leasing & Finance Pvt. Ltd.
2. M/s Girl 3,70,00,000 14,80,00,000 90,00,000 3,60,00,000 Financial Services Pvt. Ltd. Total 5,70,00,000 22,80,00,000 4,20,00,000 16,80,00,000 Grand Total Rs 28,50,00,000 Rs.21,00,00,000 (5,70,00,000 + 22,80,00000) (4,20,00,000 + 16,80,00,000)
It was noted by the AO in detailed and elaborate assessment orders that, the entities to whom non-cumulative preference share were issued are the paper entities involved in providing accommodation entries. AO has depicted the enquiry and investigation report in case of these alleged entities, as conducted by the investigation wing of the department at Kolkata, wherein, the directors of the alleged entities have accepted in the sworn statements that, their concerns are involved in the business of providing accommodation entries in the form of share premium/share capital/non-cumulative preference share/unsecured loans. It was also noted by the AO that, each debit entry in the Bank statements of the alleged creditors is preceded by the equivalent amount of credit on t he same or on the prior date. Hence, the genuineness of the 42 Nimbus Multicommodity Brokers Pvt. Ltd. Bipin Agarwal ITA Nos. 925 to 929/Del/2021 Nimbus Project Ltd. transaction and credit capacity of the creditor is not substantiated by the appellant. Therefore, AO came to the conclusion that the credits from these alleged entities are bogus, fictitious and unexplained and accordingly, addition is justified by the AO u/s 68 of the Act. ……………. 10.3 The undersigned has carefully gone through the assessment orders, written submissions as well as verbal arguments of the Ld. A.R. It is seen that during these relevant assessment years, the appellant company has received funds on account of issuing non-cumulative preference shares, as per following details:
S. Name of the A.Y. 2013-14 A.Y. 2014-15 No. Creditor Share Share premium Share Share Capital @ @ Rs. 40/- per Capital @ premium @ Rs. Rs. 10/- share Rs. 10/- per 40/- per share per share share 1. M/s Pabla 2,00,00,000 8,00,00,000 3,30,00,000 13,20,00,000 leasing & Finance Pvt. Ltd.
2. M/s Girl 3,70,00,000 14,80,00,000 90,00,000 3,60,00,000 Financial Services Pvt. Ltd. Total 5,70,00,000 22,80,00,000 4,20,00,000 16,80,00,000 Grand Total Rs 28,50,00,000 Rs.21,00,00,000 (5,70,00,000 + 22,80,00000) (4,20,00,000 + 16,80,00,000)
The alleged creditor entities namely M/s. Pabla Leasing & Finance Pvt. Ltd. and M/s. Giri Financial Services Pvt. Ltd. were subjected to enquiries and investigation by directorate of investigation, Kolkata. The revenant report as submitted by the 43 Nimbus Multicommodity Brokers Pvt. Ltd. Bipin Agarwal ITA Nos. 925 to 929/Del/2021 Nimbus Project Ltd. DDIT(lnv.), unit-2(2), Kolkata, has already been scanned and reproduced in preceding paras.
10.4 Careful perusal of the enquiry reports notes the following relevant observations: i) Alleged creditor entities do not exist on the given addresses. All the alleged entities are operating from single room in a building at Kolkata with only a computer and table. There were no evidence of any business activities being carried by these alleged creditor entities. ii) Alleged creditor companies are identified paper companies of known accommodation entry operators. iii) Statement of entry operators have been recorded on oath to evidence that, these alleged entities are carrying on the business of providing accommodation entries on commission basis in relation to share premium/share capital/non-cumulative preference share/unsecured loans. iv) Principal Officer or the director to whom summons u/s 131 of the Act were issued on the known address of the alleged creditor entities, they did not attend in response to summons.
10.5 Further, during the post search investigations, statement of Shri Anshul Mittal one of the Director of the M/s. Pabla leasing & Finance Pvt. Ltd. and M/s. Giri Financial Services Pvt. Ltd. was recorded on 20.10.2015 and Shri Anshul Mittal has 44 Nimbus Multicommodity Brokers Pvt. Ltd. Bipin Agarwal ITA Nos. 925 to 929/Del/2021 Nimbus Project Ltd. admitted in the sworn statements that, he is a dummy director of the alleged creditor companies from which, loans/snare application/share premium have been received by IITL- Nimbus group of companies. Further, other directors of the group companies Shri Vipul Kumar, brother of Shri Anshul Mittal, during the statement recorded u/s 131 of the Act on 20.10.2015 has admitted the fact that, he is a dummy director in the companies controlled and managed by Shri Bipin Agarwal.
10.6 During the course of search in the case IITL-Nimbus group of companies the incriminating diary written by Shri Bi pin Agarwal was found from the his suitcase at B-128, Surajmal Vihar, New Delhi-92. This incriminating document inventoried as Annexure A-2. From Page-8 of Annexure A-2 it is evident that, the A/c No. 00030340061364 belongs to one of the group company. This incriminating document depicts the systematic date-wise payment of cash and receipt of cheque. For example on 24.12.2014, cash of Rs. 20,00,00,000/- is represented by the entry C/20CR------24.12.2014 and further, cash payment of Rs. 15,00,00,000/- on 23.02.2015 is depicted as 23.02.2015- ------C/15CR. Further, the receipt of cheque on various dates is also noted in the incriminating document which, matches exactly with the receipt of cheque in the bank account of the company on account of issue of 8% non-cumulative preference share to the alleged creditors entities mentioned here-in-above. Also, the commission of Rs. 43,40,000/- is paid for obtaining accommodation entries, as could be evidenced from seized incriminating document. Also, Shri Bipin Agarwal has 45 Nimbus Multicommodity Brokers Pvt. Ltd. Bipin Agarwal ITA Nos. 925 to 929/Del/2021 Nimbus Project Ltd. surrendered Rs. 35,00,00,000/- for A.Y. 2015-16, as a undisclosed income on the basis of this incriminating document, Annexure A-2, page-8. Therefore, it is concluded that, appellant group companies are in the habit of receiving the cheques from the alleged creditor entities after issuing cash to the accommodation entry providers. Also, charging of the huge premium of Rs. 90 per share was not justified by the appellant with cogent evidences in the form of valuation report etc. All these above mentioned factors corroborate the fact finding of the AO that, alleged credits in the form of preference shares are fictitious and concocted.
