M/S TOPLINK COMMERCE LIMITED,KOLKATA vs. ITO, WARD 10(2), KOLKATA

IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH KOLKATA BEFORE SHRI RAJPAL YADAV, VICE PRESIDENT AND SHRI RAKESH MISHRA, ACCOUNTANT MEMBER ITA No.1413/KOL/2023 Assessment Year: 2012-13

M/s. Toplink Commerce Income Tax Officer, Ward- Limited 10(2), Kolkata Vs Jatragachi, New Town, P.O. Ghuni, Kolkata-700060. (PAN: AADCT9277C) (Appellant) (Respondent)

Present for: Appellant by : Shri Ankit Jalan, Advocate Respondent by : Shri Subhendu Datta, CIT, DR Date of Hearing : 10.06.2024 Date of Pronouncement : 09.09.2024 O R D E R PER RAKESH MISHRA, ACCOUNTANT MEMBER: This appeal filed by the assessee is against the order of the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi (hereinafter referred to as “the Ld. CIT(A)” passed u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) for AY 2012-13 vide Order No. ITBA/NFAC/S/250/2023-24/1057737637(1) dated 06.11.2023.

“1. For that on the facts and circumstances of the case, the impugned order passed by the Ld. AO as well as the appellate order passed by the Ld. CIT(A), NFAC confirming the order of the Ld. AO is unjustified, perverse, arbitrary, biased and bad in law.

2 ITA No. 1413/Kol/2023 Toplink Commerce Ltd. AY: 2012-13 2. For that on the facts and circumstances of the case, the Ld. CIT (Appeals), NFAC grossly erred in confirming the addition made by the Ld. AO of share capital and share premium amounting to Rs 18,03,30,000/- u/s 68 of the Income Tax Act, 1961, by merely citing some judgements passed by the judiciary without considering the actual facts of the case and ignoring the judicial pronouncements passed in favour of the appellant, which is in gross violation of the principles of natural justice, illegal, arbitrary and highly unjustified. Relief Claimed: The addition to the tune of Rs. 18,03,30,000/- is liable to be deleted. 3. For that on the facts and circumstances of the case, the Ld. CIT (Appeals), NFAC arbitrarily confirmed the addition of Rs. 18,03,30,000/- merely on the ground that the Director of the appellant company did not comply to the notice issued u/s 131 of the IT. Act, 1961, with utter disregard to the judicial pronouncements passed in favour of the appellant on the same ground by the judiciary, which is perverse, unjustified, not tenable in law and liable to be deleted. Relief Claimed: The addition to the tune of Rs. 18,03,30,000/- is liable to be deleted. 4. For that on the facts and circumstances of the case, the Ld. CIT (Appeals), NFAC grossly erred at the time of confirming the addition of Rs 18,03,30,000/- by ignoring the fact that the appellant had duly complied to the notices issued u/s 133(6) and in spite of the fact that Ld. AO had verified the responses of the share allottees by means of notices u/s 133(6) of the IT. Act, 1961, the Ld. AO miserably failed to draw any adverse inference on the replies so filed which is grossly iniquitous and bad in law. 5. That the appellant craves leave to add/ alter, modify, amend, delete and/or withdraw any or all of the grounds of appeal.”

3 ITA No. 1413/Kol/2023 Toplink Commerce Ltd. AY: 2012-13 share capital of Rs. 1,04,40,000/- (equity share of Rs. 1/- each), share application received pending allotment of Rs. 2,30,000/- and premium of Rs. 16,96,60,000/- totalling Rs. 18,03,30,000/- during the financial year relevant to the AY 2012-13. The Assessing Officer found it unusual that the subscribers would invest in shares of a newly incorporated company at such a huge premium. Accordingly, it was required to ascertain from the subscribers their genuineness of existence and their creditworthiness for making the investment. Response was earlier received to notice u/s 142(1) issued to the company and notices u/s 133(6) of the Act were also issued to the share applicants and replies were received but from the documents available on record, the identity and creditworthiness of the investors were not properly verifiable. Therefore, the Assessing Officer issued summons u/s 131 of the Act to the director of the company for personal deposition and to produce various documents along with a write-up on justification of large share premium. However, the assessee company neither filed any submission nor any appearance for personal deposition was made by the director of the assessee, as was required vide the summon issued u/s 131 of the Act. The assessee also failed to produce the investors who had invested in shares at a premium. The Assessing Officer thus concluded that the assessee was asked to represent its case by explaining the sources of the share capital receipt through various notices and letters issued, but in spite of several opportunities granted, the assessee failed to establish the three ingredients viz. identity, genuineness and creditworthiness of the sources/investors of fund introduced as share capital. The Assessing Office relied upon several judicial pronouncements as mentioned in the assessment order which state as under: i. It is for the assessee to prove its claim for share capital (ITA No. 1493/KOL/2013).

4 ITA No. 1413/Kol/2023 Toplink Commerce Ltd. AY: 2012-13 ii. Merely because the share application with huge and unjustified share premium was received from corporate entities from banking channel, no enquiry was warranted is not a sustainable plea (relied by the ITAT – 82 ITR 540, 214 ITR 801, 63 ITR 609). iii. it is incumbent on the assessee to prove and establish the identity of the subscribers, their creditworthiness and the genuineness of the transaction. Once materials to prove these ingredients are produced, it is for the Assessing Officer to find out as to whether on these materials the assessee was able to establish the ingredients mentioned above (134 Taxman 29 (Cal)). iv. The true nature of transaction has to be ascertained in the light of surrounding circumstances. It needs to be emphasized that standard of proof beyond reasonable doubt has no applicability in determination of matters under taxing statutes. It is also well settled that tax authorities are entitled to look into surrounding circumstances to find out the reality of the transaction by applying the test of human probability (214 ITR 801).

5 ITA No. 1413/Kol/2023 Toplink Commerce Ltd. AY: 2012-13 5. Aggrieved with the assessment order, the assessee filed an appeal before the Ld. CIT(A) who decided the appeal on the basis of submission made by the assessee and the supporting documents. After discussing the facts of the case and relying upon several judicial pronouncements, he confirmed the addition made. Aggrieved with the order of the Ld. CIT(A), the assessee has filed this appeal before the Tribunal.

S. Name of the No. of Face Premium Total No. shareholder shares Value amount allotted 1 Amritvani Dealer 50000 50000 - 50000 Pvt. Ltd

6 ITA No. 1413/Kol/2023 Toplink Commerce Ltd. AY: 2012-13 2 Astvinayak 50000 50000 - 50000 Vanijya Pvt. Lid

The above two are the promotors of the appellant company to whom initial allotment was done.

7.2 Thereafter, on 02.12.2011, 1,00,00,000 shares were allotted at face value (Copy of FORM 2 has been attached as Annexure B). The details of the shareholders as per Form-2 Dated 02.12.2011 in the said allotment are as under:

S. Name of the No. of Face Value Premium Total No. shareholder shares amount allotted 1 Amritvani 40000 4,00,000 - 4,00,000 Dealer Pvt. Ltd 2 Astvinayak 2570000 25,70,000 - 25,70,000 Vanijya Pvt. Ltd 3 Abhishekh 1000000 10,00,000 - 10,00,000 Sharaff 4 Alok Shankarlal 200000 2,00,000 - 2,00,000 Goenka

5 Amit Sharaff 860000 8,60,000 - 8,60,000 6 Deepika Anand 100000 1,00,000 - 1,00,000 Sureka 7 L Jaison T 200000 2,00,000 - 2,00,000 8 Javed Anwar 300000 3,00,000 - 3,00,000 Hawa 9 Madhu Alok 200000 2,00,000 - 2,00,000 Goenka 10 Navin Chandra 145000 1,45,000 - 1,45,000 J Gandhi 11 Nidhi Goyal 300000 300000 - 300000 12 Nidhi Sharaff 575000 5,75,000 - 5,75,000 13 Savita Dhanuka 200000 2,00,000 - 2,00,000 14 Piyush Goyal 300000 3,00,000 - 3,00,000 15 Prerna Sharaff 900000 9,00,000 - 9,00,000 16 Pooja Nishant 100000 1,00,000 - 1,00,000 Goyal 17 Ramesh Sharaff 600000 6,00,000 - 6,00,000 18 Reshma Jawed 300000 3,00,000 - 3,00,000 Hawa

7 ITA No. 1413/Kol/2023 Toplink Commerce Ltd. AY: 2012-13 19 Sanjay Agarwal 100000 1,00,000 - 1,00,000 20 Savitri Sharaff 600000 6,00,000 - 6,00,000 21 Sunita Agarwal 50000 50,000 - 50,000 Total 10000000 1,00,00,000 - 1,00,00,000 From the perusal of the above list, it is seen that out of total 21 allottees, 19 are individuals and the remaining two are the promotors of the appellant company, which themselves are companies.

7.3 On 05.12.2011, the individuals disagreed to be a part of the joint venture project and wanted to quit. Therefore, all the shares (70,30,000 in numbers) from the above-mentioned individuals were purchased by the promotor companies.

Therefore, after purchase of the above equity shares from individuals the holding of the promotor companies at the end of the relevant year stood as below:

1) M/s. Amritvani Dealer Pvt. Ltd.: 50,000 shares subscribed at the time of incorporation of the appellant company, plus 4,00,000 shares as per allotment dated 02.11.2011, plus 46,00,000 shares purchased from the individual parties = Total 50,50,000 shares at the end of the year at face value of Re. 1/- per share.

2) M/s. Astvinayak Vanijya Pvt. Ltd.: 50,000 shares subscribed at the time of incorporation of the appellant company, plus 25,70,000 shares as per allotment dated 02.11.2011, plus 24,30,000 shares purchased from the individual parties = Total 50,50,000 shares at the end of the year at face value of Re. 1/- per share.

8 ITA No. 1413/Kol/2023 Toplink Commerce Ltd. AY: 2012-13 7.4 On 29.12.2011, second round of allotment was made (Copy of FORM 2 has been attached as Annexure C). The details of the second allotment of equity shares vide Form-2 submitted dated 29.12.2011 are as given below:

As per Form 2 dated 29.12.2011 S. Name of the No. of Face Premium Total No. shareholder shares Value amount allotted 1 Amritdhara 20,000 20,000 99,80,000 1,00,00,000 Vinmay Pvt. Ltd. 2 Kingfisher 20,000 20,000 99,80,000 1,00,00,000 Tradlink Pvt. Ltd. 3 Linkline 60,000 60,000 2,99,40,000 3,00,00,000 Tradekink Pvt. Ltd. 4 Manikaran 40,000 40,000 1,99,60,000 2,00,00,000 Sales Pvt. Ltd. 5 Originals 20,000 20,000 99,80,000 1,00,00,000 Shoppers Pvt. Ltd. 6 Primeline Sales 20,000 20,000 99,80,000 1,00,00,000 Pvt. Ltd. 7 Primesoft 40,000 40,000 1,99,60,000 2,00,00,000 Tradecom Pvt. Ltd. 8 Sairam Vincom 20,000 20,000 99,80,000 1,00,00,000 Pvt. Ltd. 9 Sanyam Deal 20,000 20,000 99,80,000 1,00,00,000 Trade Private Limited 10 Snowhill 20,000 20,000 99,80,000 1,00,00,000 Agencies Pvt. Ltd. 11 Starmark 40,000 40,000 1,99,60,000 2,00,00,000 Mercantile Pvt. Ltd. 12 Tigerhill 20,000 20,000 99,80,000 1,00,00,000 Tradelink Pvt. Ltd. Total 3,40,000 3,40,000 16,96,60,000 17,00,00,000

