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Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: Ms. MADHUMITA ROY & SHRI BHAGIRATH MAL BIYANI
The cross appeals filed by the respective parties are directed against the order dated 09.04.2019 passed by the Commissioner of Income Tax (Appeals)-II, Indore (in short ‘CIT(A)’), arising out of the order dated & 656/Ind/2019 (M/s. Divine Infracreation & Trading Pvt. Ltd.) A.Y.– 2011-12 - 2 - 28.03.2014 passed by the Deputy Commissioner of Income Tax, Circle-5(1), Indore under section 143(3) of the Income Tax Act, 1961 (hereinafter referred as to ‘the Act’) for Assessment Year 2011-12. Since, the issues involved in these appeals are relating to the same assessee and common in nature, these are heard analogously and are being disposed of by a common order for the sake of convenience.
2. The Revenue has preferred the appeal with following grounds:
“1. Whether on the facts and circumstances of the case the Ld. CIT (A) was justified in deleting the addition of Rs. 42,01,80,700/- made u/s 68 of the Income Tax Act, 1961 in view of findings in assessment order.
2. Whether on the facts and circumstances of the case the Ld. CIT (A) erred in deleting the addition of Rs. 42,01,80,700/- made u/s 68 of the Income Tax Act, 1961, when it is evident that the entire share application money including share premium money was received by the assessee company in F.Y. 2010-11 and not in F.Y. 2009-10.
3. Whether on the facts and circumstances of the case the Ld. CIT (A) erred in considering the fact that merely issuance of cheque does not mean that the same has been credited in the books of account of the second party on the date of issuance as this is evident from the assessment order dated 28.03.2014 that cheques dated 31.03.2010 were cleared on much later date i.e. in F.Y 2010-11 ? 4. Whether on the facts and circumstances of the case the Ld. CIT (A) erred in deleting the addition of Rs. 7,85,60,700/- on account of disallowance of unsecured loan u/s 68 of the Income Tax Act, 1961 when as the directors of loan providing companies and loan receiving assessee company did not explain even a single transaction ? 5. Whether on the facts and circumstances of the case the Ld. CIT (A) erred in deleting the addition made on account of disallowance of unsecured loan u/s 68 of the Income Tax Act, 1961 when as identity, creditworthiness of the loan providing companies and genuineness of transactions were not established by the assessee.
& 656/Ind/2019 (M/s. Divine Infracreation & Trading Pvt. Ltd.) A.Y.– 2011-12 - 3 -
6. Whether on the facts and circumstances of the case the Ld. CIT (A) was justified in taking contrary view in allowing unsecured loan and upholding share capital and premium thereon, even where same companies were involved in both type of transactions.”
3. The Revenue has filed the instant appeal raising issues in Ground Nos. 1, 2, 3 & 6 against the deletion of addition of Rs.42,01,80,700/- made qua share application.
4. While deleting the addition, the Ld. CIT(A) simultaneously directed the Ld. AO to take action in terms of the provisions of law for A.Y. 2010-11 when the said amount was credited in the books of accounts and in the event, the investors are found to be entry providers, the amount can be assessed in the year in which the share application money was received and credited by the appellant in its books of accounts in the said A.Y. 2010-11 and not in the year under consideration. The appellant joins issues here to this effect that the Ld. CIT(A) without first arriving at any finding in respect of three limbs of Section 68 of the Act, gave carte blanche to the Ld. AO to sustain the addition in another year.
5. In fact, in that view of the matter, the appellant preferred application under Rule 27 of the ITAT Rules, 1963 raising this issue as to whether the direction given by the Ld. CIT(A) to the Ld. AO to take action in A.Y. 2010- 11, in case the investors are found to be entry providers to pass orders accordingly, is justified in view of the fact that the appellant had already demonstrated by way of submission and documents before the Ld. CIT(A) & 656/Ind/2019 (M/s. Divine Infracreation & Trading Pvt. Ltd.) A.Y.– 2011-12 - 4 - that these investors are genuine and further proved the identity and creditworthiness of the said investors as the case made out by the appellant.
The brief facts leading to this issue is this that the assessee company filed its return of income declaring total income at Rs.23,94,000/- on 24.09.2011. Subsequently, upon selection for scrutiny, a notice under Section 143(2) of the Act dated 27.09.2012 was served followed by further notice under Section 143(2) of the Act dated 30.07.2013 and notice under Section 142(1) of the Act dated 14.08.2013 alongwith the questionnaire to the appellant. During the course of assessment proceedings, it was found that the assessee has shown a receipt of Rs.48,47,22,100/- as share capital by way of allotment of shares of Rs.10 each at premium of Rs.90 for shares. The assessee was directed to file the confirmation from the share applicants and to prove their identity, creditworthiness and genuineness of the transaction with details of mode of transactions. The assessee was further directed to furnish the copy of the bank account of transaction as and when share application money was received and the details of narration appearing in the bank statement. In fact, an amount of Rs.42,01,80,700/- in total was invested by 11 shareholding companies in assessee company, the details whereof is as follows:
Investors Share Application money Ajitab Construction Pvt Ltd 3,48,49,900 Aspirant Mercantile Company Pvt Ltd - Promoter 4,33,38,700 Avocado Trading Company Pvt Ltd – Promoter 4,28,17,200 Chhitwan Developers Pvt Ltd 2,63,25,000 Frolic Reality Pvt Ltd - Promoter 2,94,12,000 & 656/Ind/2019 (M/s. Divine Infracreation & Trading Pvt. Ltd.) A.Y.– 2011-12 - 5 -
Frugul Trading Company Pvt Ltd – Promoter 2,87,41,000 Maxworth Leafin & Investment Pvt Ltd 4,91,11,900 Ruchi Agrotech Pvt Ltd 5,87,77,900 Samidha Mercantile Pvt Ltd 3,92,92,800 Subhmangal Traders Pvt Ltd 5,36,89,300 Viksit Engeneering Limited 1,38,25,000 42,01,80,700
On 09.01.2014, the representative of the assessee was directed to present all the Directors of the shareholding companies and the companies provided loan.
It is relevant to mention that details of the investors including the confirmation certificates, ITR, Audit Report, incorporation Certificate and P&L Accounts were duly furnished before the Ld. AO. The Ld. AO, however, was not satisfied with the explanation rendered by the persons related to these transactions, particularly, the Directors of these eleven companies. According to him the documents were not found to be authentic and genuine. On this premise, the identity of these investor companies were not found to be acceptable and genuineness of the transactions were also not proved. The Ld. AO was further of the opinion that as in the balance sheet of these companies, sources of funds shown mainly of share premium and share application money were not explained by the Directors of these companies, the creditworthiness of those investor companies were also not proved. All the amounts as claimed to have been received on 31.03.2010 was actually transferred after 31.03.2010 and thus, the same was received in F.Y. 2010-11. In that view of the matter, the addition under Section 68 of the Act is being & 656/Ind/2019 (M/s. Divine Infracreation & Trading Pvt. Ltd.) A.Y.– 2011-12 - 6 - made of entire amount of Rs.48,47,22,100/- received on account of share capital including share premium for the year under consideration.