10.7 Further, undersigned has noticed that the credit capacity of the share applicants also stands unsubstantiated. The following table shows the total credits by the creditors in the form of share capital/premium, and their income disclosed in the ITR:
S. Name of the Total credits Total income disclosed in No. Creditors (including share capital/ ITR premium) AY 2013-14 AY 2014-15 AY 2013-14 AY 2014-15 1. M/s Pabla leasing & 10,00,00,000 16,50,00,000 30,85,542 Nil Finance Pvt. Ltd.
2. M/s Giri Financial 18,50,00,000 4,50,00,000 3,39,176 9,16,779 Services Pvt. Ltd. From the above table, it is evident that the entities advancing huge money to appellant company are having very meager income to substantiate such huge share capital/premium. For example, M/s Girl Financial Services Pvt. Ltd., having income of only 9,00,000/- odd has advanced huge sum in the form of 46 Nimbus Multicommodity Brokers Pvt. Ltd. Bipin Agarwal ITA Nos. 925 to 929/Del/2021 Nimbus Project Ltd. preference share of Rs.4,500, 000/-, which appears to be beyond human probability. The case of other creditor is no different, as could be evidenced from the above mentioned table. Thus, it can be concluded that the appellant has failed to prove the credit capacity of the creditors. Also, there is no agreement or the co-lateral security arrangements or payment of interest on the preference share between the appellant and creditor companies. Further, a careful, perusal of Bank statements of these alleged creditors reveal the astonishing similarity in the pattern of fund flow. It is invariably noted that the creditor’s accounts were deposited with cheque of equivalent or more amount of credit on the same date or prior to advancing the loan to the appellant company. Following table shows the credit entry prior to advancing credit to appellant company by the alleged creditors:
S. Name of the Date and amount of debit in Date and amount of credit No Creditor Bank creditor Bank account in creditor Bank account account no.
M/s Pabla Leasing & 10.01.2013 25,00,000 10.01.2013 50,00,000 Finance Pvt. Ltd. IDBI Bank Ltd., Kolkata A/c No. - 0291102000006668 2. -do- 10.01.2013 25,00,000 14.01.2013 25,00,000 3. -do- 14.01.2013 25,00,000 17.01.2013 25,00,000 4. -do- 17.01.2013 25,00,000 22.01.2013 3,09,85,314 5. -do- 24.01.2013 50,00,000 05.02.2013 50,00,000 6. -do- 24.01.2013 50,00,000 07.02.2013 25,00,000 7. -do- 24.01.2013 50,00,000 07.02.2013 25,00,000 8. -do- 24.01.2013 50,00,000 08.02.2013 50,00,000 9. -do- 24.01.2013 50,00,000 08.02.2013 25,00,000
47 Nimbus Multicommodity Brokers Pvt. Ltd. Bipin Agarwal ITA Nos. 925 to 929/Del/2021 Nimbus Project Ltd. -do- 24.01.2013 50,00,000 08.02.2013 25,00,000 10. -do- 05.02.2013 50,00,000 08.02.2013 25,00,000 11. 12. -do- 07.02,2013 50,00,000 11 02.2013 25,00,000 13. : -do- 08.02.2013 50,00,000 27.02.2013 25,00,000 14. -do- 08.02.2013 50,00,000 27.02.2013 25,00,000 15. -do- 08.02.2013 25,00,000 01.03.2013 25,00,000 -do- 11.02.2013 25,00,000 01.03.2013 25,00,000 16. 17. -do- 27.02.2013 50,00,000 01.03.2013 19,00,000 -do- 01.03.2013 50,00,000 01.03.2013 50,00,000 18. 19. -do- 01.03.2013 50,00,000 01.03.2013 31,00,000 20. -do- 01.03.2013 50,00,000 01.03.2013 50,00,000 -do- 01.03.2013 50,00,000 02.03.2013 25,00,000 21. -do- 02.03.2013 25,00,000 02.03.2013 25,00,000 22. 23. -do- 02.03.2013 25,00,000 05.03.2013 35,00,000 24. -do- 05.03.2013 35,00,000 08.03.2013 10,00,000 25. -do- 08.03.2013 15,00,000 08.03.2013 5,00,000 -do- 02.04.2013 1,00,00,000 20.03.2013 26. 80,00,000 27. -do- 02.04.2013 65,00,000 20.03.2013 80,00,000 -do- 02.04.2013 1,00,00,000 20.03 2013 25,00,000 28. 29. -do- 02.04.2013 1,00,00,000 30.03.2013 50,00,000 30. -do- 02.04.2013 1,00,00,000 30.03.2013 50,00,000 31. -do- 02.04.2013 1,00,00,000 30.03.2013 80,00,000 32 -do- 02.04.2013 1,00,00,000 30.03.2013 80,00,000 33 -do- 02.04.2013 1,00,00,000 30.03.2013 80,00,000 34. -do- 02.04.2013 1,00,00,000 30.03.2013 80,00,000 35. -do- 02.04.2013 1,00,00,000 30.03.2013 80,00,000 36. -do- 02.04.2013 1,00,00,000 30.03.2013 80,00,000 37. -do- 03.04.2013 1,20,00,000 02.04.2013 50,00,000 38. -do- 03.04.2013 1,00,00,000 02.04.2013 80,00,000 t 39. -do- 03.04.2013 40,00,000 02.04.2013 50,00,000 40. -do- 10.04.2013 1,00,00,000 02.04.2013 80,00,000 41. -do- 10.04.2013 1,00,00,000 03.04.2013 25,00,000 42. -do- 10.04.2013 1,25,00,000 03.04.2013 15,00,000