7.5 Therefore, at the end of the Financial Year the list of shareholders of the appellant company stood as follows:

9 ITA No. 1413/Kol/2023 Toplink Commerce Ltd. AY: 2012-13

S. Name of No. of Face Value Premium Total No. the shares amount shareholde allotted r 1 Amritvani 50,50,000 50,50,000 0 50,50,000 Dealer Pvt. Ltd 2 Astvinayak 50,50,000 50,50,000 0 50,50,000 Vanijya Pvt. Lid 3 Amirtdhara 20,000 20,000 99,80,000 1,00,00,000 Vinmay Pvt. Ltd. 4 Kingfisher 20,000 20,000 99,80,000 1,00,00,000 Tradelink Pvt. Ltd. 5 Linkline 60,000 60,000 2,99,40,000 3,00,00,000 Tradekink Pvt. Ltd. 6 Manikaran 40,000 40,000 1,99,60,000 2,00,00,000 Sales Pvt. Ltd. 7 Originals 20,000 20,000 99,80,000 1,00,00,000 Shoppers Pvt. Ltd. 8 Primeline 20,000 20,000 99,80,000 1,00,00,000 Sales Pvt. Ltd. 9 Primesoft 40,000 40,000 1,99,60,000 2,00,00,000 Tradecom Pvt. Ltd. 10 Sairam 20,000 20,000 99,80,000 1,00,00,000 Vincom Pvt. Ltd. 11 Sanyam 20,000 20,000 99,80,000 1,00,00,000 Deal Trade Private Limited 12 Snowhill 20,000 20,000 99,80,000 1,00,00,000 Agencies Private Limited 13 Starmark 40,000 40,000 1,99,60,000 2,00,00,000 Mercantile Private Limited 14 Tigerhill 20,000 20,000 99,80,000 1,00,00,000 Tradelink Private Limited

10 ITA No. 1413/Kol/2023 Toplink Commerce Ltd. AY: 2012-13 Total 1,04,40,000 1,04,40,000 16,96,60,000 18,01,00,000 Copy of audited financial statement of the Financial Year have been enclosed as Annexure D to the written submission.

7.6 It is further submitted by the assessee that the Ld. AO at the time of assessment enquired about the increase in the share capital. The appellant submitted complete details about the increase in share capital. The details of the shareholders were also submitted. All the details as required by the Ld. AO in his notice u/s 142(1) were submitted by the appellant. The Ld. AO had also issued notices u/s 133(6) of the Income Tax Act, 1961 to the shareholders to verify the transactions done by them. All the shareholders replied to the notice issued u/s 133(6) of the Income Tax Act, 1961 (Copies of the replies submitted by the shareholders have been attached as Annexure E) and confirmed the transaction carried out by them, so is claimed. It is also submitted that the Ld. AO did not find any infirmity in the submission made by the appellant and the subscriber companies. However, the Ld. AΟ issued notice u/s 131 to the directors of the appellant company. The directors of the appellant company appeared before the Ld. AO; however, the Ld. AO did not accept their attendance and no hearing was taken. Further, the Ld. AO made his finding that the directors of the appellant company did not appear and made an addition amounting to Rs. 18,03,30,000/- invoking the provisions of section 68 of the Income Tax Act, 1961 in a mechanical manner, merely citing some case laws which are not having the same facts as the present case.

7.7 Being aggrieved with the findings of the Ld. AO and the addition made, the appellant filed an appeal before the Ld. CIT(A). It is claimed that the assessee made written submission before the Ld. CIT(A) and submitted documents to substantiate the three ingredients necessary to invoke the provision of section 68 of the Income Tax Act, 1961 i.e. identity of

11 ITA No. 1413/Kol/2023 Toplink Commerce Ltd. AY: 2012-13 shareholders, creditworthiness of the shareholder and genuineness of the transaction. It is claimed that the Ld. CIT(A) did not find any infirmity in the submission made by the appellant and nothing was brought by him on record which contradicted the submission made by the appellant but the appeal of the assessee was dismissed after relying on several decisions. Being aggrieved with the order passed by the Ld. CIT(A), the present appeal has been filed before the Tribunal.

12 ITA No. 1413/Kol/2023 Toplink Commerce Ltd. AY: 2012-13 information available on record. In the paper book filed, point wise submission was made. This was the first year of operation and addition of Rs.18 crores has been made by passing a two-page order and addition has been made in one paragraph. As regards the premium charged at Rs. 499 per share on the face value of Rs. 1, the basis of calculation was as per the commercial practice and the amount of premium to be decided was at the liberty of the director, it was so submitted by the Ld. AR during the course of the appeal before us when queried in this regard. It was also stated that there is no bar in charging the premium under the Act. Rule 11UA of the I. T. Rules, 1962 is applicable for valuation. The Ld. AR also filed copies of orders in ITA No. 43/Kol/2021 and ITA No. 855/Kol/2023 wherein on similar issue, the appeal had been decided in favour of the appellant and the addition had been deleted. It was also submitted that share premium was charged to save the fee payable for increase in the authorised share capital. It was pointed out to the Ld. AR during the course of the hearing before us that while no premium was charged from the 12 individual applicants, however when the shares were allotted to the corporate applicants after a gap of only 27 days, huge premium was charged. No plausible justification was forthcoming regarding the increase in valuation of the company within a span of 27 days for charging huge share premium. In subsequent AY 2020-21, the company was not having any significant income as has been pointed out by the Ld. CIT(A). The Ld. AR, on the other hand, relied upon the order of the Ld. CIT(A) and submitted that the order of the Ld. CIT(A) may be confirmed. The relevant extracts from the written submission filed by the Ld. AR are reproduced below:

At the outset, we would like to submit that all the grounds of appeal challenge the sole issue involved in the present case i.e. addition made by the Ld. AO amounting to Rs. 18,03,30,000/- on account of increase in share capital invoking the provision of section 68 of the Income Tax Act, 1961.

13 ITA No. 1413/Kol/2023 Toplink Commerce Ltd. AY: 2012-13 Your Honour, the appellant had submitted before the Ld. AO all the documents in relation to the share subscribers. The appellant had submitted the board resolution regarding investment in the appellant company, copy of master data reflecting the fact that share subscribers are still active companies, ITR Acknowledgement of the share subscriber reflecting the fact that they are regular filers of income tax return, audited balance sheet, Profit & Loss A/c, share application form issued by the appellant company, allotment letter, bank statement reflecting the transaction and source of fund. All these documents were submitted by the appellant company and were also confirmed to be true by the share subscribers in their replies made u/s 133(6) of the Income Tax Act, 1961. (Copies of the above documents is attached in Annexure E above.) It is pertinent to note here that even though the appellant had submitted all the documents which a normal businessman could have produced to substantiate the issue of shares and the same were verified through cross verification made u/s 133(6) of the Income Tax Act, 1961 by the Ld. AO, no enquiry of any nature was carried on by the Ld. AO at the time of assessment. It shall not be out of place to mention here that the Ld. AO failed to note the names of share subscribers, the shares allotted to them, whether premium was charged or not and the facts of the present case, which are different from the rampant practice that was going on. Merely relying on certain case laws, the assessment was completed in mechanical manner, in just three pages, making addition of Rs. 18,03,30,000/- to a newly incorporated company, in which also 1 page is copy of the letter issued by him and I page is only case laws. Your Honour, we would vehemently like to submit that such assessment made in mechanical manner, without application of mind, with a pre biased mind set is grossly incorrect, bad in law and not sustainable. 9. The assessee has reproduced the provisions of section 68 of the Act and goes on to submit that only in the absence of a satisfactory explanation, the unexplained cash credit may be charged to income tax as the income of the assessee for that year. It is submitted vide written submission filed that the primary onus stands discharged to prove the identity, credit worthiness and genuineness of the share subscribers. The unsatisfactoriness of the explanation does not and need not automatically result in deeming the amount credited in the books as income of the appellant. The same is supported by the decision held by the Hon'ble Supreme Court in the case of CIT vs. P.K. Noorjahan [1999] 237 ITR 570. However, the facts in the case of P.K. Noorjahan were different as the issue related to unexplained investment in a building u/s 69 of the Act and not unexplained cash credit on account of share capital and share premium received. It is submitted that in the present case, the Ld. AO has not found any infirmity in the submission made by the

14 ITA No. 1413/Kol/2023 Toplink Commerce Ltd. AY: 2012-13 appellant at the time of assessment nor has the Ld. AO given any reason for the dissatisfaction. It is submitted that as regards the identity of the share subscribers, the final share subscribers were private limited companies which are regularly being assessed under the Income Tax Act. The copy of the ITR is the prima facie evidence of the fact. They are registered under the companies Act, 1956, Copies of the recent master data has been attached to substantiate that the companies are still active. Moreover, all the share subscribers have replied to the notices u/s 133(6) of the Income Tax Act, 1961 issued by the Ld. AO therefore, their existence could not be disputed by any stretch of imagination. The Ld. AO and Ld. CIT(A) could not find any infirmity in the same. Therefore, there was no logical reasoning, nor any material on record to substantiate how the Ld. AO was dissatisfied with the submission by the appellant regarding the identity of the share subscribers.

SI Name of the Own Fund as on Investment made in No. shareholder 31.03.2012 the appellant company 1 Amritvani Dealer 2,27,00,000 50,50,000 Pvt. Ltd (Advance received) 2 Astvinayak 2,78,53,000 50,50,000 Vanijya Pvt. Ltd. (Advanced received) 3 Amritdhara 12,01,02,569 1,00,00,000 Vinmay Pvt. Ltd. 4 Kingfisher 11,50,61,435 1,00,00,000 Tradelink Pvt. Ltd.

15 ITA No. 1413/Kol/2023 Toplink Commerce Ltd. AY: 2012-13 5 Linkline Tradekink 550,89,223 3,00,00,000 Pvt. Ltd. 6 Manikaran Sales 3,00,89,173 2,00,00,000 Pvt. Ltd. 7 Originals 4,50,91,748 1,00,00,000 Shoppers Pvt. Ltd. 8 Primeline Sales 11,00,58,707 1,00,00,000 Pvt. Ltd. 9 Primesoft 15,50,57,765 2,00,00,000 Tradecomm Pvt. Ltd. 10 Sairam Vincom 11,00,31,527 1,00,00,000 Pvt. Ltd. 11 Sanyam Deal 10,51,10,414 1,00,00,000 Trade Private Limited 12 Snowhill Agencies 15,51,05,712 1,00,00,000 Private Limited 13 Starmark 3,50,92,073 2,00,00,000 Mercantile Private Limited 14 Tigerhill Tradelink 11,00,58,773 1,00,00,000 Private Limited

16 ITA No. 1413/Kol/2023 Toplink Commerce Ltd. AY: 2012-13 channel is not sufficient, deal with more enquiries conducted by Ld. AO which were not in consensus with the submission made. In the present case, no exercise was done either by the Ld. AO or by the Ld. CIT(A), to substantiate how the transaction done through banking channels, recorded in the audited books of accounts, confirmed by both the parties, could be treated as ingenuine and what further documentary evidence could be submitted to prove the genuineness of the transaction. There is no whisper in both the orders of the lower authorities about the discrepancy in the submission made by the appellant. Therefore, there is no plausible reasoning by the lower authorities to substantiate that the transactions are not genuine.