8. The Ld. CIT(A) deleted the addition of Rs. 42,01,80,700/- received and credited in assessee’s books of accounts for A.Y. 2010-11 as the same was not a transaction pertaining to the year under consideration. The CIT(A) further directed the Ld.AO to pass orders in accordance with the provisions of law relevant to A.Y. 2010-11 during the year which the said amount was credited in his books of account and if the investors are found to be entry providers, the amount can be assessed accordingly for the said A.Y. 2010-11. On the other hand, the share application money received towards the issue of equity shares amounting to Rs.6,45,41,400/- from the investors was confirmed by the First Appellate Authority on the ground that the appellant has failed to prove the genuineness of the transaction and creditworthiness of the shareholders which has been challenged before us by the appellant in for A.Y. 2011-12.
We have heard the rival submissions made by respective parties and we have also perused the relevant materials available on record and the written submissions filed by the appellant and considered the case laws relied upon by both the sides.
10. We find the following details of allotment of shares from the records available by us:
“List of allotments of shares allotted on 30.06.2010: & 656/Ind/2019 (M/s. Divine Infracreation & Trading Pvt. Ltd.) A.Y.– 2011-12 - 7 -
S. Name & Address of Allotee Number of Total No. Occupation of Shares Allotted amount Allottee paid(including premium)
1. Ajitabh Construction A-9/2, MIDC Taloja Industrial 348499 34849900 Pvt. Ltd. Estate, Taloja, Raigarh(M.H.)
2. Aspirant Mercantile 20, Johari Place 1st Floor, 51, 433387 43338700 Company Pvt. Ltd. M.G. Road, Indore
3. Avocado Trading 20, Johari Place 1st Floor, 51, 390672 39067200 Company Pvt. Ltd. M.G. Road, Indore
4. Chhitwan Developers A-9/2, MIDC Taloja 263250 26325000 Pvt. Ltd. Industrial Estate, Taloja, Raigarh(M.H.)
5. Frolic Reality Pvt. Ltd. A-9/2, MIDC Taloja 294120 29412000 Industrial Estate, Taloja, Raigarh(M.H.)
6. Frugal Trading A-9/2, MIDC Taloja 291997 29199700 Company pvt. Ltd. Industrial Estate, Taloja, l Raigarh(M.H.)
7. Maxworth Leafin & 20, Johari Place 1st Floor, 51, 474589 47458900 Investment Pvt. Ltd. M.G. Road, Indore
Ruchi Agrotech Pvt. A-9/2, MIDC Taloja 369942 36994200 Ltd. Industrial Estate, Taloja, Raigarh(M.H.)
9. Samidha Mercantile A-9/2, MIDC Taloja 367991 36799100 Pvt. Ltd. Industrial Estate, Taloja, Raigarh(M.H.)
Shubhamangal Traders A-9/2, MIDC Taloja 228470 22847000 Pvt. Ltd. Industrial Estate, Taloja, Raigarh(M.H.)
11 Viksit Engineering Ltd. A-9/2, MIDC Taloja 138250 13825000 Industrial Estate, Taloja, Raigarh(M.H.)
Total 3601167 360116700 List of allotment of shares allotted on 20.01.2011 & 656/Ind/2019 (M/s. Divine Infracreation & Trading Pvt. Ltd.) A.Y.– 2011-12 - 8 -
S. Name & Address of Allotee Number of Total No. Occupation of Shares Allotted amount Allottee paid(including premium)
Avocado Trading 20, Johari Place 1st Floor, 51, 37500 3750000 Compny Pvt. LTd. M.G. Road, Indore
Maxworth Leafm & 20, Johari Place 1st Floor, 51, 16530 1653000 Investment Pvt. Ltd. M.G. Road, Indore
Ruchi Agrotech Pvt. A-9/2, MIDC Taloja 217837 21783700 Ltd. Industrial Estate, Taloja, Raigarh(M.H.)
Samidha Mercantile A-9/2, MIDC Taloja 42737 4273700 Pvt. Ltd. Industrial Estate, Taloja, Raigarh(M,H.)
Shubhamangal Traders A-9/2, MIDC Taloja 308423 30842300 Pvt. Ltd. Industrial Estate, Taloja, Raigarh(M.H.)
6. Benco Finance and 621, Tulsiani Chambers 623027 62302700 Investment Pvt. Ltd. Narima Point Mumbai
Total 1246054 124605400
Before the Ld. AO, the assessee submitted as follows:
"In continuation to submissions made earlier and in compliance to further queries raised by your good self, we submit the following for kind consideration
01) Justification of shares issued at a premium:- a) It is submitted that the company was-incorporated -in-the- year- 2004 by-members of Bansal family who transferred their entire holdings on 01.06.2007 to four inter corporates at a premium of Rs.40/- per share. Such premium was charged by Bansal group based on intrinsic value of shares because fixed assets in the nature of land and building owned by the company. List of shares transferred from Bansal family to other inter corporates as on 01.06.2007 is annexed. Thereafter, the company allotted 1,50,000 shares of Rs.10/- each to aforesaid four incorporates on 05.07.2007 at a premium ofRs.40/- per share. Such premium of Rs.40/-was thus & 656/Ind/2019 (M/s. Divine Infracreation & Trading Pvt. Ltd.) A.Y.– 2011-12 - 9 - based on the actual consideration .paid to Bansal family being fair market value of such share. The share premium decision is that of Board of Directors taking intc always the market forces and same is on capital account (Anncxurc-A) b) Certain shares held by these incorporates were transferred interse on 07.03.2008. At that time the fair market value of the share was considered at Rs.60/~ per share. Transfers effected on 07.03.2.008 amongst such companies were of 5000 equity shares of the company as per details enclosed. (Annexure-13). c) The company thereafter, issued 4000 shares on 31.03.2010 at a premium ofRs.90/-per share to Shri Santosh Sahara with his family 'members. The Share premium was decided based on the fact that on 01.06.2007 fair market value was decided at Rs.50/- per share which was increased to Rs.60/- per share on 07.03.2008. Therefore, considering the substantial increase in the market value of land and building in Indore, fair market value of such asset as on 31.03.2010 was worked out and the valuation of share was accordingly considered at Rs.100/- per share. Therefore, premium ofRs.90/- per share was justified in view of increased value of assets held by the company. d) During the year, the company issued 48,47,221 new equity shares on 30.06.2010 and 20.01.2011 at the same value i.e. Rs.100/- per share comprising of Rs.90/- towards premium. Such shares were allotted to various intercorporates as per statement annexed (Annexure-C).