48 Nimbus Multicommodity Brokers Pvt. Ltd. Bipin Agarwal ITA Nos. 925 to 929/Del/2021 Nimbus Project Ltd. 43. -00- 08.04.2013 2,00,00,000 44. -do- 08.04.2013 2,00,00,000 45. -do- 09.04.2013 50,00,000 46. -do- 09.04.2013 1,00,00,000 26,50,00,000/-
25.01.2013 35,00,000 24.01.2013 50,00,000 M/s Giri Financial Services Pvt. Ltd. Punjab National Bank, A/c No. - 0954002100021187 48. -do- 25.01.2013 40,00,000 24.01.2013 30,00,000 — — 49. -do- 24.01.2013 10,00,000 — 50. -do- — 25,01.2013 20,00,000 — 51. -do- — 25.01.2013 10,00,000 52. -do- 28.01.2013 35,00,000 28.01.2013 20,00,000 53. -ao- 29.01.2013 30,00,000 08.02.2013 25,00,000 54. -do- 09.02.2013 25,00.000 11.02.2013 50,00,000 55. -do- 12.02.2013 30,00,000 11.02.2013 40,00,000 56. -do- 12.02.2013 35,00,000 11.02.2013 35,00,000 57. -do- 12.02.2013 30,00,000 18.02.2013 55,00,000 58. -do- 12.02.2013 30,00,000 18.02.2013 45,00,000 59. -do- 19.02.2013 35,00,000 22.02.2013 25,00,000 60. -do- 19,02.2013 35,00,000 22.02.2013 25,00,000 61. -do- 19.02.2013 30,00,000 22.02.2013 25,00,000 62. -do- 25.02.2013 35,00,000 22.02.2013 30,00,000 63. -do- 25.02.2013 35,00,000 25.02.2013 35,00,000 64. -do- 25.02.2013 35,00,000 05.03.2013 60,00,000 1 65. -do- 26.02.2013 35,00,000 08.03.2013 35,00,000 66. -do- 06.03.2013 30,00,000 08.03.2013 30,00,000 67. -do- 05.03.2013 30,00,000 08.03.2013 35,00,000 68. -do- 09.03.2013 25,00,000 09.03.2013 25,00,000 69. -do- 09.03.2013 25,00,000 11.03.2013 40,00,000
49 Nimbus Multicommodity Brokers Pvt. Ltd. Bipin Agarwal ITA Nos. 925 to 929/Del/2021 Nimbus Project Ltd. 70. -do- 09.03.2013 25,00,000 11.03.2013 30,00,000 71. -do- 09.03.2013 25,00,000 11.03.2013 30,00,000 72. -do- 11.03.2013 25,00,000 12.03.2013 30,00,000 73. -do- 12.03.2013 25,00,000 12.03.2013 20,00,000 74. -do- 12.03.2013 25,00,000 13.03.2013 25,00,000 75. -do- 12.03.2013 50,00,000 13.03.2013 25,00,000 76. -do- 12.03.2013 25,00,000 13.03.2013 20,00,000 77. -do- 13.03.2013 25,00,000 13.03.2013 30,00,000 78. -do- 13.03.2013 25,00,000 14.03.2013 25,00,000 79. -do- 14.03.2013 25,00,000 18.03.2013 40,00,000 80. -do- 14.03.2013 25,00,000 18,03.2013 40,00,000 81. -do- 14.03.2013 25,00,000 19.03.2013 30,00,000 82. -do- 14.03.2013 25,00,000 19,03.2013 40,00,000 83. -do- 15.03.2013 25,00,000 20.03.2013 30,00,000 84. -do- 19.03.2013 30,00,000 20.03.2013 40,00,000 85. -do- 19.03.2013 25,00,000 20.03.2013 30,00,000 86. -do- 19.03.2013 25,00,000 21.03.2013 35,00,000 87. -do- 20.03.2013 35,00,000 21.03.2013 35,00,000 88. -do- 20.03.2013 35,00,000 21.03.2013 30,00,000 89. -do- 21.03.2013 30,00,000 22.03.2013 20,00,000 90. -do- 21.03.2013 40,00,000 22.03.2013 30,00,000 91. -do- 21.03.2013 30.00,000 22.03.2013 20,00,000 92. -do- 22.03.2013 30,00,000 22.03.2013 30,00,000 93. -do- 22.03.2013 40,00,000 23.03.2013 25,00,000 94. -do- 22.03.2013 30,00,000 23.03.2013 25,00,000 95. -do- 23.03.2013 50,00,000 25.03.2013 25,00,000 96. -do- 23.03.2013 50,00,000 25,03.2013 30,00,000 97. -do- 30.03.2013 10,00,000 25.03.2013 30,00,000 98. -do- 26.03.2013 22,00,000