17 ITA No. 1413/Kol/2023 Toplink Commerce Ltd. AY: 2012-13 v. Principal Commissioner of Income-tax vs. Anmol Stainless (P.) Ltd. [2022] 138 taxmann.com 535 (Calcutta) vi. Income Tax Officer Vs. M/s. Goodluck Merchants (P) Ltd. (I.T.A. No. 1812/kol/2016 dated 16.11.2018) of ITAT Kolkata Bench

7.1 I have carefully examined the action of the Ld. AO and the circumstances which led to the completion of the impugned assessment order. I observe that there has been non-compliance by the assessee at assessment stage. I have also carefully perused the statement of facts and grounds as made in the course of the appeal proceedings. It is not in dispute that the assessee-company have received share capital of Rs. 1,04,40,000/- (equity share of Rs. 1 each), share application received (pending allotment) of Rs. 2,30,000/- and premium of Rs. 16,96,60,000/- totalling to Rs. 18,03,30,000/- during the financial year under consideration. It has been submitted by the appellant that initially 1,00,00,000 shares with face value of Re.1 were issued on 02.12.2011 to 21 entities of which two are corporate and 19 are individual in whose case no premium was charged. Subsequently 3,40,000 shares with same face value but premium of Rs.499/- were issued on 29.12.2011 to 12 corporates without any basis. I find that merely because the amounts of share application / Share Premium money has been routed through banks, the assessee could not have been said to have discharged the onus cast upon him in the surrounding circumstances of the case. Such ratio emanates from the decision of the Hon'ble High Courts of Delhi in the case of CIT Vs Ultra Modern Exports (P) Ltd reported in [2013] 40 taxmann.com 458 (Delhi). The head notes in the said case are as under: IT: 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 circumstances, Assessing Officer was justified in drawing

18 ITA No. 1413/Kol/2023 Toplink Commerce Ltd. AY: 2012-13 adverse inference and adding amount in question to assessee's taxable income under section 68

7.2 The factual matrix of the case clearly points out that the contributions received by the assessee-company from the contributors of Share Capital from 21 subscribers and 12 subscriber with Premium were from persons who did not have the means to be creditworthy, and could not establish their credit-worthiness. The appellant though submitted various documents to substantiate identity, genuineness of the transaction but never tried to establish with details of activities and source of income of those 14 companies and 19 individuals who were allotted shares of assessee company about creditworthiness. Ld AO to establish, identity and creditworthiness of the share applicants as well as genuineness of the transactions, issued summon u/s 131 of the Act to the Director of the assessee company who was also asked to the produce the subscriber companies/individuals requesting for personal appearance, which are apparent from the assessment order, but none attended for personal hearing. In such a situation, the assertions of the appellant were to be disbelieved, as brought forth in the ratio emanating from the case decided by the Hon'ble High Court of Madras by their order dated 24th April, 2017, in BR Petrochem (P) Ltd Vs ITO, Ward-1(1), Chennai reported in [2017] 81 taxmann.com424 [Mad]. The head notes in the said case are as under IT: 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. Similarly, in the case of CIT Vs. Nipun Builders & Developers Pvt. Ltd. reported in [2013] 30 taxmann.com 292 (Delhi) the Hon’ble High Court of Delhi has taken the view that where the assessee has failed to prove the identity and capacity of the subscriber companies to pay share application money, the amount so received was liable to be taxed under Sec 68 of the Income Tax Act, 1961……

15.1 The Ld. CIT(A) has relied upon and elaborately quoted from the following judicial pronouncements in his order i. CIT v Nivedan Vanijya Niyojan Ltd 130 Taxman 153 (Calcutta) ii. CIT Vs N R Portfolio (Pvt) Ltd [2014] 42 taxmann.com 339 (Delhi) – when the persons working behind the companies do not appear before the AO and are evasive in approach, the matter of due discharge of onus by the assessee company is not fulfilled.

19 ITA No. 1413/Kol/2023 Toplink Commerce Ltd. AY: 2012-13 iii. Riddhi Promoters (Pvt) Ltd. CIT-7, Delhi (2015) taxmann.com 367 (Delhi) -; establishing identity of share applicant is not sufficient to discharge initial onus that lay on assessee under section 68: assessee has to further satisfy revenue as to genuineness of transaction and creditworthiness of share applicant or individual who is advancing amounts.

15.2 In the following para, the Ld. CIT(A) has examined the aspect of suspicious transactions in the case of the assessee:

7.7 I also find that all the submissions made by the appellant during the course of the assessment point towards few documentations, meaning thereby that the appellant has produced papers relating to payments by cheque and the necessary papers filed before the Registrar of companies, where the name of the assessee has been reflected as a shareholder. It is also the contention of the appellant that it has provided copies of the bank statement, payments by cheque and the necessary papers by way of proof that all these transactions were genuine. However, in my considered view of the matter, it is precisely this elaborate paperwork that strengthens the matter relating to the share application which clearly has been schemed, pre-planned and executed with mala fide intelligence and precision. Therefore, all these papers are mere documents and not any evidence. The whole gamut of transactions is unnatural and highly suspicious, and therefore the rules of SUSPICIOUS TRANSACTIONS ought to apply in the instant case. There are grave doubts in the story propounded by the assessee before the authorities below. None of the material produced before the Ld. AO by the assessee-appellant are enough to justify the premium Rs.499/- with face value of Rs.1/- for each share taken from 12 companies and when no such premium was taken from 21 subscribers (two companies and 19 individual) when the appellant company did not have any profit which commensurate of such premium. The appellant company was incorporated on 01.08.2011 having no activity or income or assets. A close look at the return of income of subsequent years of the appellant show the following gross income: (i) A.Y 2113-14 other income Rs.6,60,622/- (ii) A.Y. 2014-15 interest income Rs.6,66,000/- (iii) A.Y.2015-16 interest income Rs.7,47,921/-, (iv) A.Y. 2016-17 interest income Rs.3,27,350/-, (v) A.Y 2017-18 profit on sale of investment Rs. 38,350/-

20 ITA No. 1413/Kol/2023 Toplink Commerce Ltd. AY: 2012-13 Stock-in-trade (in respect of goods acquired for trading) 15,59,76,215/- when there is no purchase during the A.Y 2017-18. (vi) A.Y. 2018-19 the appellant has shown sale of shares of Rs. 13,64,94,893/- as revenue receipts when there is purchase of Rs.2,75,000/- only and no purchase in the immediately preceding year. 7.8 The AO may examine the return of income for A.Y 2017-18 and A.Y 2018-19 in a separate proceeding as per the Act to find out the implication. Further from the return of income it is observed that there are no fixed assets of the assessee company. It appears that the company does not have any genuine business activities. The company does not have any assets base and is a company without any visible future prospect. This being the initial year of incorporation of the company no past record exists. The appellant has also not made any valuation under Rule 11UA of the Income Tax Rules, 1962 to justify the premium when 1,01,00,000 shares were allotted at par and 3,40,000 shares at a primum of Rs.499/-. The appellant's contention that issuance of shares at premium was a commercial decision which does not require any justification under any law for the time being in force may be correct. The Companies Act, 1956 does not specify the price at which shares are to be issued and it does not limit the premium at which shares are to be issued is also true. However, this argument is not an acceptable proposition as an investor before investing his or her money always looks at the companies past and future prospect. In the present case there is no history of the company as this the first year of incorporation and regarding future prospects it has been observed that there are nо activities of the company. In this regard the appellant has also submitted that company being freshly formed company cannot earn an income to the extent of Rs. 18,03,30,000/- in the very first year. The appellant has also submitted that 19 individual share allottees to whom shares were allotted at face value of Re. 1/- dated 02.12.2011, in total of 70,30,000 equity shares had been bought back on 05.12.2011 by the two private limited companies namely M/s Amritvani Dealer Pvt. Ltd. & M/s Astvinayak Vanijya Pvt. Ltd who are promoter companies of the appellant company. These two companies which are promoter companies of the group companies of the appellant company or by any other group companies, cannot be ruled out that money has been routed through the appellant company without paying any tax on the same. Thus, from the discussion made above, it can safely be considered that the money so invested by the subscriber companies/individuals needs to be proved their creditworthiness. 7.9 In my considered view the banking documents are mere self serving recitals. The law in the matter of self-serving recitals has been long established by the Hon'ble apex Court. In the case of CIT vs P. Mohankala 291 ITR 278, the Hon'ble Supreme Court held that “the money came by way of bank cheque and was paid through the process of banking transactions was not by itself of any consequences." The burden of proof is on the assessee in the matter of justification of receipts which are of suspicious and dubious nature. In the case of CIT vs. Durga Prasad More (1971) 82 ITR 540 (SC), their Lordships laying down the significance of human probabilities held as under "in a case where a party relied on self serving recitals in documents, it was for that party to establish the truth of those recitals: the taxing authorities were entitled to look into the surrounding circumstances to find out the reality of such recitals." Similarly in the case of Sumati Dayal vs. CIT (1995) 214 ITR 801 (SC), their Lordships held as under: "In view of section 68 of the Act, where any sum is found credited in the

21 ITA No. 1413/Kol/2023 Toplink Commerce Ltd. AY: 2012-13 books of the assessee for any previous year, the same may be charged to income tax as the income of the assesses of that previous year if the explanation offered by the assessee about the nature and source thereof is, in the opinion of the Assessing Officer, not satisfactory. In such a case, there is prima facie, evidence against the assessee viz the receipt of money, and if he fails to rebut, the said evidence being un-rebutted, can be used against him by holding that it was a receipt of an income nature." In the case of Sajjan Das & Sons vs. CIT (2003) 264 ITR 435 (Delhi), their Lordships of the High Court of Delhi, while considering a case in which gifts were received by the assessee through banking channels laid importance on the capacity of the donor for making the gift and his identity as well as importance of relationship between the donor and donee in determination of genuineness of gift held as under: "That a mere identification of the donor and showing the movement of the gift amount through banking channels was not sufficient to prove the genuineness of the gift Since the claim of the gift was made by the assessee, the onus lay on him not only to establish the identity of the person making the gift but also his capacity to make a gift and that it had actually been received as a gift from the donor. " In my considered view wherever documents are relied upon they should pass the test of normal behaviour of the assessee in the course of business viz., human conduct, preponderance of probability and surrounding circumstances. In my considered view, even if documentary evidence is produced, the same must pass the test of human probabilities and surrounding circumstances if they do not, then addition justified. Reliance on such matters is placed on the case of Smt Phoolwati Devi 314 ITR (AT) 1 (Del.). 7.10 It must also be stated here that in Commissioner of Income Tax vs NR Portfolio Pvt Ltd on 22 November, 2013, the Hon'ble Delhi High court has held: “Assessing Officer is both an investigator and an adjudicator. When a fact is alleged and stated before the Assessing Officer by an assessee, he must and should examine and verify, when in doubt or when the assertion is debatable. Normally a factual assertion made should be accepted by the Assessing Officer unless for justification and reasons the assessing officer feels that he needs/requires a deeper and detailed verification of the facts alleged. The assessee in such circumstances should cooperate and furnish papers, details and particulars. This may entail issue of notices to third parties to furnish and supply information or confirm facts or even attend as witnesses. The Assessing Officer can also refer to incriminating material or evidence available with him and call upon the assessee to file their response. We cannot lay down or state a general or universal procedure or method which should be adopted by the assessing officer when verification of facts is required. The manner and mode of conducting assessment proceedings has to be left to the discretion of the assessing officer, and the same should be just, fair and should not cause any harassment to the assessee or third persons form whom confirmation or verification is required. The verification and investigation should be one with the least amount of intrusion, inconvenience or harassment especially to third parties, who may have entered into transactions with the assessee. The ultimate finding of the assessing officer should reflect due application or mind on the relevant facts and the decision should take into consideration the entire material, which is germane and which should not be ignored and exclude that which is irrelevant Certain facts or aspects may be neutral and should be noted These should not be ignored but they cannot become the bedrock or substratum of the conclusion. The provisions of Evidence Act are not applicable, but the assessing officer being a quasi-judicial authority, must take care and caution to ensure that the decision is reasonable and satisfies the canons of equity, fairness and justice. The evidence should be impartially and