02) Identity, Creditworthiness & Genuineness of Share Applicants: It is submitted that various details of share applicants including confirmation certificates regarding investment made by them in equity shares of the assessee company at a premium, have already been submitted. However, further documents to support identity, capacity i.e. creditworthiness and genuineness are enclosed as under :- a) Copy of return of income submitted by all incorporates for A.Y. 2011-12 along with computation of income. b) Copy of Balance sheet and profit and loss account of all intercorporates along with schedule of investments as on 31.03.2011. c) Copy of incorporation certificate of all applicant companies issued by Registrar of Companies, Maharashtra.
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It is submitted that most of the applicants are carrying on the trading-activities as evident from the profit and loss account and they are also registered with Commercial tax Department at Indore and/or Mumbai The companies are being regularly assessed to tax and submitted their returns of income upto A.Y. 2013-14 and such shares are still held by them as on date. Thus, the identity is proved beyond doubt. Capacity or creditworthiness of the applicants is proved from the fact that each one of them are having substantial capital and reserves of their own and borrowed funds were not invested while making investment in shares of the assessee company. The balance sheet of the applicant companies proves such fact beyond doubt. Genuineness of the applicants is also proved from the fact that the companies are either investment companies registered with Reserve Bank of India as NBFC or such companies are investing the funds for better return. The directors' of various companies who made the investment in this company are known to the directors of four incorporate who had initially purchased the shares from Bansal family. The share application money was received by A/c payee cheques and the investment in shares of assessee company was approved by the Board of Directors of applicant company. Thus, identity, capacity, creditworthiness and genuineness of such investment in the assessee company by various incorporates is proved beyond doubt, which may kindly be accepted.
12. Before the Ld. CIT(A), the assessee submitted as follows:
“(a) Addition u/s. 68 of the cannot be made on opening balance: The Appellant had received the shares application money from the various investor companies amounting to Rs. 48, 47, 22, 100 /- and credited in the books of account in the preceding previous year, i.e. financial year 2009-10 relevant to assessment year 2010-11. (Kindly refer to Balance Sheet of F.Y. 2009-2010 in FPB) The AO has treated shares application money as unexplained cash credit and made addition u/s.68 of the Act. In this regard, the appellant would like to invite kind attention to section 68 of the Act which read as under:
Section 68: Where any sum is found credited in the books of an assesses maintained for any previous year, and the assesses offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing & 656/Ind/2019 (M/s. Divine Infracreation & Trading Pvt. Ltd.) A.Y.– 2011-12 - 11 -
Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assesses of that previous year It can be observed from the above that the addition u/s. 68 of the Act can be made in the previous year in which credit is made in the books of account and not in subsequent year. For this view, the Appellant place reliance on the following decisions: > ITO v. NasirKhan J. Mahadik (16 taxmann.com 312) (Mum.) > Parmod Kumar Dang v. JCIT (6 SOT 301)(DELHI) > DCIT v. Allied leather Finishers (P.) Ltd (32 SOT 549)(LUCK.) In view of the above, the action of the AO in making addition u/s. 68 of the Act in the previous year is not as per law and therefore the addition deserves to be deleted. Without prejudice to proposition a. above: b. The transaction has been explained by the Appellant with the supporting documentary evidence: The AO has treated the entire shares application money as unexplained cash credit and has made addition u/s. 68 of the Act. In this regards, it is submitted that the following conditions need to be satisfied cumulatively for applying section 68 of the Act. i. the existence of books of account maintained by the assessee himself; ii. a credit entry in the books of account; and iii. the absence of a satisfactory explanation by the assessee about the nature and source of the sum credited. In the present case, it is not disputed facts that the appellant has maintained its books of account and has credited shares application money in the preceding of the Act. previous year 2009-10. Further, it is settled legal position that the onus is on the assessee to explain the nature and source of cash credit and it is also a legal settled position in the law that in order to discharge the onus, the assessee must prove the following: a) The identity of the person from whom the fund is received; b) The capacity of the said person to advance money; c) The genuineness of the transaction. In view of the above, the appellant has submitted the following details to prove the identity, capacity of the inventor companies and genuineness of the transaction:
> Company's Master Data like company name, Company Identification Number (CIN), date of incorporation, registered address, e-mail ID, etc. of Investor companies; > Name, Address, PAN, Income-tax Jurisdiction, etc. of the Investor companies; > Certificate of Incorporation of the Investor companies: > Copy of Director Report, Audit Report and Balance Sheet of the Investor companies; > Form of application for equity shares filled by the Investor companies; Copies of Allotment Advices given by the Appellant to the Investor companies; & 656/Ind/2019 (M/s. Divine Infracreation & Trading Pvt. Ltd.) A.Y.– 2011-12 - 12 -
> Bank statement of appellant. > Confirmations from the investor companies > Copy of Shareholders Register & other statutory registers maintained under the Companies, Act, 1956. From the above details of the investor companies, the following information are summarized; Sr. Amount Amount Total Share Reserves Networth Name No. of of Share of Amount Capital of Investor of investor Capital Premium of companies Investor companies Investor companies companies 34,84,990 313,64,910 348,49,900 261,00,000 2340,00,000 2608,04,602 Ajitabh 1 Constructio n Pvt. Ltd 2 Aspirant 43,33,870 390,04,830 433,38,700 262,26,000 2383,79,407 2678,50,814 Mercantile Company Put. Ltd 3 42,81,720 385,35,480 428,17,200 261,40,000 2343,60,000 Avocado 2610,31,452 Trading Company Put. Ltd
4 62,30,270 560,72,430 623,02,700 450,84,840 6143, 90,760 6579,31,785 Benco Finance and Investment Put. Ltd.
5 Chitwan 26,32,500 263,25,000 228,80,000 2050,20,000 2286,23,4 236,92,500 30 Developers Pvt. Ltd 6 29,41,200 264,70,800 294,12,000 261,00,000 2340,00,000 2624,35,720 Frolic Reality Pvt. Ltd
7 29,19,970 262,79,730 291,99,700 261,00,000 2340,00,000 2604,75,676 Frugal Trading Company Put. Ltd & 656/Ind/2019 (M/s. Divine Infracreation & Trading Pvt. Ltd.) A.Y.– 2011-12 - 13 -
8 49,11,190 442,00,710 491,11,900 201,00,000 1800,00,000 2005,15,532 MaxworthL eafin& Investments Pvt. Ltd 9 58, 77, 790 529,00,110 587,77,900 247,02,000 2133,00,000 2623,16,550 RuchiAgrote chPul. Ltd
10 Samidha 41,07,280 369,65,520 410,72,800 161,00,000 1440,00,000 1717,05,340 Mercantile Pvt Ltd 11 53,68,930 483,20,370 536,89,300 531,80,000 1037,70,000 1282,08,931 Shubhmang al Traders Pvt. Ltd '12 13,82,500 124,42,500 138,25,000 24,90,000 1235,41,698 Viksit 12,10,51,698 Engineering Limited (Listed Company)
Grand 484,72,210 4362,49,890 4847,22,100 Total
In view of the above, it can be observed that all the investors, companies are assessed under Income tax Act and all investor companies had enough reserves to make investment in the Appellant Company. This proves the identity and capacity of the investor companies. Further, the Appellant has received the funds via proper banking channel and the relevant bank statement of the Appellant filed with the AO vide letter dated 04-12-2013, and all the companies had provided confirmation with respect to the transaction: By these, the genuineness of the transaction is also proved.