50 Nimbus Multicommodity Brokers Pvt. Ltd. Bipin Agarwal ITA Nos. 925 to 929/Del/2021 Nimbus Project Ltd. 99. -do- 26.03.2013 37,57,878 100 -do- 26.03.2013 30,00,000 . 101 -do- 26.03.2013 35,00,000 . 102 -do- 26.03.2013 35,00,000 . j -do- 26.03.2013 25,00,000 103 . 104 -do- 26.03.2013 40,00,000 . 105 M/s Giri Financial 09.02.2013 50,00,000 08.02.2013 50,00,000 . Services Pvt. Ltd. ICICI Bank Ltd, A/c No. - 0954002100021187 106 -do- 11.03.2013 25,00,000 09.03.2013 20,00,000 . 107 -do- 11.03.2013 25,00,000 09.03.2013 25,00,000 . 108 -do- 11.03.2013 25,00,000 09.03.2013 25,00,000 . 109 -do- 11.03.2013 25,00,000 09.03.2013 15,00,000 . 110 -do- 12.03.2013 25,00,000 09.03.2013 15,00,000 . 111 -do- 12.03.2013 25,00,000 11.03.2013 25,00,000 . 112 -do- 12.03.2013 25,00,000 11.03.2013 25,00,000 . 113 -do- 12.03.2013 25,00,000 11.03.2013 50,00,000 . 114 -do- 14.03.2013 25,00,000 13.03.2013 25,00,000 . 115 -do- 14.03.2013 25,00,000 13.03.2013 30,00,000 . 116 -do- 14.03.2013 25,00,000 13.03.2013 40,00,000 . 117 -do- 14.03.2013 25,00,000 14.03.2013 25,00,000 . 118 -do- 15.03.2013 25,00,000 . 119 M/s Giri Financial 02.04.2013 35,00,000 26.03.2013 37,57,878 . Services Pvt. Ltd. Punjab National Bank, A/c No. - 0954002100021187 120 -do- 02.04.2013 20,00,000 26.03.2013 30,00,000 . 121 -do- 02.04.2013 35,00,000 26.03.2013 35,00,000 . 122 -do- 02.04.2013 35,00,000 26.03.2013 35,00,000 . 123 -do- 02.04.2013 35,00,000 26.03.2013 25,00,000 . 124 -do- 02.04.2013 35,00,000 26.03.2013 40,00,000 .
51 Nimbus Multicommodity Brokers Pvt. Ltd. Bipin Agarwal ITA Nos. 925 to 929/Del/2021 Nimbus Project Ltd. 125 -do- 02.04.2013 35,00,000 02.04.2013 25,00,000 . 126 -do- 02.04.2013 35,00,000 02.04.2013 25,00,000 . 127 -do- 03,04.2013 35,00:000 02.04.2013 25,00,000 . 128 -do- 03.04.2013 30,00,000 02.04.2013 25,00,000 . 129 -do- 03.04.2013 30,00,000 04.04.2013 50,00,000 . 130 -do- 05.04.2013 35,00,000 10.04.2013 40,00,000 . 131 -do- 05.04.2013 20,00,000 10.04.2013 25,00,000 . 132 -do- 11.04.2013 35,00,000 . 23,00,00,000/- Thus, the evidence submitted by the appellant does not inspire the confidence regarding credit capacity of the creditors and genuineness of the transactions, especially considering the fact that, lenders have disclosed meager income in their returns and each credit of unsecured loans to the appellant company is preceded by the equivalent or more amount of deposits of credit on the same date or on the prior dates. Also, AO has recorded the finding of fact that, most of the lenders do not exist and operate on the given address and are paper companies providing the accommodation entries of share capital/unsecured loans. Also it is noted from the balance sheet of the creditor companies that, they do not possesses any tangible or intangible fixed assets to conduct business activities. Thus, it is concluded that, genuineness of the transaction and credit capacity of the creditors stands unsubstantiated. Appellant, on the other hand has not placed any material before the undersigned to dislodge the finding of the AO. Therefore, considering the totality of facts and circumstances of the case,
52 Nimbus Multicommodity Brokers Pvt. Ltd. Bipin Agarwal ITA Nos. 925 to 929/Del/2021 Nimbus Project Ltd. it is concluded that, appellant has miserably failed to prove the credit capacity and genuineness of the transaction.
10.8 It is a settled preposition of law u/s. 68 of the IT Act that the initial burden of proof rests upon the appellant to establish the identity, credit capacity of the creditor and to establish the genuineness of transaction. For the sake of clarity provision of section 68 of the Act as amended reads as under:
"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 53 Nimbus Multicommodity Brokers Pvt. Ltd. Bipin Agarwal ITA Nos. 925 to 929/Del/2021 Nimbus Project Ltd. (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 therein is recorded, is a venture capital fund or a venture capital company as referred to in clause (23FB) of section 10.]"
The present facts of the case are squarely covered by the provisions of law' mentioned here-in-above, wherein it was imperative for the appellant to simultaneously prove the identity and creditworthiness of the creditors along with the genuineness of transaction. In the instant facts of the case, appellant has miserably failed to prove genuineness of the transaction and creditworthiness of the creditors. Hence, addition made by Assessing Officer is perfectly justified.