22 ITA No. 1413/Kol/2023 Toplink Commerce Ltd. AY: 2012-13 objectively analyzed to ensure that the adverse findings against the assessee when recorded are adequately and duly supported by material and evidence and can withstand the challenge in appellate proceedings. Principle of preponderance of probabilities applies What is stated and the said standard, equally apply to the Tribunal and indeed this Court. The reasoning and the grounds given in any decision or pronouncement while dealing with the contentions and issues should reflect application of mind on the relevant aspects. When an assessee does not produce evidence or tries to avoid appearance before the Assessing Officer, it necessarily creates difficulties and prevents ascertainment of true and correct facts as the Assessing Officer is denied advantage of the contention or factual assertion by the assessee before him In case an assessee deliberately and intentionally fails to produce evidence before the Assessing Officer with the desire to prevent inquiry or investigation, an adverse view should be taken". 7.11 In this connection, I would also wish to refer to the decision of the Hon'ble ITAT Bombay Bench 'B' (ITA No.614/Bom/87 A.Y. 1983-84) in the case of M/s. Mont Blane Properties and Industries Pvt. Ltd., which was upheld by the Hon'ble Supreme Court. The Hon'ble Tribunal held that the word 'evidence’ as used in sec. 143(3) covered circumstantial evidence also. The word 'evidence' as used in sec.143 (3) obviously could not be confined to direct evidence. The word 'evidence' was comprehensive enough to cover the circumstantial evidence also. Under the tax jurisprudence, the word 'evidence' had much wider connotations. While the word 'evidence' might recall the oral and documentary evidence as may be admissible under the Indian Evidence Act the use of word 'material' in Sec. 143(3) showed that the assessing officer, not being a court could rely upon material, which might not strictly be evidence admissible under the Indian Evidence Act for the purpose of making an order of assessment. Court often took judicial notice of certain facts which need not be proved before them. The plain reading of section 142 and 143 clearly suggests that the assessing officer may also act on the material gathered by him. The ward 'material' clearly shows that the assessing officer is not fettered by the technical rules of evidence and the like, and that he may act on material which may not strictly speaking be accepted evidence in court of law. 7.12 The Hon'ble Supreme Court in CIT v. Durga Prasad More [1971] 82 ITR 540 at pages 545-547 made a reference to the test of human probabilities in the following fact situation :- It is true that an apparent must be considered real until it is shown that there are reasons to believe that the apparent is not the real in a case of the present kind a party who relies on a recital in a deed has to establish the truth of those recitals Otherwise it will be very easy to make self-serving statements in documents either executed or taken by a party and rely on those recitals. If all that an assessee who wants to evade tax is to have some recitals made in a document either executed by him or executed in his favor then the door will be left wide-open to evade tax. A little probing was sufficient in the present case to show that the apparent was not the real. The taxing authorities were not required to put on blinkers while looking at the documents produced before them They were entitled to look into the surrounding circumstances to find out the reality of the recitals made in those documents. 7.13 It is a well settled principle of law as declared by the Hon'ble Supreme Court in the case of Sumati Dayal Vs.CIT" (214 ITR 801) (SC) that the true nature of transaction have to be ascertained in the light of surrounding circumstances. It

23 ITA No. 1413/Kol/2023 Toplink Commerce Ltd. AY: 2012-13 needs to be emphasized that standard of proof beyond reasonable doubt has no applicability in determination of matters under taxing statutes. In the present case, it is clear that apparent is not the real as evidenced from the investigation report. Further, the Hon'ble Supreme Court. in the case of Chuhar Mal V CIT (1988) 172 ITR 250, highlighted the fact that the principle of evidence law are not to be ignored by the authorities, but at the same time, human probability has to be the guiding principle, since the AO is not fettered, by technical rules of evidence, as held by the Hon'ble Supreme Court in the case of Dhakeshwari Cotton Mills v CIT (1954) 261 TR 775. The Hon'ble Supreme Court, in the case of Chuhar Mal V CIT (supra) held that what was meant by saying that evidence Act did not apply to the proceedings under Income-tax Act, 1961, was that the rigors of Rules of evidence, contained in the Evidence Act was not applicable; but that did not mean that when the taxing authorities were desirous of invoking the principles of Evidence Act, in proceedings before them, they were prevented from doing so. It was further held by the Hon'ble Apex Court that all that Section 110 of the Evidence Act, 1872 did, was to embody a salutary principle of common law, jurisprudence viz, where a person was found in possessing of anything, the onus of proving that he was not its owner, was on that person. Thus, this principle could be attracted to a set of circumstances that satisfies its conditions and was applicable to taxing proceedings, 7.14 The transactions relating to share capital come within the ambit of "suspicious transactions", and therefore the rules of suspicious transactions would apply to the case. Payment through Banks, furnishing of details of name and address of shareholders, their PAN, No. of shares allotted, share premium, mode of payment, utilization of money along with the copy of return of allotment filed with the ROC and Bank Statements and other such features are only apparent features, Therefore, I have to reach the inevitable conclusion that the transactions as discussed by the Ld.AO fall in the realm of "suspicious" and "dubious" transactions. The Ld. AO has therefore necessarily to consider the surrounding circumstances, which he indeed has done in a very meticulous and careful manner. In the case of Win Chadha Vs CIT (International Taxation) in ITA No.30888 3107/Del/2005, the Hon'ble Delhi ITAT "B"-Bench has observed, on 31.12.2010 as under: “SUSPICIOUS AND DIBIOUS TRASANCTION HOW TO BE DEALT WITH: 6.11. The lax liability in the cases of suspicious transactions, is to be assessed on the basis of the material available on record, surrounding circumstances, human conduct preponderance of probabilities and nature of incriminating information/ evidence available with AO. 6.12. In the case of Sumati Dayal V. CIT (1995) 80 Taxman 89 (SC), the Hon'ble Supreme Court has dealt with the relevance of human conduct, preponderance of probabilities and surrounding circumstance, burden of proof and its shifting on the Department in cases of suspicious circumstances, by following observations “....It is, no doubt, true that in all cases in which a receipt is sought to be taxed as income, the burden lies on the department to prove that it is within the taxing provision and if a receipt is in the nature of income, the burden of proving that it is not taxable because it falls within exemption provided by the Act lies upon the assessee. But in view of section 68, where any sum is found credited in the books of the assessee for any previous year, the same may be

24 ITA No. 1413/Kol/2023 Toplink Commerce Ltd. AY: 2012-13 charged to income-tax as the income of the assessee of that previous year if the explanation offered by the assessee about the nature and source thereof is, in the opinion of the Assessing Officer, not satisfactory In such case there is prima facie evidence against the assessee, viz, the receipt of money, and if he fails to rebut the same, the said evidence being un-rebutted, can be used against him by holding that it is a receipt of an income nature. While considering the explanation of the assessee, the department cannot, however, act unreasonably. …….Having regard to the conduct of the appellant as disclosed in her sworn statement as well as other material on the record, an inference could reasonably be drawn that the winning tickets were purchased by the appellant after the event. The majority opinion after considering surrounding circumstances and applying the test of human probabilities had rightly concluded that the appellant's claim about the amount being her winning from races, was not genuine it could not be said that the explanation offered by the appellant in respect of the said amounts had been rejected unreasonably and that the finding that the said amounts were income of the appellant from other sources was not based on evidence.” CIRCUMSTANTIAL EVIDENCE HOW TO BE USED 6.13. It would, at this stage, be relevant to consider the admissibility and use of circumstantial evidence in income tax proceedings. Circumstantial evidence is evidence of the circumstances, as opposed to direct evidence. It may consist of evidence afforded by the bearing on the fact to be proved, of other and subsidiary facts, which are relied on as inconsistent with any result other than the truth of the principal fact. It is evidence of various facts, other than the fact in issue which are so associated with the fact in issue, that taken together, they form a chain of circumstances leading to an inference or presumption of the existence of the principal fact. In the appreciation of circumstantial evidence, the relevant aspects, as laid down from time to time are- 1) the circumstances alleged must be established by such evidence, as in the case of other evidence (2) the circumstances proved must be of a conclusive nature and not totally inconsistent with the circumstances or contradictory to other evidence. (3) although there should be no missing links in the case, yet it is not essential that every one of the links must appear on the surface of the evidence adduced, some of these links may have to be inferred from the proved facts: (4) in drawing those inferences or presumptions, the Authorities must have regard to the common course of natural events, to human conduct and their relation to the facts of the particular case (5) The circumstantial evidence can, with equal facility, be resorted to in proof of a fact in issue which arises in proceedings for the assessment of taxes both direct and indirect, circumstantial evidence can be made use of in order to prove or disprove a fact alleged or in issue. In fact, in whatever proceedings or context inferences are required to be drawn from the evidence or materials available or lacking, circumstantial evidence has its place to assist the process of arriving at the truth."

25 ITA No. 1413/Kol/2023 Toplink Commerce Ltd. AY: 2012-13

6.14. It will also be worthwhile to consider the nature of burden of proof on the AO for proving a fact or circumstance in the income tax proceedings. The questions raised about the tax liability by the AO are to be answered by the assessee by furnishing reasonable and plausible explanations. If assessee is not forthcoming with proper or complete facts or his statement or explanation is contradictory, drawing of suitable inferences and estimation of facts is inevitable. Courts generally will not interfere with such estimate of facts, unless the inferences or estimates are perverse or capricious. 6.15. The Assessee's technical contentions about admissibility and reliance on material available on the AO's record are in the nature of contentions challenging criminal or civil liabilities in a court of law. We are dealing with a process of adjudication of assesses tax liability i.e. assessment under Income Tax Act rather than conducting criminal or civil court proceedings. As held by the Hon'ble Supreme Court in the case of SS. Gadgil (supra) no 'lis' is involved in adjudication of tax liability. The Assessee's contention that there was no new material before the AO after the CIT(A)'s setting aside order cannot be accepted. New information and material did indeed come on record. In our view, in a sensitive matter like this, even a single clue or revelation can be of great importance. To reverse the order of the AO on this technical plea will amount to taking a lopsided view of the proceedings. Besides, the JPC has underlined the importance of Reports of investigation agencies like CBI, DRI, ED whose were in the offing, as the relevant investigations were in process. In view of these observations, we do not accede to the assessee's pleas in this behalf. The Assessee's contentions and objections in this behalf that the material available on record was not admissible as evidence and that it cannot be relied on by the AO, are devoid of any merit and are rejected outright......... 7.15 In a more recent case in the case of N.R.Iron & Steel Pvt Ltd. [2019] 110 taxmann.com 491(SC) 25.10.2019, hon'ble Apex court has held that- 14. The practice of conversion of un-accounted money through the cloak of Share Capital/Premium must be subjected to scrutiny. This would be particularly so in the case of private placement of shares where a higher onus is required to be placed on the Assessee since the information is within the personal knowledge of the Assessee. The Assessee is under a legal obligation to prove the receipt of share capital/premium to the satisfaction of the AO, failure of which, would justify addition of the said amount to the income of the Assessee." 7.16 From the assessment order, it is observed that the appellant was provided ample opportunity and principle of natural justice was also observed. To establish identity and creditworthiness of the share applicants as well as genuineness of the transactions, summon u/s 131 of the Act was issued to the Director of the assessee company who was asked to produce the subscriber companies/individuals requesting for personal appearance which is undisputed. Thus, it is evident that the director merely filed few details which does not establish the identity and creditworthiness of the share applicants as well as genuineness of the transactions. The director did not appear for deposition which the Ld ought have taken to ascertain the fact of the case. As the details of the share applicants could not be ascertained from the return of Income and as the Director of the assessee company did not comply with the notice u/s 131 of the Act,