The AO doubted the authenticity of the documents submitted before him based on the statements of directors and other persons recorded by him at the time of assessment proceeding. In this regard, as submitted above, these statements are recorded by mean of coercion and therefore these statements are not reliable evidence. Further, all the directors and other person have given statements only that they are not aware of the transaction. They have not denied the transaction. Therefore, the Appellant has discharged its onus and proved the identity, capacity of the investors companies and genuineness of transaction.
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Following is the summary of statements taken on directors of share applicant companies.
Total Share Applicant Companies 12 No Director’s statement taken 3 Statement of Invalid Directors (Not director at time 1 of transaction) Directors called issuing notices in personal name of 2 directors but no statements recorded in relation to share applicant company. Statement of only 1 Directors taken 5 Statement of both directors taken 1
Thus out of 12 share applicant only 1 company's both directors were called for and statements have been taken. 9. The Appellant submit that the Appellant has discharged its onus of proving the identity of the parties, genuineness of the transactions, and the creditworthiness of the shareholder. Therefore, the Appellant humbly submit that the addition made under section 68 of the Act be deleted.”
The case made out by the assessee is this that the appellant has received the share application money from various investor companies amounting to Rs.48,47,22,100/- and credited in the books of account in the previous assessment year i.e. F.Y. 2009-10 relevant to A.Y. 2010-11. The same has also been established from the balance sheet submitted by the assessee as annexed to the paper book filed before us. So far as the provision of Section 68 of the Act is concerned, when a sum is found credited in the books of account of the assessee maintained for any previous year and when the assessee offers no explanation about the nature and source thereof or the explanation so rendered by the assessee is not found to be satisfactory by the & 656/Ind/2019 (M/s. Divine Infracreation & Trading Pvt. Ltd.) A.Y.– 2011-12 - 15 - Ld. AO, the sum so credited may be charged to Income Tax as income of the assessee of that previous year. Admittedly, in the case in hand, as the share application money and premium has been credited in the bank account of the assessee in A.Y. 2010-11, the addition made under Section 68 of the Act in the year under consideration is not sustainable.
The assessee further submitted the following before the First Appellate Authority:
“1. On the facts and in the circumstances of the case and in law, the Learned AO erred in making addition of entire equity shares application money amounting to Rs. 48,47,22,100/-, received from the Corporate Investors, u/s 68 of the Act on the alleged ground that it is unexplained cash credit.
2. The Learned AO failed to appreciate and ought to have held that: a. The share application money has been credited by the appellant in preceding previous year's books of account of the appellant and it is an opening balance for that year under consideration; b. the Appellant has filed all the relevant documentary evidences call for by the AO and thus, the Appellant has discharge its onus and it has proved the identity and creditworthiness of all investor companies; c. the Appellant received the funds via proper banking channel and the relevant bank statement of the Appellant were filed with the AO and hence genuineness of the transaction is also proved.
3. The Appellant prays that the AO be directed to delete the addition of Rs.48,47,22,100/- made u/s.68 of the Act which addition has been purportedly made by treating the equity share application money as unexplained cash credit 4. Without prejudice to above, since the shares application money has been received in preceding previous year, the addition of the same cannot be made in the captioned year and therefore, the Appellant prays that the addition made u/s 68 of Rs. 48,47,22,100/- in the captioned assessment year be deleted.”
Thus, it further appears that the assessee in order to prove the identity, creditworthiness of the investors and the genuineness of the transactions duly submitted detailed documents before the authorities below as already & 656/Ind/2019 (M/s. Divine Infracreation & Trading Pvt. Ltd.) A.Y.– 2011-12 - 16 - indicated hereinabove. However, we find that no defect has been pointed out by the Ld. AO on evidences and documents submitted by the assessee to prove the three limbs of Section 68 of the Act. If the AO was not satisfied with the documents so submitted by the assessee, the AO was not prevented to make further enquiry in respect of investors companies. We find that instead of exercising the statutory powers vested upon Ld. AO, the burden of proof has entirely been shifted on the assessee despite the submission of documents furnished by the assessee in order to satisfy the three limbs of Section 68 of the Act. The Ld. AO has not issued notice under Section 133 (6) of the Act to the investors who had paid share application money to the assessee company towards share capital and share premium. No fact is forthcoming from the order passed by the Ld. AO that enquiry to that effect has been done by him before making addition. Simply, rejection of submission of documents without scrutinizing the same alleging receipt of accommodation entry in the garb of share capital and share premium by the assessee is not supposed to be encouraged. The allegation of not having creditworthiness of the investors companies made by the Ld. AO is also contrary to the financial records of those investor companies as submitted by the assessee. The assessee has tried its level best by filing plethora of documents and evidences in order to satisfy the AO and discharged his onus to prove the identity, and creditworthiness of the investors and genuineness of the transactions.
The Ld. AO has not given any factual finding in respect of these share applicants in the light of documents so submitted but only discussed the & 656/Ind/2019 (M/s. Divine Infracreation & Trading Pvt. Ltd.) A.Y.– 2011-12 - 17 - modus operandi adopted by the entities and termed them as shell companies engaged in providing bogus entries of share capital and share premium by money laundering. The same is entirely on surmises and conjunctures and not borne on records. No material is forthcoming from the Ld.AO to support such finding against the case made out by the appellant. In this aspect, the assessee has relied upon the judgment passed by the Hon’ble Delhi High Court in case of CIT vs. Oasis Hospitalities in ITA No. 2093/2010, which we have carefully gone through.
Further that, it appears that the Ld. AO has made addition on the basis of the statement of the Directors. The statements were recorded under coercion and threat and thus, the same cannot be said to be admissible evidence to arrive at such conclusion in the matter. Furthermore, no opportunity of cross examination was given to the assessee, in the absence of which, the addition is not sustainable. The judgment in this aspect as relied upon by the appellant in the case of Andaman Timber Industries vs. CCE [2015] 281 CTR 241 and the judgment passed by the Hon’ble Apex Court in the case of CIT vs. Odeon builders (P.) Ltd. [2019] 110 taxmann.com 64 has been duly taken care by us which goes without saying in favour of the assessee. We further found the following facts which goes to the germane to the issue involved in the matter.
(i) Out of 12 Investors Companies, in case of 3 Investors Company viz. M/s Avocoda Trading Company Pvt. Ltd., M/s Chitwan Developers and Ruchi Agrotect Private limited no Statement was recorded of any director or & 656/Ind/2019 (M/s. Divine Infracreation & Trading Pvt. Ltd.) A.Y.– 2011-12 - 18 - principal officer thus addition of these three companies has been made without any sufficient cause.