10.9 It is also an established law that mere filing of confirmation letter and the ITR copies are not enough to prove the credit capacity of the creditor. Hon'ble Kolkata High Court: in the case of CIT Vs Korlav Trading Company Ltd.(Cal.) 232 ITR 280 and CIT Vs Precision Finance P. Ltd. (Cal .) 208 ITR 465 have observed and held that mere filing of confirmation and transaction through the banking channel is not enough to prove the genuineness of cash credit and it can be assessed. Further, Hon'ble Apex Court in the case of Shri Roshan D. Haiti Vs CIT (SC) 107 ITR 938 held that in the case of credits in the name of third party, it is the duty of the appellant to prove the identity or credit capacity of the creditors to advance money and 54 Nimbus Multicommodity Brokers Pvt. Ltd. Bipin Agarwal ITA Nos. 925 to 929/Del/2021 Nimbus Project Ltd. genuineness of transaction. Further, Hon'ble Delhi High Court in the case of Sanraj Engineering Pvt. Ltd. Vs. CIT in ITA 79/2016 has held that, "addition made u/s 68 of the Act on account of unsecured loans was not justified, where initial onus of proving the creditworthiness of the lenders were not discharged by the assessee." Also, Hon'ble Gujarat High Court in the case of Pawan Kumar Sanghvi [2018] SO taxmann.com 290 has held that, "where assessee received loan from two companies, in view of fact that on date of advancing loan to assessee there were credit entries of almost similar amounts and balance after these transactions was a small amount and moreover assessee failed to produce these lenders for verification, impu gned amount was rightly brought to tax under section 68." Hon'ble Delhi High Court in the case of Seema Jain Vs ACIT [2018] 96 taxmann.com 307 (Delhi) has held that, "where AO made addition to assessee's income in respect of loan availed, in view of fact that lender company did not have tangible or intangible fixed assets and, moreover, it had declared a meager income and, thus, it was not in a position to give such a huge loan to assessee, impugned addition was to be confirmed." Further, Hon'ble Delhi High Court in the case of CIT Vs Ultra Modern Exports (P.) Ltd [2013] 40 taxmann.com 458 (Delhi)/[2014] 220 Taxman 165 (Delhi)(MAG.) has held that, "where in order to ascertain genuineness of assessee's claim relating to receipt of share application money, Assessing Officer sent notices to share applicants which returned unserved, however, assessee still managed to secure documents such as their income tax returns as well as bank account particulars, in such 55 Nimbus Multicommodity Brokers Pvt. Ltd. Bipin Agarwal ITA Nos. 925 to 929/Del/2021 Nimbus Project Ltd. circumstances, Assessing Officer was justified in drawing adverse inference and adding amount in question to assessee's taxable income under section 68." Also, Hon'ble Calcutta High Court in the case of C!T Vs Maithan International 56 (2015] 375 ITR 123 (Calcutta) has held that, "Assessing Officer could not accept genuineness of loan taken by assessee from various creditors merely on basis of their bank statements and letter of confirmations as he was required to examine creditworthiness of said creditors as well." Hon'ble Madras High Court in the case of B.R. Petrochem (P.) Ltd. Vs ITO [2017] 81 taxmann.com 424 (Madras) has observed and held that, "where assessee received share capital from various contributors, in view of fact that those contributors were persons of insignificant means and their creditworthiness to have made contributions had not been established, impugned addition made by authorities below in respect of amount in question under section 68 was to be confirmed." Further, Hon'ble Supreme Court while dismissing the SLP of the assessee in the case of Rick Lunsford Trade & Investment Ltd Vs CIT 2016 TIOL-207-SC-IT has held that, "it is open to the Revenue Department to make addition on account of alleged share capital u/s 68, where the assessee company has failed to show genuineness of its sharehol ders." Also, Hon'ble Apex Court in the case of Navodaya Castle Pvt . Ltd. Vs CIT [2015] 230 Taxman 268 (SC) observed during dismissal of SLP of the appellant that, "High Court ruling that certificate of incorporation, PAN etc., are not sufficient for purpose of identification of subscriber company when there is material to show that subscriber was a paper company and not a genuine
56 Nimbus Multicommodity Brokers Pvt. Ltd. Bipin Agarwal ITA Nos. 925 to 929/Del/2021 Nimbus Project Ltd. investor." in the instant case, the undersigned is of the view that the credit capacity of the creditor and genuineness of the transaction are not proved by the appellant company.