26 ITA No. 1413/Kol/2023 Toplink Commerce Ltd. AY: 2012-13 there was no other option left with the Ld AO but to complete the assessment on the basis of information available on record. 7.17 Thus, from the series of actions by the AO there remains no doubt that the appellant is into the activities of accommodation entry. Human probabilities, surrounding circumstance and preponderance of probability goes against the appellant. The ratio and observations in the case of Durga Prasad More (supra) and Sumati Dayal (supra) and other case laws referred above, applies in the appellant's case. The appellant thus, failed to satisfy the all the three ingredients set forth as per decision of various courts including the Apex court, which cast onus on the assessee to prove the identity and creditworthiness of the person from whom the monies were taken and the genuineness of the transaction when money is found credited in the books of accounts of the assessee and failure to satisfy the same, provision of section 68 shall be invoked. The Ld AO has, thus, righty invoked section 68 and added Rs. 18,03,30,000/-, found credited in the books of the accounts of the appellant, under that section. 7.18 In view of the above discussion and relying upon the case laws mentioned above, I find no infirmity in the orders of the Ld. AO and I confirm the addition of Rs. 18,03,30,000/-. The case laws relied upon by the appellant are distinguishable on the facts of the case. The grounds No.1 to 6 taken by the appellant, thus, stand dismissed. 16. Similar issue arose in the case of Winsher Vinimay Pvt. Ltd. Vs. ITO, Ward-9(2), Kolkata in ITA No.1393/KOL/2018 for AY 2012-13 before the ITAT “A” BENCH KOLKATA in the order dated 06.08.2024 wherein reliance has been placed on a recent decision of the Hon’ble jurisdictional High Court in the case of Principal Commissioner of Income-tax v. BST Infratech Ltd. [2024] 161 taxmann.com 668 (Calcutta) to decide the issue of share premium treated as unexplained cash credit. The relevant extracts from the order are as under: 11. We have gone through the facts of the case, the written submissions filed by both the Ld. AR and the Ld. Sr. DR as well as the case laws cited. A similar issue came up for consideration before the Hon’ble Jurisdictional High Court and in the case of Principal Commissioner of Income-tax v. BST Infratech Ltd. [2024] 161 taxmann.com 668 (Calcutta) this issue has been discussed threadbare. Relevant paragraphs from the order of the Hon’ble High Court are extracted and reproduced as under: 14. Before we examine the correctness of the decision rendered by the learned tribunal it will be beneficial to take note of a few decisions which have elabo- rately dealt with Section 68 of the Act and what are the parameters which are required to be established to prove the creditworthiness or the genuineness of a transaction. 15. Mr. Om Narayan Rai, learned senior standing counsel appearing for the departments submits that though the assessee might have established the identity and creditworthiness of the share applicants at the relevant time but

27 ITA No. 1413/Kol/2023 Toplink Commerce Ltd. AY: 2012-13 the third and the most important ingredient namely genuineness of the trans- action has to be established and unless and until all the three factors are con- jointly established, the revenue was fully justified in invoking Section 68 of the Act. 16. In CIT v. N.R. Portfolio Private Limited [2014] 42 taxmann.com 339/264 CTR 258/222 Taxman 157 (Delhi) the substantial question of law which was framed for consideration is whether the tribunal was right in deleting the ad- ditions under Section 68 of the Act and whether the decision of the tribunal is perverse. 17. With regard to the role of the assessing officer, the Hon'ble Court held that the assessing officer is both an investigator and an adjudicator; when a fact is alleged and stated before the assessing officer by an assessee, he must and should examine and verify, when in doubt or when the assertion is debatable. Normally a factual assertion made should be accepted by the assessing officer unless for justification and reasons the assessing officer feels that he needs/requires a deeper and detailed verification of the facts alleged. The as- sessee in such circumstances should cooperate and furnish papers, details and particulars, this may entail issue of notices to third parties to furnish and supply information or confirm facts or even attend as witnesses. The assessing officer can also refer to incriminating material or evidence available with him and call upon the assessee to file their response. A universal procedure or method which should be adopted by the assessing officer when verification of facts is required cannot be laid down. The manner and mode of conducting assessment proceedings has to be left to the discretion of the assessing officer and the same should be just, fair and should not cause harassment to the assessee or third person from whom the confirmation or verification is re- quired. 18. It was further held that the provisions of the Evidence Act are not applica- ble but the assessing officer being a quasi-judicial authority must take care and caution to ensure that the decision is reasonable and satisfies the can- nons of equity, fairness and justice. The principle of Preponderance of Proba- bility applies. On the question of creditworthiness and genuineness of the transaction in the said case, the Hon'ble Court recorded the following finding:- 19. On the question of creditworthiness and genuineness, it was high- lighted that the money no doubt was received through banking channels, but did not reflect actual genuine business activity. The share subscribers did not have their own profit making apparatus and were not involved in business activity. They merely rotated money, which was coming through the bank accounts, which means deposits by way of cash and issue of cheques. The bank accounts, therefore, did not reflect their creditworthi- ness or even genuineness of the transaction. The beneficiaries, including the respondent-assessee, did not give any share-dividend or interest to the said entry operators/subscribers. The profit motive normal in case of in- vestment, was entirely absent. In the present case, no profit or dividend was declared on the shares. Any person, who would invest money or give loan would certainly seek return or income as consideration. These facts are not adverted to and as noticed below are true and correct. They are undoubtedly relevant and material facts for ascertaining creditworthiness and genuineness of the transactions. 19. The doctrine of "Source of Source" or "Origin of Origin" was explained in the following terms:-

28 ITA No. 1413/Kol/2023 Toplink Commerce Ltd. AY: 2012-13 24. We are conscious of the doctrine of 'source of source' or 'origin of origin' and also possible difficulty which an assessee may be faced with when asked to establish unimpeachable creditworthiness of the share subscrib- ers. But this aspect has to be decided on factual matrix of each case and strict or stringent test may not be applied to arms length angel investors or normal public issues. Doctrine of 'source of source' or 'origin of origin' cannot be applied universally, without reference to the factual matrix and facts of each case. The said test in case of normal business transactions may be light and not vigorous. The said doctrine is applied when there is evidence to show that assessee may not be aware, could not have knowledge or was unconcerned as to the source of money paid or belonging to the third party. This may be due to the nature and character of the commercial/busi- ness transaction relationship between the parties, statutory postulates etc. However, when there is surrounding evidence and material manifesting and revealing involvement of the assessee in the "transaction" and that it was not entirely an arm's length transaction, resort or reliance to the said doctrine may be counter- productive and contrary to equity and justice. The doctrine is not an eldritch or a camouflage to circulate ill gotten and unre- corded money. Without being oblivious to the constraints of the assessee, an objective and fair approach/determination is required. Thus, no as- sessee should be harassed and harried but any dishonest facade and smokescreens which masquerade as pretence should be exposed and not accepted. 20. With regard to the identity, creditworthiness and genuineness of the trans- action and the onus of prove the Hon'ble Court held as follows:- 30. What we perceive and regard as correct position of law is that the court or tribunal should be convinced about the identity, creditworthiness and genuineness of the transaction. The onus to prove the three factum is on the assessee as the facts are within the assessee's knowledge. Mere pro- duction 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 documen- tation but genuineness, creditworthiness, identity are deeper and obtru- sive. Companies no doubt are artificial or juristic persons but they are soul- less and are dependent upon the individuals behind them who run and manage the said companies. It is the persons behind the company who take the decisions, controls and manage them. 31. Identity, creditworthiness or genuineness of the transaction is not es- tablished by merely showing that the transaction was through banking channels or by account payee instrument. It may, as in the present case required entail a deeper scrutiny. It would be incorrect to state that the onus to prove the genuineness of the transaction and creditworthiness of the creditor stands discharged in all cases if payment is made through banking channels. Whether or not onus is discharged depends upon facts of each case. It depends on whether the two parties are related or known to each; the manner or mode by which the parties approached each other, whether the transaction was entered into through written documentation to protect the investment, whether the investor professes and was an angel investor, the quantum of money, creditworthiness of the recipient, the ob- ject and purpose for which payment/investment was made etc. These facts are basically and primarily in knowledge of the assessee and it is difficult

29 ITA No. 1413/Kol/2023 Toplink Commerce Ltd. AY: 2012-13 for revenue to prove and establish the negative. Certificate of incorporation of company, payment by banking channel, etc. cannot in all cases tanta- mount to satisfactory discharge of onus. The facts of the present case no- ticed above speak and are obvious. What is unmistakably visible and ap- parent, cannot be spurred by formal but unreliable pale evidence ignoring the patent and what is plain and writ large. 21. In Rajmandir Estates Private Limited v. Principal Commissioner of Income Tax 2016 SCC Online Cal 1237, one of the substantial questions of law which fell for consideration was whether the finding of the CIT(A) that unaccounted money was or could have been laundered as clean share capital by creating facade of paper work, routing the money through several bank accounts and getting the seal of statutory approval by getting the case re-opened under Sec- tion 147 suo motu and whether the same is perverse. The facts of the said case was noted wherein 19 out of the 13 applicants secured funds for the purpose of contributing to the share capital of the assessee therein, on account of share application money. In other words, those 19 applicants collected funds on account of share application money in their respective companies and that money was contributed to the share capital of the assessee. 15 out of the 39 applicants procured the requisite funds by selling the shares and the rest of the applicants of shares, in the share capital of the assessee company, did not disclose the nature of receipt at their end though the source of funds were identified. Further the shares were offered to and subscribed by closely held companies owned by the promoter/director or their close relatives and friends. After noting the facts, the Hon'ble Court held that the identity of the alleged shareholders is known but the transaction was not a genuine transaction. The transaction was nominal rather than real; creditworthiness of the alleged shareholders is also not established because they did not have money of their own, each one of them received from somebody and that somebody received from a third person and therefore prima facie, shareholders are near namelenders. 22. In Principal Commissioner of Income Tax, (Central - 1) v. NRA Iron and Steel Private Limited (2019) 15 SCC 529 the issue which fell for consideration is when share capital/premium is credited in the Books of Account of the as- sessee company, the onus of prove is on the assessee to establish by cogent and reliable evidence of the identity of the investor company, the creditworthi- ness of the investor and genuineness of the transaction, to the satisfaction of the assessing officer. The Hon'ble Supreme Court observed that the courts have held that in the case of cash credit entries, it is necessary for the as- sessee to prove not only the identity of the creditors but also the capacity of the creditors to advance money, and establish the genuineness of those trans- action. The initial onus of proof lies on the assessee. The decision in Roshan Di Hatti v. Commissioner of Income Tax (1977) 2 SCC 378 was referred to wherein it was held that if the assessee fails to discharge the onus by produc- ing cogent evidence and explanation the assessing officer would be justified in making the addition back into the income of the assessee. 23. The decision in N.R. Portfolio Private Limited was quoted with approval wherein it has been held that creditworthiness or genuineness of a transaction regarding share application money depends on whether two parties are re- lated or known to each other, or mode by which parties approached each other, whether a transaction is entered into through written documentation to protect investment or whether the investor was a angel investor, the quantum of money invested, the creditworthiness of the receipt, object and purposes for