(ii) In case of M/s Viksat Engineering (Public limiated company) statement of Mr. Sanjay Khandewal was taken who was appointed w.e.f 25/08/2011 and thus it is obvious that he was not fully aware of the transaction.
(iii) In case of other 6 investors, statement of only 1 director was taken who are involved in business operation and less in financial operation which is evident from Paragraphs 14 to 18 of CIT (A)’s order.
(iv) In view of the above, the addition is found to be wrong without any corroborative evidence and made only on basis of statement that too without giving any cross-opportunity of hearing. Therefore, the same cannot be sustained. Additionally, at the time of Appellate hearing opportunity of cross examination was provided wherein all the Directors who had given statement had explained the transaction with appellant company along with the purpose of investment in Appellant company. Thus, the allegation on basis of which the addition was made by the AO does not survive any more which is discussed in CIT (A)’s order at page nos. 69 to 72.
(v) Further the Ld. AO had alleged that the Director has failed to explain the transaction but importantly failed to take note that the director have not denied the transaction and at later stage before the First Appellate Authority they have explained the object & purpose of their transactions. & 656/Ind/2019 (M/s. Divine Infracreation & Trading Pvt. Ltd.) A.Y.– 2011-12 - 19 - (vi) The Ld. AO has made addition of all 12 investors company only on basis of statement of one director of only five investors without bringing on record even a single iota of evidence to support such addition and without looking into the financials of these investors. That Existence of investor company and 3 limbs of section 68 of the Act cannot be disputed merely on the ground that few of the directors could not explain the transactions at the same time accepting the transactions because they were involved in business related activity and have less knowledge in financial activity of the company.
(vii) Most Importantly during the Appellant Proceedings the Ld. AO on direction of CIT (A) re-examined the director of the investor company wherein Director explained the Nature of transactions & activity of their business & purpose of investment which discussed by the Ld. CIT(A) in his order at page nos. 69 to 72. The re-examination and summary thereof appeared at page 74, paragraphs 14 to 18 wherein all the directors of the investor companies had explained the transactions. Thus the finding of Ld. AO does not survive any more.
(viii) That from the bare perusal of discussion made by Ld. CIT (A) in its order and in process of cross examination of directors it is evident that the entire line of reasoning given by the AO to make addition and to doubt the creditworthiness of the shareholders and evidences submitted cannot be countenanced anymore. Thus, in conclusion, the whole reasoning of Ld. AO does not exist anymore after the appellate order coupled with factum that the & 656/Ind/2019 (M/s. Divine Infracreation & Trading Pvt. Ltd.) A.Y.– 2011-12 - 20 - assessee has duly discharged his onus to prove the 3 limbs of Section 68 of the Act. In that view of the matter the addition deserves to be deleted.
After careful consideration of the records, we further find that all the 3 limbs of section has been discharged by the assessee in the following manner:
(a) Identity: The LD. AO failed to look into the factum that investors are carrying on business of trading activities (as evident from P&L Account), investors are regularly assessed with Income Tax department. That out of eleven investor companies four companies are the promoter companies and therefore identity is beyond doubt.
(b) Creditworthiness : The investors are having substantial capital & reserve of their own and borrowed funds were not invested for making investment & from same investor companies the appellant has taken unsecured loan in the same financial years which was duly accepted by the Ld. CIT (A) by giving a finding that “Companies are existing & having Creditworthiness”
Investors Reserve & Surplus CIT (A) deleted addition on unsecured loan qua same investor companies Ajitab Construction Pvt Ltd 21,76,54,571 Aspirant Mercantile Company Pvt Ltd - 23,83,79,406 Promoter Unsecured Loan Accepted by Ld. CIT Avocado Trading Company Pvt Ltd – 23,48,91,451 (Page No. 98 of CIT (A) order for same Investors company Promoter Chhitwan Developers Pvt Ltd 20,57,43,431 Frolic Reality Pvt Ltd - Promoter 23,63,35,720 Frugul Trading Company & 656/Ind/2019 (M/s. Divine Infracreation & Trading Pvt. Ltd.) A.Y.– 2011-12 - 21 -
Pvt Ltd – Promoter 23,43,75,677 Unsecured Loan Accepted by Ld. CIT Maxworth Leafin & (Page No. 98 of CIT (A) order for 18,04,15,532 Investment Pvt Ltd same Investors company Unsecured Loan Accepted by Ld. CIT (Page No. 98 of CIT (A) order for 23,76,14,793 Ruchi Agrotech Pvt Ltd same Investors company Unsecured Loan Accepted by Ld. CIT Samidha Mercantile Pvt (Page No. 98 of CIT (A) order for 144,00,000 Ltd same Investors company Unsecured Loan Accepted by Ld. CIT Subhmangal Traders Pvt 10,37,70,000 (Page No. 98 of CIT (A) order for Ltd same Investors company Viksit Engeneering Limited 12,11,94,879 (c) Genuineness : The Director of investors Companies are known to the directors of four incorporated companies who had initially purchased shares from Bansal Family. Furthermore, the amount was received through Banking channel which has been admitted by the authorities below.
The investors are not mere paper company as alleged by the Ld. AO. The details of turnover and net worth of these companies are as follows which is on record:
Investors Turnover Net-worth Ajitab Construction Pvt Ltd 19,13,22,372/- 25,05,39,571 Aspirant Mercantile Company Pvt Ltd - 18,37,65,336/- 26,46,05,406 Promoter Avocado Trading Company Pvt Ltd – 22,86,27,396 26,10,31,451 Promoter
Chhitwan Developers 19,15,49,941 22,86,23,431 Pvt Ltd Frolic Reality Pvt Ltd - Promoter 19.11 CR. 26,24,35,720 Frugul Trading Company Pvt Ltd – Promoter 291020000 26,04,75,677 Maxworth Leafin & Investment Pvt Ltd 3,74,79,857 20,05,15,532 Ruchi Agrotech Pvt Ltd & 656/Ind/2019 (M/s. Divine Infracreation & Trading Pvt. Ltd.) A.Y.– 2011-12 - 22 -
3 CR. 26,26,17,435 Samidha Mercantile Pvt Ltd 1,33,21,85,797 17,17,05,340 Subhmangal Traders Pvt 86.8 CR. 15,69,50,000 Ltd Viksit Engeneering Limited 65,50,98,278 12,36,84,879
That from the above, it is evident that investors company / their businesses are not paper concerns. The assessing officer has not given any reasoned finding based on examination of the financial statements. The identity, creditworthiness and genuineness of these three resident share applicants are established by above factual of turnover & net-worth. Moreover, the net-worth of each of the investors was more than the investment made in Assessee Company which was apparent from above and visible from their audited financial statements as placed on record.