10.10 Further, Hon'ble Delhi High Court in the case of PCIT Vs Vikram Singh (2017) 85 taxmann.com 104 has observed and held that "even if transaction of loan is made through cheque, it cannot be presumed to be genuine in absence of any agreement, security and interest payment. Mere submission of the PAN and bank statements of the creditor does not establish the authenticity and genuineness of huge loan transaction particularly when the ITR of the lender does not inspire such confidence. Mere submission of ID proof and the fact that the loan transaction were through banking channel does not establish the authenticity of transaction. The loan entries are generally masked to pump the black money into the banking channel and such practices continued to plague Indian Economy." Further, in the case of CIT Vs. N.R, Portfolio Pvt. Ltd. (ITA No. 1018, 1019/2100 dated 22.11.2013) Hon'ble Delhi High Court has observed and held that:
"mere production of incorporation details, PAN Nos. or the fact that third persons or company had filed income tax details in case of a private limited company may not be sufficient when surrounding and attending facts predicate a cover up. These facts indicate and reflect proper paper work or documentation but genuineness, creditworthiness, identity are deeper and obtrusive companies no doubt are artificial or juristic person but they are soulless and are dependent upon the individuals behind
57 Nimbus Multicommodity Brokers Pvt. Ltd. Bipin Agarwal ITA Nos. 925 to 929/Del/2021 Nimbus Project Ltd. them who run and manage the said companies. It is the person behind the company who take the decisions, controls and manage them." The cases relied upon by the Ld. AR are on their own footings and distinguishable on facts and are not applicable to the present case. Further, Hon'ble Calcutta High Court has observed and held in the case of Pragati Financial Management Pvt. Lt d. Vs. CIT in C.A. 887 & 998 of 2016 and others dated 07.03.2017, that, AO is entitled to make enquiry u/s. 68 of the-Act regarding genuineness of the transaction, Further, it is held that, in the following judicial pronouncements of the Hon’ble High Courts that, unsecured loans/share capital received from the entities involved in providing accommodation entries are liable to be taxed u/s 68 of the Act: i) CIT vs. Nova Promoters & Finlease (P) Ltd. 342 ITR 169 [Delhi] 2013. ii) CIT vs. D.K. Garg [2017] 84 taxmann.com 257 [Delhi] 10.11 The AR of the appellant has submitted that the AO did not allow assessee to make the cross examination of the persons on whose statement Ld. AO relied for making the assessment against the assessee even after specific request of the assessee which is against the principle of natural justice, hence the assessment made is bad in law. In this regard it is observed that ail the material facts, which have been used against the assessee, have been provided to the appellant, therefore the plea of the appellant that non providing the opportunity of cross
58 Nimbus Multicommodity Brokers Pvt. Ltd. Bipin Agarwal ITA Nos. 925 to 929/Del/2021 Nimbus Project Ltd. examination, vitiates the income escaping assessment proceedings has not been found correct.
10.12 On the issue of cross examination, it is noticed that all the documents were shown to the appellant. Therefore, no separate opportunity to further cross examine is required to be given to the appellant. Further, Hon'ble Supreme Court, in the well-known Dhakeswari Cotton Mills (26 ITR 775 at 782) case, ruled that the Evidence Act may have no application in tax assessment proceedings. However, the court also clarified later, in Chuharmal vs CIT (172ITR 250at 255 SC), that when the taxing authorities are desirous of invoking the principles of the Evidence Act in proceedings before them, they are not prevented from doing so. All that is required is that whatever material they collect will have to be placed before the tax - paying assessee, if adverse inference is going to be drawn - audi alteram partem is a well-known principle of natural justice. This principle is established by the judgment of the Supreme Court in Dhakeswari Cotton Mills Ltd. v. CIT (26 ITR 775,783), and applied by that court in Kishin chand Chellaram vs. CIT (125 ITR 713), where an assessment based on the result of private inquiries conducted behind the back of the assessee was set aside because the evidence so gathered was not placed before the assessee. In Gunda Subbayya vs. CIT (7 ITR21, 28), Hon'ble Madras High Court has held:
"Information which the Income-Tax Officer has received may not always be accurate and it is only fair when he proposes -to act on material which he has obtained from an outside source
59 Nimbus Multicommodity Brokers Pvt. Ltd. Bipin Agarwal ITA Nos. 925 to 929/Del/2021 Nimbus Project Ltd. that he should give the assessee an opportunity of showing, if he can, that the Income Tax Officer has been misinformed; but the Income-Tax obviously not bound to disclose the source of his information"
10.13 Further, jurisdictional Hon'ble Allahabad High Court in the case of Motilal Padampat Udyog Ltd. Vs. CIT 293 1TR 656 has laid down the correct preposition of law of cross examination and held as follows:
Right of cross-examination of persons from whom the Assessing Officer has collected the evidence is not required by law. The requirement of the statute for a valid assessment would be met if all the evidence collected which is to be used against the assessee while framing the assessment order is placed before the assessee and he is given opportunity to rebut the evidence.
In this case, all the material used against the assessee has been provided, therefore the contention of the AR that the assessee has not been given opportunity of cross examination is not found tenable in the light of above judgments.
10.14 In view of the above detailed discussion of the factual matrix of the case and considering the enumerated judicial pronouncements, it is concluded that appellant company has miserably failed to prove the vital ingredients of creditworthiness of the creditors and genuineness of the transaction. Therefore, undersigned finds no reason to interfere
60 Nimbus Multicommodity Brokers Pvt. Ltd. Bipin Agarwal ITA Nos. 925 to 929/Del/2021 Nimbus Project Ltd. with the addition made by Assessing Officer, u/s 68 of the Act. The same is therefore, confirmed and ground of appeal of the appellant is dismissed for A.Y. 2013- 14 & A.Y. 2014-15.”
53. Aggrieved with the order of the ld. CIT(A) the assessee filed appeal before the ITAT.
During the hearing, at the outset, the ld. AR brought to our notice that the identity, genuineness and creditworthiness of the investors namely, Giri Financial Services Pvt. Ltd. & Pabla Leasing & Finance Pvt. Ltd. has been widely examined in detail during the proceedings before the Tribunal in the case of Nimbus India Ltd. for the A.Y. 2013-14 and relied on the order of the Co-ordinate Bench of ITAT.
On the other hand, the ld. DR strongly supported the orders of the revenue authorities.
We have gone through the order of the Co-ordinate Bench of ITAT in & 930/Del/2019 in the case of Nimbus India Ltd. Vs. DCIT for the A.Y. 2013-14 and A.Y. 2014-15.