30 ITA No. 1413/Kol/2023 Toplink Commerce Ltd. AY: 2012-13 which payment/investment was made etc. The incorporation of a company and payment by banking channel etc. cannot in all cases tantamount to satis- factory discharge of onus. The principles which emerge were sums of money are credited as share capital/premium was summarised as follows:- 13.1. The assessee is under a legal obligation to prove the genuineness of the transaction, the identity of the creditors, and creditworthiness of the investors who should have the financial capacity to make the investment in question, to the satisfaction of the AO, so as to discharge the primary onus. 13.2. The assessing officer is duty-bound to investigate the creditworthi- ness of the creditor/subscriber, verify the identity of the subscribers, and ascertain whether the transaction is genuine, or these are bogus entries of name-lenders. 13.3. If the enquiries and investigations reveal that the identity of the cred- itors to be dubious or doubtful, or lack creditworthiness, then the genuine- ness of the transaction would not be established. In such a case, the as- sessee would not have discharged the primary onus contemplated by Sec- tion 68 of the Act. 24. In Principal Commissioner of Income Tax, Kolkata v. Swati Bajaj 2022 SCC Online Cal 1572 this court considered as to in what manner the allegation against the assessee has to be proved. It was held that to prove the allegation against the assessee, it can be inferred by a logical process of reasoning from the totality of the attending facts and circumstances surrounding the allega- tion/charges made and levelled and when direct evidence is not available it is the duty of the court to take note of the immediate and proximate facts and circumstances surrounding the events on which the charges/allegations are founded so as to reach a reasonable conclusion and the test would be what inferential process that are reasonable/prudent man would apply to arrive at a conclusion. It was further held that the proximity of time and prior meeting of minds is also very important factor especially when the income tax depart- ment has pointed out the unnatural rise in prices of the scripts of very little known companies. 25. While on this issue it would be beneficial to take note of the decision in Yadu Hari Dalmia v. Commissioner of Income Tax, Delhi (Central) (1980) 126 ITR 48 wherein it was held that the whole catena of sections starting from Section 68 have been introduced in the taxing enactment step by step in order to pluck loopholes and in order to plug certain situation beyond doubts even though there were judicial decisions covering some of the aspects. It was pointed out that even prior to the introduction of Section 68 in the statute book, the courts have held that where any amounts were found credited in the books of the assessee in the previous year and the assessee offered no explanation about the nature and source thereof or the explanation offered, in the opinion of the ITO, not satisfactory, the sum so credited would be charged to income tax as income of the assessee during the relevant previous year. That Section 68 was inserted in the Act only to provide statutory recognition to a principle which had been clearly adumbrated in judicial decisions. Section 68 thus only codified the law as it existed before 01.04.1962 and did not introduce any new principle or rule. 26. We also take note of the Finance Bill, 2012 which brought about certain amendments to the Act with effect from the assessment year 20132014

31 ITA No. 1413/Kol/2023 Toplink Commerce Ltd. AY: 2012-13 wherein under the heading "Measures to Prevent Generation and Circulation of Unaccounted Money" it was pointed out that the onus of satisfactory ex- plaining such credit remains on the person in whose books such sum is cred- ited. If such person fails to offer an explanation or the explanation is found to be satisfactory then the sum is added to the total income of the person. That certain judicial pronouncements have created doubts about the onus of proof and the requirements of Section 68, particularly in cases where sum is credited as share capital, share premium etc. That courts have drawn a distinction and emphasised that in case of private placement of shares the legal regime should be different from that which is followed in case of a company seeking share capital from the public at large. In the case of closely held companies, invest- ments are made by a known person; therefore, a higher onus is required to be placed on such companies besides the general onus to establish, identity and creditworthiness of the creditors and genuineness of the transaction. This ad- ditional onus needs to be placed on such companies to also prove the source of money in the hands of such shareholders or person making payments to- wards issue of shares before such sum is accepted as genuine credit. If the company fails to discharge the additional onus, the sum shall be treated as income of the company and added to its income. Therefore, it was proposed to amend Section 68 of the Act to provide the nature and onus of any sum cred- ited, as share capital premium etc. in the books of a closely held company shall be treated as explained only if the source of fund is also explained by the assessee company in the hands of the resident shareholders. However, even in the case of closely held companies, it is proposed that this additional onus of satisfactorily explaining the source in the hands of the shareholder, could not apply if the shareholder is a well regulated entity namely a Venture Capital Fund, a Venture Capital Company registered with SEBI. 27. It is no doubt true that this amendment which was made to Section 68 applies in relation to the assessment year 2013-2014 and the subsequent years and it has been argued that the said amendment will not apply to the assessee's case as the case concerns the assessment year 2012-2013. Though this may be true, as pointed out in Yada Hari Dalmia Section 68 as it stood prior to the earlier amendment only codified the law as it existed before 01.04.1962 and did not introduce any new principle or rule and when Section 68 was inserted in the 1961 Act it only provided a statutory recognition to a principle which had been clearly adumbrated in judicial decisions. Therefore, it was held that ratio laid down in the earlier judgments of the Hon'ble Su- preme Court is equally applicable to the interpretation of Section 68 of the 1961 Act. Thus, we can very well refer to the objects behind amendment to Section 68 by Finance Bill, 2012 which has taken note of various decision of the court where the courts have drawn a distinction and emphasised that in case of private placement of shares the legal regime should be different from that which is followed in the case of a company seeking share capital from the public at large. 28. Having taking note of the above referred decisions and the legal principles if we revert back to the factual position in this case, we find that the CIT(A) has analysed the three principles which are required to be fulfilled namely identity, creditworthiness and genuineness of the transaction. It is not in dis- pute that the investors whose details we have referred in the earlier part of this judgment are all either group companies or having a common set of direc- tors. Further the assessee has not been able to dislodge the factual findings recorded by the CIT(A) that the share application money was received from independent legal entities. By way of illustration if we take the case of

32 ITA No. 1413/Kol/2023 Toplink Commerce Ltd. AY: 2012-13 Gainwell Textrade Private Limited, they have invested Rs. 8,10,00,000/- in the assessee company. The said company receives a total of Rs. 1,65,00,000/- on 01.06.2011 and 02.06.2011 from eight private limited companies/entities. Out of the said amount, Rs. 1,50,00,000/- was remitted to the assessee's bank account on 02.06.2011 by three cheques of Rs. 50,00,000/- each. The balance remained at Rs. 15,09,039/-. On 02.06.2011, an amount of Rs. 38,00,000/- was remitted to the account by a private limited company and the balance rose to Rs. 53,09,039/- out of this an amount of Rs. 50,00,000/- was remitted to the assessee account on the same day. On 04.06.2011, Divine Suppliers Pri- vate Limited deposited another sum of Rs. 60,00,000/- of which Rs. 50,00,000/- was remitted to the assessee on 06.06.2011. On 06.06.2011 Highlight Goods Private Limited transferred a sum of Rs.10,00,000/- to this account by taking a closing balance to Rs. 23,08,819/-. On the same day an amount of Rs. 20,00,000/- was remitted to the assessees account. On 06.06.2011 Divine Suppliers Private Limited RD Fashion transferred Rs. 25,00,000/-, Rs. 38,00,000/- and Rs. 37,00,000/-to this account and out of this amount Rs. 1,00,00,000/- was remitted to the assessee's account in two transactions on 07.06.2011. On 14.06.2011, Magnificent Distributors Private Limited remitted an amount of Rs. 35,00,000/- to the account which was im- mediately transferred to the assessee's account. On 18.07.2011, Superior Re- tail Private Limited credited an amount of Rs. 50,00,000/- to the account which was remitted to the assessee's account on 19.07.2011. On 20.07.2011 amount of Rs. 30,00,000/- was received through RTGS in the account and the amount was transferred to the account of the assessee on the same day. On 02.01.2012 an amount of Rs. 40,00,000/- was deposited into account by two companies and this was remitted to the assessee's account on 03.01.2012. On 03.01.2012 Salasar Garments Traders Private Limited credited to the account a sum of Rs. 20,00,000/- and out of the said amount Rs. 40,00,000/- was transferred to the assessee's account on 04.01.2012. The CIT(A) has in the above manner examined the factual position and has analysed the pattern of the transactions in the bank accounts of the five investor companies to that of the assessee's bank account. They have received cheques from somewhere and has immediately issued in favour of another company and the balance remaining in the account was very meagre the bank account has been oper- ated solely for the purpose of rotating money. 29. With regard to the other investor namely Mubarak Cosmetics Private Lim- ited on perusal of the bank statements, it was found that the said company had transactions with the assessee between 23.07.2011 to 28.07.2011 and the entire sum remitted to the assessee by Mubarak Cosmetics Private Limited had come from Gainwell Textrade Private Limited. The bank statements of HIL Engineering was also thoroughly examined more particularly the pattern of transaction and it was held that the only apparent purpose for which the bank accounts have been used is to receive money from one account and transfer it to another. With regard to the investor Pavapuri Mercantile Private Limited the bank statements revealed that the entire sums are remitted by Pawapuri Mer- cantile Private Limited to the assessee had come from Gainwell Textrade Pri- vate Limited. The analysis done by the CIT(A) would reveal the nature and character of the transaction and the CIT(A) cannot be faulted to have held that the transactions are well planned and stage managed to show genuineness behind which a clean and simple "round tripping" of funds is taking place. The CIT(A) on examination of the facts found that the bank accounts act as "high- way" in the "journey of money" on a rotation and laundry trial from one entity to another and by this way these bank accounts create a facade of

33 ITA No. 1413/Kol/2023 Toplink Commerce Ltd. AY: 2012-13 documentary evidence for clean money in the form of account payee cheques for any kind of accommodation entries. 30. The CIT(A) did not stop with the above findings but proceeded to analyse the data which was made available in the form of return of income, bank state- ments etc. and found that the investors have purchased the shares of the as- sessee at a premium and all have shown similar characteristics, the revenue from operations are either nil or are negligible; the returns are either of loss or of insignificant income below taxable limit; they have been issued shares at very high premium without having earned any revenue from business opera- tions; they have invested on shares at very high premium in companies who also have not earned anything from business operations; their balance sheet shows that even though they do not earn anything, they invite huge invest- ments in their accounts and this money is used to make further investments at high premiums in other companies and they have also issued unsecured loans to other companies; money obtained from the route of share premium is rerouted for supplying sources of receipts of money to other companies; the circuit of investments remains within a group companies and in this manner through a circular routing of funds, the capital of each of the companies is enhanced and this inflated capital is then used for providing loans etc. to de- sired entities; the bank accounts show huge sums are received from one con- cern through cheques or RTGS and immediately diverted to other companies of the group and the bank balance remains negligible before and after such transfers; each of these companies invest in each other at very high premiums even though there is no business conducted; there is no reason or logic pro- vided by any of the companies as to on what basis they arrived at the value of premium on shares to be issued as neither the assessee nor its investors had followed the guidelines of RBI or ICAI or any other guidelines for deter- mining the rate of premium on their shares. Thus, the fixing of rate for premium is arbitrary and devoid of any financial or accounting rationale; the investors have not bothered to ensure protection of their investments; the investor com- pany do not have any business operations worth noticing yet they have raised huge capital through issue of shares at a premium and also made investments in shares of other companies at a premium even though the other companies like them, did not have any promising business activities. Thus, on analysing the data which was available it is seen that each of the companies have in- vested in each other and the investments have been made by rotating funds from one account to another. The assessee has not been able to explain why the investors companies had applied for shares in the assessee's company at a high premium even though the face value of the share was Rs. 10/- per share. The pattern of transaction clearly shows that these investors companies had raised capital by issue of shares at a very high premium and the transac- tion is repetitive. Therefore, the mere fact that the transactions were though banking channels or that the companies where income tax assessees or regis- tered with Registrar of Companies can in no manner be sufficient to discharge the onus under Section 68 of the Act. The learned tribunal did not examine the factual matrix in the depth and in the manner it ought to have done. Therefore, we would be well justified to hold that the findings rendered by the tribunal are perverse. It was argued by the learned Senior Advocate appearing for the respondent assessee that there is no material to show "round tripping" of funds; there is no finding that the money which has come to the assessee is ill gotten money and that the CIT(A) did not examine how the money came to the investors and failed to note that the company had requisite share capital re- source. Various documents which were placed before the tribunal in the form