Further that the burden of Proof under Section 68 of the Act was duly discharged by the appellant. For the purposes of Section 68 of the Act, the 'burden to proof' begins with the assessee and once the assessee submits evidence in support of the credit and makes out a prima facie case, then the 'onus of proof' shifts to the Revenue. Such shifting of 'onus' is a continuous process in the evaluation of evidence. If the evidence on record weighs in favour of the assessee [based on preponderance of probability which is the standard of proof required in income tax assessments] or that the explanation put forth cannot be said to be completely unsatisfactory, then the onus cast upon the assessee u/s 68 of the Act can be said to have been discharged. & 656/Ind/2019 (M/s. Divine Infracreation & Trading Pvt. Ltd.) A.Y.– 2011-12 - 23 -
On this aspect, we find that the department has placed reliance on the Judgment of the Hon'ble Apex Court in the case of NRA Iron & Steel (P.) Ltd. (supra), whereas, the same is found to be misplaced in as much as in that case [NRA] the shareholders were found to be untraceable even after making field enquiries. The assessment was framed in the most arbitrary manner by blatantly ignoring glaring material facts and evidences placed by the assessee before the authorities below.
We have further considered that the Proviso to section 68, which provides that explanation furnished by assessee about nature and source of share application money, etc. shall be not satisfactory unless person in whose name such credit is recorded offers an satisfactory explanation about nature and source of sum so credited, is applicable only from assessment year 2013- 14 and is not retrospective in nature. In this regard, we have considered the judgment passed in the matter of Gaurav Triyugi Singh v. ITO [2020] 121 taxmann.com 86/423 ITR 531 as relied upon by the appellant and has found that the said provision is not applicable to this instant case.
In view of the documents / evidences it is evident the initial burden on the assessee was only to substantiate the source of its share Application & premium in as much as the identity and creditworthiness of the investors along with the genuineness of the transaction are provided. Once, the same has been discharged by the Assessee, the onus had shifted on Ld. AO to dislodge the assessee's documentary evidences and bring on record cogent material to establish that the assessee generated unaccounted money. & 656/Ind/2019 (M/s. Divine Infracreation & Trading Pvt. Ltd.) A.Y.– 2011-12 - 24 - However, no iota of document is forthcoming from the Revenue to establish the same against the appellant. Rather the addition has been made on surmise and conjectures only by the Ld. AO.
Thus, when assessee had discharged initial onus of proving share- application transactions and Assessing Officer could not establish that assessee generated unaccounted money and routed same through banking channels in the garb of share-application money, addition under sections 68 is not sustainable in law and thus liable to be quashed.
Keeping in view the entire aspect of the matter, we support the order of deletion of addition made by the Ld. CIT(A). We do not find any merit in the appeal preferred by Revenue. Hence, same is dismissed. However, it is also a fact that the Ld. CIT(A) deleted the addition only on this aspect that the addition is not allowable in respect of the year under consideration since the money has been credited in the books of accounts of the appellant in the earlier A.Y. 2010-11. However, we do not find any justification in directing the Ld. AO to take action in accordance with the provisions of law for F.Y. 2009-10 relevant to A.Y. 2010-11 during the year in which the said amount was credited in the appellant’s books of accounts and in the event the investors are found to be the entry providers, the amounts can be assessed in the year in which the share application money was received and credited in the books of accounts of the appellant i.e. for A.Y. 2010-11 and not in the year where shares were allotted to them because of the particular reason that the assessee has discharged its onus by adducing various & 656/Ind/2019 (M/s. Divine Infracreation & Trading Pvt. Ltd.) A.Y.– 2011-12 - 25 - documents to substantiate the source of its application and premium in as much as identity and creditworthiness of the investors companies alongwith genuineness of the transactions. Rather the onus is shifted to the Ld. AO to dislodge the assessee’s documentary evidence and bring on record the cogent material to establish that the assessee generated money and rooted the same through banking channel in the garb of share application money. Needless to mention that no such evidence is forthcoming from the Revenue in order to dislodge the assessee’s evidentiary docuemnts as discussed above. Moreso, the CIT(A) does not have any power to pass such direction upon the Ld. AO. We find, that the CIT(A) is empowered under Section 251 of the Act to confirm the order of the Ld. AO, to reduce or enhance or annul assessment order under the provisions of the Act and no power has been vested upon the Ld. CIT(A) to give any direction to the Ld. AO for reopening the case of other years. On this aspect, we have considered the judgment relied upon by the Ld. AR in the case of I.T.O vs. Sri Biswajit Chatterjee in ITA No.565/Kol/2013 for A.Y. 2007-08 passed by the Kolkata Bench. We find that the said matter was decided on the basis of the ratio laid down by the Hon’ble Supreme Court in the case of ITO vs. Murlidhar Bhaghubabu reported in 52 ITR 335 (SC). The relevant observation on this aspect by the Kolkata Bench is as follows:
“11. Now the Revenue has agitated before us that Ld. CIT(A) erred in not giving direction to reopen the case of earlier years of the assessee in which investments were made. In this regard, we find that Ld. CIT(A) has been given power u/s. 251 of the Act to confirm the order of AO reduce, enhance or annul assessment order under the provision of Act there is no power available to Ld. CIT(A) to give direction to AO for reopening the case of other years. The Income Tax Act provides different schemes wherein the AO is empowered to assess or re-assess the income which has escaped assessment. So at the most, if the Revenue wishes to tax the escapement of income then it has followed the scheme provided under the Act. The relevant provisions for taxing the escape income are given u/s 147/263 & 656/Ind/2019 (M/s. Divine Infracreation & Trading Pvt. Ltd.) A.Y.– 2011-12 - 26 - of the Act. In holding so, we find support and guidance from the judgment of Hon'ble Supreme Court in the case of ITO vs. Murlidhar Bhaghubabu reported in 52 ITR 335 (SC). The relevant extract of the judgment is reproduced below:- "Section 33(4) of 1922 Act only refers to a finding or direction made by an appellate authority and does not itself confer any power on an appellate authority to make a finding or direction. Indeed, section 34 of 1922 Act deals with entirely a different aspect, that of empowering an ITO to bring to assessment escaped income, and has no concern with the powers of an appellate authority. The provision which deals with the powers of an appellate authority is section 31 of 1922 Act." Respectfully following the judgment of Hon'ble Supreme Court in the case of Murlidhar Bhaghubabu (supra) we conclude that Ld. CIT(A) has no power under the provision of law for giving any direction to AO for reopening of assessment. The appeal before Ld. CIT(A) is confined to the particular assessment year which is before him. Thus, in view of the above proposition, A.Y 2007-08 ITO Wd-1(2) Hgl. Vs. Sh. Biswajit Chatterjee Page 8 we dismiss the ground of Revenue's appeal. Consequently, Revenue's ground is dismissed.
In the result, Revenue's appeal stands allowed partly for statistical purpose.”
We find that the direction given by the Ld. CIT(A) to reopen the case of another year of the assessee has been quashed following the ratio laid down by the Hon’ble Supreme Court due to lack of jurisdiction of the CIT(A).