The relevant points with regard to examination of genuineness of Giri Financial Services Pvt. Ltd. & Pabla Leasing & Finance Pvt. Ltd. by the Tribunal in the above said order is as under:
Para 7 - From the report of the Investigation Unit, Kolkata, he noted that this company along with Giri Financial Services Pvt. Ltd., M/s Pabla Leasing & Finance Pvt. Ltd.
61 Nimbus Multicommodity Brokers Pvt. Ltd. Bipin Agarwal ITA Nos. 925 to 929/Del/2021 Nimbus Project Ltd. and Intellectual Securities Pvt. Ltd., are used by different accommodation entry operators to facilitate accommodation entry operators. Further, the Directors of these companies have admitted that they were involved in providing accommodation entries on commission basis to IITL Nimbus group of companies. Para 9 - So far as A.Y. 2014-15 is concerned, the AO made addition of Rs.20,51,00,000/- being the amount of share capital received from M/s Pabla Leasing & Finance Pvt. Ltd. of Rs.2,51,00,000/- and the amount of share capital received from M/s Giri Financial Services Pvt. Ltd. of Rs.18 crores. Para 13 - So far as the addition of Rs.15 crores in A.Y. 2013-14 and Rs.2.51 crore in respect of M/s Pabla Leasing & Finance Pvt. Ltd., ……..and Rs.18 crore from M/s Giri Financial Services in A.Y. 2014-15 is concerned, the ld. Counsel for the assessee drew the attention of the Bench to the various details of the parties from whom the assessee has received non-cumulative redeemable share capital during the year. Referring to various pages of the paper book, the ld. Counsel for the assessee drew the attention of the Bench to the copies of the income-tax returns, balance sheets, copy of annual reports of the companies, bank statements, copies of the assessment orders of those companies, etc., and submitted that the assessee has discharged the onus cast on it by substantiating the identity and credit worthiness of the creditors and genuineness of the transactions.
62 Nimbus Multicommodity Brokers Pvt. Ltd. Bipin Agarwal ITA Nos. 925 to 929/Del/2021 Nimbus Project Ltd. Para 16 - So far as the amount of Rs.18 crore received from M/s Giri Financial Services (P) Ltd. in A.Y. 2014-15 is concerned, the ld. Counsel for the assessee submitted that the assessee has filed the requisite documents such as the copy of bank statement of the investor company, their audited accounts, income-tax return acknowledgement, Form 2 filed with the ROC, etc., to substantiate the identity and the credit worthiness of the investor com pany and genuineness of the transaction. Referring to paper book page 254, he submitted that Giri Financial Services (P) Ltd., is registered with RBI as a NBFC w.e.f. 16.02.2001. He submitted that in response to notice u/s 133(6), the director of the company Mr. Anshul Mittal had appeared and filed relevant document and he had confirmed to have invested in the assessee company. He submitted that in the A.Y. 2015-16, the AO, in the order ITA Nos.929 & 930/Del/2019 passed u/s 153A/143(3) has accepted a sum of Rs.11.34 crores towards share capital and share premium in the assessee company and no adverse view has been taken. Further, the investor company is showing continuous substantial income and, therefore, no addition is called for u/s 68 of the Act when the assessee has proved the three ingredients of section 68 of the IT Act, 1961. Para 26 - We have heard the rival arguments made by both the sides, perused the orders of the AO, CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find
63 Nimbus Multicommodity Brokers Pvt. Ltd. Bipin Agarwal ITA Nos. 925 to 929/Del/2021 Nimbus Project Ltd. the AO, in the instant case, made addi tion of Rs.29,50,00,000/- to the total income of the assessee being the amount of Rs.14,50,00,000/- from M/s Cindy Goods & Supply ITA Nos.929 & 930/Del/2019 Pvt. Ltd., and Rs.15 crores from M/s Pabla Leasing & Finance Pvt. Ltd., on account of non-genuine share premium/share capital. Similarly for A.Y. 2014-15, the AO made an addition of Rs.20,51,00,000/- being an amount of Rs.2,51,00,000/- received from M/s Pabla Leasing & Finance Pvt. Ltd. and Rs.18 crores from Giri Financial Services Pvt. Ltd. treating the same as non-genuine and by invoking the provisions of section 68 of the IT Act. We find the ld.CIT(A) upheld the addition so made by the AO. It is the submission of the ld. Counsel for the assessee that the assessee has filed the requisite details such as copy of the bank account, copy of the Income-tax returns, copy of confirmations, details of allotment of shares, etc. before the AO to substantiate the identity and credit worthiness of the investor companies and the genuineness of the transaction. It is also his submission that the directors of the investor companies were produced before the AO whose statements were recorded u/s 131 in which they have confirmed to have invested in the shares of the assessee company. It is also his submission that in the preceding and subsequent assessment years, such share capital at high premium has been accepted by the AO in the order passed u/s 153A/143(3) and no adverse view has been taken. Further, it is also his submission that such non-cumulative non-
64 Nimbus Multicommodity Brokers Pvt. Ltd. Bipin Agarwal ITA Nos. 925 to 929/Del/2021 Nimbus Project Ltd. participating optionally convertible redeemable preference shares were redeemed to the investor companies in the F.Y. 2014-15 much before the search and, therefore, under the facts and circumstances of the case no addition is called for. Para 28 - ………. In the case of M/s Pabla Leasing & Finance ITA Nos.929 & 930/Del/2019 Pvt. Ltd., the AO, in the order passed u/s 143(3) for A.Y. 2015-16, copy of which is placed at pages 503 and 504 of the paper book, has accepted an amount of Rs.2,64,60,000/- towards preferential share capital and Rs.11,34,00,000/- towards equity share capital and no addition has been made. Similarly, in the case of Giri Financial Services Pvt. Ltd., the AO, in the order passed u/s 143(3)/153A for A.Y. 2015-16, copy of which is placed at pages 505 and 506 of the paper book, has accepted the same and no addition has been made. Therefore, the allegation of the AO that these companies are paper companies without doing any business and these companies are existing only for being used by different accommodation entry operators to facilitate accommodation entries in different forms to various beneficiary groups is factually incorrect in view of the orders passed in case of these investor companies in preceding and subsequent years.