34 ITA No. 1413/Kol/2023 Toplink Commerce Ltd. AY: 2012-13 of a paper book was submitted to the court for its perusal. 31. In our view it is not required to show that the money which came to the assessee is ill gotten and what is required to be seen is whether the transac- tion was genuine. It may be true that the identity of the investor company has been established as they are registered with the Registrar of Companies and they are regularly assessed to income tax. Assuming without admitting that at the relevant point of time when the investor companies invested in the as- sessee company by purchasing shares at high premium, they had sufficient funds in the bank accounts, the question would be as to whether this by itself will establish the creditworthiness of the investor companies. This is a fit case where the doctrine of "source of source" or "origin of origin" should be made applicable. We say so because the CIT(A) has brought the evidence and the materials on record which manifestly show the involvement of the assessee as the Directors of the five investors companies and the Director of the as- sessee company Mr. Gopal Kumar Agarwala are all closely related. 32. One of the directors of the Gainwell Textrade Private Limited is brother-in- law of Gopal Kumar Agarwala. One of the directors of Lucky Trading Private Limited is the wife of the brother-in-law of Mr. Agarwala and the other director is the maternal uncle. Mr. Gopal Kumar Agarwala himself is one of the director in Pavapuri Mercantile Private Limited and another director is the sister of Mr; Agarwala. One of the directors of HIL Engineering Private Limited is the brother-in-law of Mr. Agarwala and one of the Directors of Mubarak Cosmetics Private Limited is the wife of Mr. Agarwala. Thus, the facts clearly show that the doctrine of "origin of origin" has to be applied in the case on hand and this exercise has been rightly done by the CIT(A) by lifting the veil and enquiring into the real nature of the transaction. The pattern of remittances made to the five investor companies and immediately thereafter to the assessee company clearly shows that the shares subscriptions were collected as a part of pre- meditated plan which has been conceived by the assessee. 33. The tribunal fell in error in holding that the CIT(A) has not pointed out any doubt or discrepancy with regard to the identity of the investors. The learned tribunal has posed a wrong question which has led to a wrong answer. The question is not whether the identity of the investor has to be established but the question was whether the investor had requisite creditworthiness and whether such creditworthiness was a make belief situation by means of a cir- cular transaction and if the same had been established. The learned tribunal has held that the findings rendered by the CIT(A) that the assets in the form of investments have been created through rotating of money in between the group companies and the assets mainly consists of cash and cash equivalents are not enough to prove that any unaccounted money of the assessee has been introduced in the assessee company warranting addition under Section 68 of the Act. This finding in our opinion upon consideration of the facts is perverse. 34. The CIT(A) has made an elaborate exercise to assess the creditworthiness of the investor companies as well as the genuineness. All the investor compa- nies are group companies and the directors are closely related to the director of the assessee company and the director Mr. Agarwala himself is one of the directors in one of the investor companies namely Pawapuri Mercantile Private Limited and the spouse of Mr. Agarwala is the director of Mubarak Cosmetics Private Limited, an investor company. Therefore, on a deeper scrutiny of the factual position would show that the investor company did not have a genuine creditworthiness and consequently the transaction has to be held to be not

35 ITA No. 1413/Kol/2023 Toplink Commerce Ltd. AY: 2012-13 genuine. As held in N.R. Portfolio Private Limited (supra) whether or not the onus is discharged depends on facts of each case as well as it depends on whether the two parties are related or known to each other; the manner or mode by which the parties approach each other, the quantum of money, the object and purpose for which payment/investment was made. As held earlier certificate of incorporation of the companies, payment by banking channel etc. cannot tantamount to satisfactory discharge of onus and the facts of the case on hand speaks for itself as it is obvious. Thus, the principle of Preponderance of Probabilities applies with full force to the case on hand which leads to the irresistible conclusion that the finding rendered by the CIT(A) is legal and valid. 35. We have noted that the tribunal has made certain observations as regards the future prospects of the assessee company as they are a steel industry and that their fixed assets and also the turnover had increased substantially. How- ever, this appears to have not been the submission when the assessee filed an appeal before the CIT(A) challenging the addition made by the assessing officer. This is evident from the grounds of appeal which have been set out in the order passed by the CIT(A) in paragraph 2.1 of the order dated 28.11.2019. The finding rendered by the tribunal is probably taken from the written sub- missions made by the assessee before the tribunal giving certain facts and figures regarding the expanding of business activities of the assessee. The assessee in their submission contended that their business activity has in- creased considerably and for the purpose of expansion funds were required and therefore the assessee raised funds from various means, increment in share capital from associates being one of them. The fact clearly demonstrates that the source of the funds which have flown into the account of the assessee have substantially come from one company namely Gainwell Textrade Private Limited and the said company had contributed to the other companies and the funds transferred to those companies were transferred to the assessee com- pany invariably on the same day leaving a bank balance which was almost negligible and the bank statements reveal that the prior to the inflow of the funds into those investing companies, the bank balance was negligible and after the transfer it was also negligible. The assessee had contended before the tribunal that the amount was credited through proper banking channels and the investing companies are body corporate registered with the Registrar of Companies and individually assessed to income tax and therefore the gen- uineness of the parties is beyond doubt. However, this is not the litmus test to discharge the burden on the assessee to establish creditworthiness of the in- vesting companies as well as the genuineness of the transaction. Thus, we have no hesitation to hold that the explanation offered by the assessee is nei- ther proper, reasonable or acceptable. 36. In Swati Bajaj, the court held that based on the foundational facts the department has adopted the concept of "working backward" leading to the as- sessee. The department would be well justified in considering the surrounding circumstances, the normal human conduct of a prudent investor, the probabil- ities that may spill over and then arrive at a decision. 37. Thus the CIT(A) was right in adopting a logical process of reasoning con- sidering the totality of the facts and circumstances surrounding the allegations made against the assessee taking note of the minimum and proximate facts and circumstances surrounding the events on which charges are founded so as to reach a reasonable conclusion and rightly applied the test that a reason- able/prudent man would apply to arrive at a conclusion. On facts we are con- vinced to hold that the assessee has not established the capacity of the

36 ITA No. 1413/Kol/2023 Toplink Commerce Ltd. AY: 2012-13 investors to advance moneys for purchase of above shares at a high premium. The credit worthiness of those investors companies is questionable and the explanation offered by the assessee, at any stretch of imagination cannot be construed to be a satisfactory explanation of the nature of the source. The as- sessee has miserably failed to establish genuineness of the transaction by cogent and credible evidence and that the investments made in its share cap- ital were genuine. As noted above merely proving the identity of the investors does not discharge the onus on the assessee if the capacity or the credit wor- thiness has not been established. 38. In the light of the above discussion, we hold that the assessee has failed to discharge legal obligation to prove the genuineness of the transaction and the credit worthiness of the investor which has shown to be so by a "round tripping" of funds. For all the above reasons, the revenue succeeds. 39. In the result the appeal is allowed, the order passed by the learned Tribu- nal is set aside and the order passed by the CIT(A) dated 28.11.2019 is re- stored and the substantial questions of law are answered in favour of the rev- enue. 11.1 Further, in another case of Principal Commissioner of Income-tax v. One Point Commercial (P.) Ltd. [2024] 161 taxmann.com 737 (Calcutta) also, it has also been held as under:

The impugned order passed by the Tribunal has recorded that from the bare perusal of the documents placed, it is revealed that all the share applicants are income tax assessees, they are filing their income tax returns, share application form and allotment letter is available on record which were filed in response to the notice under section 133(6), share application money was made by account payee cheques, details of the bank accounts belonging to the share applicants and their bank statements have been furnished and all the share applicants are having substantial creditworthiness represented by their capital and reserves. Though such is the findings recorded by the Tribunal, it is not supported by facts. The Assessing Officer has held that the assessee was a private limited company which cannot issue shares in the same manner in which public limited company does and in so far as creditworthiness of the share subscribers is concerned, there must be positive evidence to show the nature and source of resources of the share subscribers and if the assessee was serious enough to establish his case, it ought to have complied with the notices/letters issued by the Assessing Officer and ought to have produced the directors of the subscribing companies before the Assessing Officer so that they could explain the sources from which the share subscription was made. It is stated that there is no complaint either from the end of the assessee-company or from the end of the alleged subscriber company. This finding recorded by the Assessing Officer as affirmed by the Commissioner (Appeals), if required to be set aside by the Tribunal, reasons have to be assigned. Therefore, the conclusion arrived at by the Tribunal is insufficient to support its ultimate conclusion in allowing the assessee’s appeal. Therefore, the matter has to be remanded back to the Tribunal for fresh consideration. [Para 4]

37 ITA No. 1413/Kol/2023 Toplink Commerce Ltd. AY: 2012-13 Accordingly, the appeal is allowed. The order passed by the Tribunal is set aside and the matter is remanded to the Tribunal to take a fresh decision on merits and in accordance with law and pass a reasoned order. [Para 5] 11.2 Both the decisions are squarely applicable to the facts of the case. Similar issue also came up before the ITAT Kolkata Bench for the case of Nexcare Agency Pvt. Ltd. Vs. ITO Ward 7(1), Kolkata, dated 26.07.2024. The relevant extract of the aforesaid order is as under: 5.1. The profit and loss account filed by the assessee paints a grim picture about the qualitative aspect of commercial activity which does not seem to justify a premium of Rs. 490/- on a share with face value of Rs. 10/-. Thus total revenues of Rs 1,26,350 for the year ending on 31.3.2012 and Rs. 96,020 for the year ending on 31.3.2011 are visible, which cannot be said to indicate a healthy bottom-line or even a robust business model. Considering this fact, it would be all the more prudent to examine the genuineness etc. of the 11 concerns which chose to repose considerable faith in the commercial future of the assessee to trust them with huge sums of money. It was on a somewhat similar situation when the Hon'ble Jurisdictional High Court upheld the doubtful nature of share premium monies being given to companies having doubtful commercial credentials in the case of PCIT vs. BST Infratech Ltd. reported in [2024] 161 taxmann.com 668 (Calcutta). Hon'ble Calcutta High Court had occasion to observe that in the said case investors had no reason to invest huge amounts in business of that assessee and the entire transaction was done to circumvent the provisions of the Act. It has been held that the action of the assessing officer in treating such share application money u/s 68 of the Act as undisclosed cash credit was justified. The relevant portion from this order deserves to be extracted as under:

“36. In Swati Bajaj, the court held that based on the foundational facts the department has adopted the concept of "working backward" leading to the assessee. The department would be well justified in considering the surrounding circumstances, the normal human conduct of a prudent investor, the probabilities that may spill over and then arrive at a decision.