Thus, keeping in view the entire aspect of the matter, we do not find any justification in passing such direction to the Ld. AO to reopen the case in view of the ratio laid down by the Hon’ble Supreme Court followed by the Kolkata Bench, particularly, when this primary onus has been duly discharged by the assessee by producing the Directors and the corroborative evidences in order to prove the identity and creditworthiness of the investors companies and genuineness of the transaction made to the assessee by these companies. Hence, we expunge this observation and quash this direction made by the Ld. CIT(A) to the Ld. AO to reopen the case of the assessee for different assessment year. Assessee’s application under Rule 27 of the Income Tax & 656/Ind/2019 (M/s. Divine Infracreation & Trading Pvt. Ltd.) A.Y.– 2011-12 - 27 - (Appellate Tribunal) Rules, 1963 filed by the appellant is, thus, allowed accordingly.
Deletion of addition of Rs.7,85,60,700/- made under Section 68 of the Act in respect of unsecured loans received by the appellant company from various corporate lenders is under challenge before us by the Revenue. The case of the assessee is this that the assessee has discharged all three limbs of Section 68 of the Act by way of submitting various details of the lender companies including the confirmation certificate, Income Tax Return, Audit Report, Incorporation Certificate and P&L Account. In that view of the matter, the deletion of addition made by the Ld. CIT(A) analysing said documents placed on record is justified. The case of the Revenue is this that the assessee has not been able to furnish proper documents so as to justify the identity of those loan provider companies. The test of genuineness of the transaction has also failed as none of the transaction has been explained neither the proof of creditworthiness of those companies giving unsecured loan to the appellant has been found to be satisfactory. The funds, therefore, of these companies were not raised genuinely and these entities are nothing but paper entities. In that view of the matter, the Ld. AO rightly added this impugned amount under Section 68 of the Act, which was, however, deleted by the Ld. CIT(A). Hence, the instant appeal before us.
We have heard the rival submissions made by the respective parties and perused the materials available on record. & 656/Ind/2019 (M/s. Divine Infracreation & Trading Pvt. Ltd.) A.Y.– 2011-12 - 28 -
It appears from the records that the appellant has received unsecured loans from the following parties:
SN Name of companies Date of PAN Total Amount incorporation 1 Viksit Engineering Limited 16-02-1983 AACV1796P 17,70,000
2 Shubhamangal Traders Pvt. Ltd. 28-04-1997 AAECS7744N 3,55,62,300
3 Middlemist Agrotech Private Limited 11-06-1997 AABCV0168J 2,35,71,700 (Formerly Ruchi Agro Tech Put. Ltd.) '4 MaxworthLeafin and Investments Put. 20-07-1 995 AACCM7410K 34,23,000 Ltd. 5 Satguru Iron and Steel Company Pvt. 17-11-2005 AALCS0501Q 17,70,000 Ltd, 6 Toptra.de Mercantile Pvt. Ltd. 02-04-2007 AAGCA4206K 37,50,000 (Formerly Avocado trading Company (P) Limited
7 SamidhaMercantiles Put. Ltd. 02-05-1997 AAECS7746Q 42,73,700 8 Mid India Power & Steel Ltd 19-7-1995 AAACM7130L 44,40,000
Grand Total 7,85,60,700
Before Revenue, the appellant filed the acknowledgement of Income tax Return, forms filed with ROC, PAN & address of the lenders, Certificates of incorporation of the companies, latest financials and Income Tax Returns in order to prove existence of an entity. In fact, the assessee has filed the latest financial records up to A.Y. 2018-19 alongwith acknowledgement of Income Tax Return for A.Y. 2018-19 from whom the impugned loans were received justifying the lender companies are still active. It is relevant to mention that only because the Directors would not explain the transaction with the lenders, the Ld.AO made the addition despite filing of all relevant & 656/Ind/2019 (M/s. Divine Infracreation & Trading Pvt. Ltd.) A.Y.– 2011-12 - 29 - documents by the appellant which is germane to the issue involved in the matter. Furthermore, the assessee had received loan through account payee cheques. In support of loan transaction, the books of accounts, bank statement and Income Tax Return of the lenders were duly submitted. Apart from that we have further considered the companies’ master data, Income Tax jurisdiction details and financial of these parties, perusal of which, does not keep any doubt in regard to the identity as well as financial capacity i.e. the creditworthiness of these parties. The financial capacity of these companies are also clear from those documents which has been considered and summarized by the Ld. CIT(A) as follows:
S.N Name of Companies Date of PAN Loan Amount Turnover FY Networth as incorporation 2010-11 or. 31.03.2011
01 Viksit Engineering 16-02-1983 AAACV1796P 17,70,000/- 65,50,98,278 12,36,84,879 Limited
02 Shubhmangal 28-04-1997 AAECS7744N 3,55,62,300 36,86,35,419 12,81,58,932 Traders Pvt. Ltd,
03 Ruchi Agro Tech 11-06-1997 AABCV0168J 2,35,71,700 23,19,60,143 26,26,17,435 Pvt. Ltd.
04 Maxworth Leafm 20-07-1995 AACCM7410K 35,23,000 3,74,79,857 20,05,15,532 and Investment Pvt. Ltd,
05 Satguru Iron and 17-11-2005 AALCS0501Q 17,70,000 28,88,23,428 67,67,000 Steel Company Pvt Ltd.
06 Avocado. Trading 02-04-2007 AAGCA4206K 37,50,000 22,86,27,396 26,10,31,452 Company Pvt. Ltd.
07 Sarriidha 02-05-1997 AAECS7746Q 42,73,700 1,33,21,85,707 17,17,05,340 Mercantiles Pvt. Ltd.
08 Mid India Power & 19-07-1995 AAACM7130L 44,40,000 6,90,15,86,455 1,84,02,22,650 Steel Ltd.
& 656/Ind/2019 (M/s. Divine Infracreation & Trading Pvt. Ltd.) A.Y.– 2011-12 - 30 -
Grand Total 7,85,60,70 0 10,54,43,96,683 2,99,47,03,220
When the assessee has discharged its onus by way of submitting entire details including the identity and creditworthiness of lenders of companies and genuineness of transactions, the addition under Section 68 of the Act is uncalled for. In this regard, the assessee relied upon the following judgments: i. CIT vs. Sachitel Communications (P.) Ltd., reported in [2014] 51 taxmann.com 205 (Gujarat) ii. CIT vs. Patel Ramniklal Hirji, reported in [2014] 41 taxmann.com 493 (Gujarat) iii. CIT vs. Apex Therm Packaging (P.) Ltd., reported in [2014] 42 taxmann.com 473 (Gujarat) iv. CIT vs. Mark Hospitals (P.) Ltd., reported in [2015] 58 taxmann.com 226 (Madras) v. CIT vs. Vijay Kumar Jain, reported in [2014] 41 taxmann.com 433 (Allahabad)
Needless to mention that the Revenue has failed to come forward with any document so as to justify the addition made by the Ld. AO under Section 68 of the Act.