We find that the Co-ordinate Bench of the ITAT has considered the identity of the companies and found that Giri Financial Services Pvt. Ltd. to have been incorporated in the 65 Nimbus Multicommodity Brokers Pvt. Ltd. Bipin Agarwal ITA Nos. 925 to 929/Del/2021 Nimbus Project Ltd. year 1995, the amounts have been accepted as genuine du ring the assessments completed u/s 143(3), the returned income range from Rs.53.9 lacs, Rs.9.16 lacs, Rs.148 lacs for the A.Y. 2013-14, A.Y. 2014-15 and A.Y. 2015-16 respectively in the case of Giri Financial Services Pvt. Ltd. and in the case of Pabla Leasing & Finance Pvt. Ltd. Rs.30.85 lacs for the A.Y. 2013 -14, Rs.(-) 52.22 lacs for A.Y. 2014-15 and Rs.93.18 lacs for A.Y. 2015-16 which undisputedly proves that the investor companies cannot be considered as a accommodation entry provider/paper company. The company has duly responded to notices issued u/s 133(6) to the revenue authorities. Further, Shri Virendra Tripathy, Managing Director of M/s Pabla Leasing & Finance Pvt. Ltd., has confirmed the investments made in the assessee company during the statement recorded u/s 131 of the IT Act by the revenue authorities. Mr. Anshul Mittal, Director of the company has submitted all the relevant details before the revenue authorities. Hence, keeping in view, the facts narrated above, we find that the observation of the revenue authorities holding that the identity, genuineness and creditworthiness of the lender company could not be proved is contrary to the facts on record. Hence, the addition made by the revenue authorities is liable to be obliterated.
In the result, the appeal of the assessee in for A.Y. 2013-14 and ITA No. 929/Del/2021 for A.Y. 2014-15 is allowed.
66 Nimbus Multicommodity Brokers Pvt. Ltd. Bipin Agarwal ITA Nos. 925 to 929/Del/2021 Nimbus Project Ltd. ITA No. 923/Del/2021 for A.Y. 2012-13 Nimbus Multicommodity Brokers Pvt. Ltd.
During the year, the assessee received unsecured loans from three entities which are as under: Sr. No. Name of Party Amount(Rs.) 1. Cindy Goods & Suppliers 2,00,00,000/- 2. Newways Finance Pvt. Ltd. 1,05,00,000/- 3. RCJ Investment Trust Ltd. 70,00,000/- Total 3,75,00,000 61. The AO has made addition under Section 68 of the IT Act on account of the unsecured loan received from M/s Cindy Goods & Supply Pvt. Ltd. accepting the unsecured loans received from the other two lenders namely, Newways Finance Pvt. Ltd. and RCJ Investment Trust Ltd.
The issue of identity, genuineness and creditworthiness of the lender namely, M/s Cindy Goods & Supply Pvt. Ltd. has already been discussed in the for A.Y. 2011-12 and ITA No. 927/Del/2021 for A.Y. 2012-13. Hence, following the same ratio, the addition made by the AO is directed to be deleted.
In the result, the appeal of the assessee in for A.Y. 2012-13 is allowed.
A.Y. 2012-13 Bipin Agarwal
During the year, the assessee received unsecured loans from seven entities which are as under:
67 Nimbus Multicommodity Brokers Pvt. Ltd. Bipin Agarwal ITA Nos. 925 to 929/Del/2021 Nimbus Project Ltd. Sr. No. Name of Party Amount(Rs.) 1. Viniyas Finance & Investment Pvt. Ltd. 2,50,00,000/- 2. M/s Cindy Goods & Supply Pvt. Ltd. 2,50,00,000/- 3. M/s Mysore Finlease Pvt. Ltd. 4,00,00,000/- 4. RCJ Investment Trust Pvt. Ltd. 50,00,000/- 5. M/s Mysore Finlease Pvt. Ltd. 2,00,00,000/- 6. M/s Jardine Infrastructure & Developers 1,25,00,000/- Pvt. Ltd.
M/s Tavishi Holdings Pvt. Ltd. 2,00,00,000/- 65. The AO has made addition u/s 68 of the I.T. Act on account of unsecured loan received from M/s Cindy Goods & Supply Pvt. Ltd. only accepting the unsecured loans received from the other lenders.
The issue of identity, genuineness and creditworthiness of the lender namely, M/s Cindy Goods & Supply Pvt. Ltd. has already been discussed in for A.Y. 2011 - 12 and in ITA No. 927/Del/2021 for A.Y. 2012-13. Hence, following the same ratio, the addition made by the AO is directed to be deleted.
In the result, the appeal of the assessee in A.Y. 2012-13 is allowed.
Order Pronounced in the Open Court on 12/01/2022.