38 ITA No. 1413/Kol/2023 Toplink Commerce Ltd. AY: 2012-13 38. In the light of the above discussion, we hold that the assessee has failed to discharge legal obligation to prove the genuineness of the transaction and the credit worthiness of the investor which has shown to be so by a "round tripping" of funds. For all the above reasons, the revenue succeeds. 39. In the result the appeal is allowed, the order passed by the learned Tribunal is set aside and the order passed by the CIT(A) dated 28.11.2019 is restored and the substantial questions of law are answered in favour of the revenue.” 5.2. We also draw considerable strength from the case of PCIT vs. NRA Iron & Steel (P.) Ltd. reported in [2019] 412 ITR 161 (SC) in which share application money was approved for action u/s 68 of the Act even where the share applicants had filed confirmations and attempted to show that the transactions have taken place through normal banking channels, etc. In this case, the Hon'ble Apex Court has dealt with the issue from a legal perspective and some of the passages deserve to be extracted for reference: “ This Court in the land mark case of Kale Khan Mohammad Hanif v. CIT [1963] 50 ITR 1 (SC) and, Roshan Di Hatti v. CIT [1977] 107 ITR 938 (SC) laid down that the onus of proving the source of a sum of money found to have been received by an assessee, is on the assessee. Once the assessee has submitted the documents relating to identity, genuineness of the transaction, and creditworthiness, then the Assessing Officer must conduct an inquiry, and call for more details before invoking section 68. If the assessee is not able to provide a satisfactory explanation of the nature and source, of the investments made, it is open to the revenue to hold that it is the income of the assessee, and there would be no further burden on the revenue to show that the income is from any particular source. [Para 8.2] With respect to the issue of genuineness of transaction, it is for the assessee to prove by cogent and credible evidence, that the investments made in share capital are genuine borrowings, since the facts are exclusively within the assessee's knowledge. Merely, proving the identity of the investors does not discharge the onus of the assessee, if the capacity or credit-worthiness has not been established. [Para 8.3] The Assessing Officer ought to conduct an independent enquiry to verify the genuineness of the credit entries. In the instant case, the Assessing Officer made an independent and detailed enquiry, including survey of the so-called investor companies from Mumbai, Kolkata and Guwahati to verify the credit-worthiness of the parties, the source of funds invested, and the genuineness of the transactions. The field reports revealed that the shareholders were either non-existent, or lacked creditworthiness. [Para 9] The principles which emerge where sums of money are credited as Share Capital/Premium are: i. The assessee is under a legal obligation to prove the genuineness of the transaction, the identity of the creditors, and creditworthiness of the investors who should have the financial capacity to make the investment in question, to the satisfaction of the Assessing Officer, so as to discharge the primary onus. ii. The Assessing Officer is duty bound to investigate the creditworthiness of the creditor/ subscriber, verify the identity of the subscribers, and

39 ITA No. 1413/Kol/2023 Toplink Commerce Ltd. AY: 2012-13 ascertain whether the transaction is genuine, or these are bogus entries of namelenders. iii. If the inquiries and investigations reveal that the identity of the creditors to be dubious or doubtful, or lack credit-worthiness, then the genuineness of the transaction would not be established. In such a case, the assessee would not have discharged the primary onus contemplated by section 68. [Para 11] In the instant case, the Assessing Officer had conducted detailed enquiry which revealed that: i. There was no material on record to prove, or even remotely suggest, that the share application money was received from independent legal en- tities. The survey revealed that some of the investor companies were non- existent, and had no office at the address mentioned by the assessee. The genuineness of the transaction was found to be completely doubtful. ii. The enquiries revealed that the investor companies had filed returns for a negligible taxable income, which would show that the investors did not have the financial capacity to invest funds ranging between Rs. 90 lakhs to Rs. 95 lakhs in the assessment year 2009-10, for purchase of shares at such a high premium. iii. There was no explanation whatsoever offered as to why the investor companies had applied for shares of the assessee company at a high premium of Rs. 190 per share, even though the face value of the share was Rs. 10 per share. iv. Furthermore, none of the so- called investor companies established the source of funds from which the high share premium was invested. v. The mere mention of the income tax file number of an investor was not sufficient to discharge the onus under section 68. [Para 12] The practice of conversion of un-accounted money through the cloak of Share Capital/Premium must be subjected to careful scrutiny. This would be particularly so in the case of private placement of shares, where a higher onus is required to be placed on the assessee since the information is within the personal knowledge of the assessee. The assessee is under a legal obligation to prove the receipt of share capital/premium to the satisfaction of the Assessing Officer, failure of which, would justify addition of the said amount to the income of the assessee. [Para 14] On the facts of the present case, clearly the assessee company - respondent failed to discharge the onus required under section 68, the Assessing Officer was justified in adding back the amounts to the assessee's income. [Para 15]” 5.3. It is seen that in another case on somewhat similar facts, the Hon'ble Calcutta High Court in the case of Bal Gopal Merchants (P.) Ltd. vs. PCIT reported in [2024] 162 taxmann.com465 (Calcutta) has held that action u/s 68 of the Act was justified. 6. A close reading of the case laws cited (supra) reveals that mere filing of confirmations and the income tax details etc. are not enough to justify payment of monies as share premium when the financial aspects of the recipient company would not merit such investments under any kind of prudent consideration. In the present case while 4 out of 11 share applicants were not traceable on given addresses and one more did not respond to the summons,

40 ITA No. 1413/Kol/2023 Toplink Commerce Ltd. AY: 2012-13 it is evident that even those share applicants who did file certain documents, were not sufficient in the eyes of law to discharge the burden cast on the assessee regarding proving the genuineness of the transaction. The profit and loss account statement extracted (supra) would normally paint a grim picture to any prudent investor, however, in this case it seems to have encouraged 11 entities to transfer huge sums of money by way of share premium. 6.1. Considering the case laws cited (supra) the financial health of the assessee and the inadequate discharge of onus, we hold this case to be a fit case for application of Section 68 of the Act and thereby confirm the impugned addition.

12.Having considered the submissions filed, the facts of the case and the judicial pronouncement discussed above, there is no justification for the huge premium charged by the assessee nor the assessee has been able to establish the same before the Ld. AO nor even before the Ld. CIT(A). As discussed above, mere identity of the creditor is not sufficient but the genuineness of the transaction as well as the creditworthiness of the creditor has to be established which the assessee has miserably failed to do. The onus is heavy on the assessee in case of private placement of shares as the details are in the knowledge of the assessee and it ought to have established the creditworthiness of the share applicants/shareholders and the genuineness of the transactions. The directors also failed to appear before the Ld. AO. Most of the applicants are not having any regular source of income except for income under the head income from other sources nor have strong financials to justify the investment with huge premium, as would be evident from Annexure ‘SP’ which forms part of the order. Neither the applicants are likely to receive any dividend nor the assessee has carried out any valuation to justify the huge premium charged. Accordingly, the transactions relating to issue of shares are not genuine nor the creditworthiness of the creditors has been established. Hence in view of the decision of the Hon’ble Jurisdictional High Court in the case of PCIT v BST Infratech Ltd. (supra) and others and the discussion made out by the Ld. CIT(A) to demonstrate that the applicants are shell companies, there does not appear to be any justification to interfere with the order of the Ld. CIT(A) and his order is hereby confirmed and ground nos. 2 and 3 of the appeal are accordingly rejected. In the result, the appeal of the assessee is dismissed.

41 ITA No. 1413/Kol/2023 Toplink Commerce Ltd. AY: 2012-13 The factors which militate against the assessee and question the genuineness of the entirely dubious and unjustified transactions for receipt of share capital along with huge share premium from corporate entities are as under: i.No verification of the applicants could be carried out by the Assessing Officer since the required evidence was not produced. ii.The assessee does not have any plausible source of income so as to attract the funds at a huge premium nor the investors had any plausible source of income to justify the genuineness of the transactions of the source of the funds invested. As would be apparent from the details of the financial statements filed, the promoter companies themselves had invested out of the advances received while others had invested out whether share capital/loans received. There does not appear to be any plausible source of income for the repayment of such advances by the assessee. iii.The sources of funds of the investing companies were either advances or loans/share capital, at times received with huge premium having no link with the valuation of the concerned company. iv.No business model exists for repayment of loans by the recipient of the loans or payment of dividend to the subscribers who have invested in shares at a huge premium. It appears as if the so-called investors had huge money lying with them which they could not handle and therefore dumped it anyhow upon the assessee without carrying out any due diligence.

42 ITA No. 1413/Kol/2023 Toplink Commerce Ltd. AY: 2012-13 v.The above factors are compounded by the fact that when required to produce the directors, the same were not produced. Even before us, the details of the directors have not been even mentioned. vi.The assessee was not a listed company or a company belonging to any big industrial house so as to attract investment, yet shares were applied for at a huge premium, which cannot be carried out by any prudent businessman and therefore makes the whole transaction suspicious and nongenuine. vii.Entire transactions appear to be a make-believe arrangement. The assessee could not explain how in the second lot, shares were issued at a huge premium whereas in the first lot, no such premium was charged, the gap between the two events being only of 27 days. viii.Although the replies to the notices were received yet the investors were not produced, hence the transactions remained unverified as has been rightly pointed out by the Ld. CIT(A). ix.The reliance by the assessee on the various cash laws is misplaced in view of the observations of the Hon’ble jurisdictional High Court in the recent cases(supra) wherein new mode of shell companies for tax evasion and routing of unaccounted money through such companies have been discussed, which require a rethink on the views held in the past. x.The source of source or origin of the origin, which needed to be explained as the investors were known to the assessee being private limited companies, was not established. This was the first year of incorporation of the

43 ITA No. 1413/Kol/2023 Toplink Commerce Ltd. AY: 2012-13 company yet the company could command huge premium during the second allotment of shares. xi.No supporting valuation report to justify the huge premium charged was produced and the premium was said to be the commercial decision of the directors but no comparable case was mentioned. No premium was charged for the shares issue mostly to individual shareholders, whose shares were bought back by the promoters, while huge premium was charged on the second allotment carried out within a span of 27 days only. The events which occurred in the meanwhile and which could justify the charging of premium on account of increased valuation of the company could not be informed. xii.The financial transactions do not have any plausible business model to support them. xiii.The commercial practice of charging premium has not been disclosed nor the justification for the same has been made out. It appears, the directors could call the shots without any basis. The evidence furnished were self-serving documents which could not establish the genuineness of the transitions.

44 ITA No. 1413/Kol/2023 Toplink Commerce Ltd. AY: 2012-13 require any separate adjudication. Hence, based upon the discussion made in the preceding paragraphs and the reasons mentioned by the Ld. CIT(A), Ground Nos. 1 to 4 of the appeal are rejected and dismissed and the order of the Ld. CIT(A) is confirmed. 19. In the result, the appeal of the assessee is dismissed.

Order pronounced in the open court on 9th September, 2024.

Sd/- Sd/- (Rajpal Yadav) (Rakesh Mishra) Vice President Accountant Member

Dated: 9th September, 2024

AK, PS

Copy to:

Assistant Registrar ITAT, Kolkata Benches, Kolkata