We have carefully considered the above judgment relied upon by the appellant before us. The crux of the ratio laid down by all the judgments is this that where the assessee duly submitted all the details of creditors from whom it had obtained unsecured loans and the evidence produced by the & 656/Ind/2019 (M/s. Divine Infracreation & Trading Pvt. Ltd.) A.Y.– 2011-12 - 31 - assessee proved the creditworthiness of the lender companies and genuineness of the transaction, no addition under Section 68 of the Act is sustainable. The Directors have also filed the confirmation of the above loan transactions. We further note that out of the total impugned loan amount of Rs.7,85,60,700/-, Rs.6,67,42,700/- were squared off during the year and the balance of Rs.1,18,18,000/- were outstanding at the year end which also were further squared off before 31.03.2013 i.e. before passing the assessment order dated 28.03.2014. On this aspect, we have considered the judgments relied upon by the assessee in the case of CIT vs. Kapoorchand Magneshchand, reported in (2013) 38 taxmann.com 239 (All.), H. R. Mehta vs. Asst. CIT, reported in [2016] 72 taxmann.com 110 (Bombay), CIT vs. Ayachi Chandrashekhar Narsangji, reported in [2014] 42 taxmann.com 251 (Gujarat), CIT vs. Lovely Exports Pvt. Ltd., reported in 216 CTR 195 (SC), wherein it has been held that when the loan taken by the assessee was duly repaid through account payee cheque to the lenders, the addition under Section 68 of the Act as unexplained cash credit is not sustainable. In that view of the matter, the judgment passed by the Ld. CIT(A) in deleting the addition of Rs.7,85,60,700/- found to be justified, without any ambiguity so as to warrant interference. Hence, the ground preferred by the Revenue is found to be devoid of merit and thus dismissed.
ITA No. 656/Ind/2019 (Assessee’s Appeal)
Addition of Rs.6,23,02,700/- qua account of Share application money including share premium is subject matter before us. & 656/Ind/2019 (M/s. Divine Infracreation & Trading Pvt. Ltd.) A.Y.– 2011-12 - 32 -
The brief facts leading to the issue is this that out of Rs.6,45,41,400/- received by the assessee as the share application money including the share premium, Rs.6,23,02,700/- was received from one Benco Finance & Investment Pvt. Ltd. The name of the said investor company is also appearing at Page No. 52 of the order passed by the Ld. CIT(A) alongwith the name of the other 11 investor companies. Surprisingly, though the Directors of other companies were called for by Ld. AO. The Directors of this particular company was not called neither examined so as to determine the identity and creditworthiness of the said investor company and the genuineness of the transaction alongwith other companies. In fact, the said Benco Finance & Investment Pvt. Ltd. had received the said amount from its investors company. It is relevant to mention that the relevant financial statement is appearing at Page Nos. 90 onwards in the paper book filed before us. These were also on record before the authorities below. Audit Report in respect of Benco Finance & Investment Pvt. Ltd. is also appearing at Page No.90 of the paper book filed before us. The assessment order in respect of the said company is also found at Page No.80 of the paper book for A.Y. 2011-12. It is the case of the assessee that this is the non-banking financial company engaged in the business of finance. From the financial statement, however, it appears that the investment company having sufficient reserve and surplus to make the impugned investment. Before us, it was further clarified by the Ld. AR that so far as to the remaining amount of Rs.22,38,700/- is concerned, in respect of which, the Ld. CIT(A) has observed that the assessee has failed to submit any details. The two investors company, namely, Frugal Trading Co. Pvt. Ltd. and Samidha Mercantile Pvt. Ltd. made & 656/Ind/2019 (M/s. Divine Infracreation & Trading Pvt. Ltd.) A.Y.– 2011-12 - 33 - the share application amount of Rs.4,58,700/- and Rs.17,80,000/- respectively totalling to Rs.22,38,700/-. It has further been clarified and gone through by us that the said two companies are having turnover of Rs.29,10,20,000/- and Rs.1,33,21,85,797/- and networth of Rs.26,04,75,677/- and Rs.17,17,05,340/-. The Ld. CIT (A) further applied the amendment made under the Finance Act, 2012 in regard to source of source of the amount so credited in the appellant’s books of accounts, which has been given effect on and from 01.04.2013. The Ld. AR vehemently argued that the same is not applicable to the case in hand since the year under consideration i.e. A.Y. 2011-12. We find substance in such submission made by the Ld. AR. Thus, having regard to the facts and circumstances of the case, we find that though sufficient details have been furnished by the appellant in regard to the financial statement of the Benco Finance & Investment Pvt. Ltd., no enquiry has been made by the Ld. AO. The application of the amendment through Finance Act, 2012 w.e.f. 01.04.2013 though made by the Ld. CIT(A), the same is not found to be applicable here in view of the transaction relates to A.Y. 2011-12. On the other hand, when the assessee has substantially discharged its onus to satisfy three limbs of Section 68 of the Act in regard to identity of the said Benco Finance & Investment Pvt. Ltd. through its assessment order, the creditworthiness of the Benco Finance & Investment Pvt. Ltd. through its financial statements and genuineness of the transactions too, the addition in the hands of the assessee is not sustainable. So far as to the amount of Rs.22,38,700/- is concerned, we have already discussed hereinabove the source of such amount explained by the assessee through its financial statement and the same cannot be doubted by us. Relevant to & 656/Ind/2019 (M/s. Divine Infracreation & Trading Pvt. Ltd.) A.Y.– 2011-12 - 34 - mention that no contrary documents is being forthcoming from the Revenue to deny such case made out by the assessee. Hence, considering the entire aspect of the matter, we do not find any justification in making impugned addition in the hands of the assessee. The same is, thus, deleted.
In the result, Revenue’s appeal is dismissed and Assessee’s appeal is allowed.
This Order pronounced on 21 /12/2022 Sd/- Sd/- (BHAGIRATH MAL BIYANI) (MADHUMITA ROY) ACCOUNTANT MEMBER JUDICIAL MEMBER Indore; Dated 21 /12/2022 TRUE COPY S. K. Sinha, Sr. PS आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent. 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त(अपील) / The CIT(A)- 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, अहमदाबाद / DR, ITAT, Indore 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER,
(Sr.PS) ITAT, Indore 1.Date of dictation on 12.12.2022 2.Date on which the typed draft is placed before the Dictating Member 13.12.2022 3.Date on which the approved draft comes to the Sr.P.S./P.S. 4.Date on which the fair order is placed before the Dictating Member for pronouncement 5.Date on which the fair order comes back to the Sr.P.S./P.S 6.Date on which the file goes to the Bench Clerk 7.Date on which the file goes to the Head Clerk…………. 8.The date on which the file goes to the Asstt. Registrar for signature on the order…………………… 9.Date of Despatch of the Order………Date on which the typed draft is placed before the Dictating Member 19.12.2019 1. Other Member………………Date on which the approved draft comes to