M/S TRIMURTHY FINVEST LIMITED,BILASPUR vs. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 1(1), BILASPUR

आदेश / ORDER

PER RAVISH SOOD, JM:

2. That the learned Commissioner of Income Tax (Appeals), Bilaspur, erred in confirming the addition of Rs.1,12,37,50,000/- made by the Assessing Officer under section 68 of the Income Tax Act, 1961 on irrelevant considerations and arbitrary grounds.

3. That the learned Commissioner of Income Tax (Appeals), Bilaspur, erred in confirming the addition of Rs. 1,12,37,50,000/- made by the Assessing Officer under section 68 of the Income Tax Act, 1961 on the basis of judgments which are distinguishable on facts as well as on law.

4. That the learned Commissioner of Income Tax (Appeals), Bilaspur erred in confirming the addition of share capital of Rs. 1,12,37,50,000/- made under section 68 of the Income Tax Act, 1961 in disregard of the binding judgments of Hon'ble Apex Court, Hon'ble High Courts and the Hon'ble ITATs which directly lays down ratio on the merits of the addition of share capital under section 68 of the Income Tax Act. 1961.

5. That the appellant craves leave to add, alter or delete all or any of the grounds of appeal."

4 M/s. Trimurti Finvest Limited Vs. DCIT, Circle-1(1), Bilaspur pointed out that the share applicant/subscriber companies lacked identity, genuineness, and creditworthiness. The A.O., in all fairness, provided a copy of the report received from DDIT (Inv.), Kolkata, to the assessee company.

7 M/s. Trimurti Finvest Limited Vs. DCIT, Circle-1(1), Bilaspur the aforementioned share applicant/subscriber companies, since incorporation, had not done any actual business activities, in spite of that, they had invested considerable amounts in securities premium account vis-à-vis non-current investments in the shares of private limited companies.

8 M/s. Trimurti Finvest Limited Vs. DCIT, Circle-1(1), Bilaspur investments. He further observed that the companies in which the share applicant/subscriber companies had earlier invested were also found to be companies having no substantial worth and were only entry providers.

9 M/s. Trimurti Finvest Limited Vs. DCIT, Circle-1(1), Bilaspur claim by making available the requisite details, failing which, the addition would be called for u/s.68 of the Act.

presumptions only .However report of the Hon'ble DDIT(inv.), unit 4(1), Kolkata itself prove the followings – -the Hon'ble DDIT(inv.), unit 4(1), Kolkata has not enquire the matter specifically related to our transactions with the all such alleged companies. - All the alleged companies are existed at their address and traceable. - All the alleged companies are assessed regularly u/s 143(1) and W' 143(3) at their respective jurisdictional income Tax Ward. -All such alleged companies have been duly assessed with their sufficiency of funds for their investments in the A/Y 2012-13, 2013-14 & 2014-15. Kindly refer to the same. -Directors of all such alleged companies are identifiable and well-traceable to the Department. -Report of the Hon'ble DDIT(Inv), unit 4(1), Kolkata also stated that out of the alleged companies, summons u/s 131 has been served, and as informed to us by those companies, they have submitted requisite documents before the Hon'ble DDIT(Inv). unit 4(1), Kolkata through the speed post dated 16/12/2016 and the same facts also mentioned by them in the submissions letters before you. Kindly refer to the same. - On critical reading of the Report of the Hon'ble DDIT (inv.), unit 4(1), Kolkata, it reveals that the report is issued merely on presumptions and pre-fix mindset. Assessee company has submitted complete details of 48 companies before you at the time of recording of the statement under section 131 dated 13/12/2016. Details of the evidence submitted on 13/12/2016 are as under. -Directors have appeared and recorded statements and oaths for providing complete facts along with supporting documents which he possessed on 13/1212016. Active status of all the 48 companies from the Ministry of Corporate Affairs website (www.mcasov.in) wherein it clearly mentions the name of the company, its address, and the name of its directors as of today. Therefore identity of all the 48 companies were given with the authenticated documents is proved -Directors have furnished a copy of the memorandum of association of all the 48 companies, which is obtained from the authenticated website of the Ministry of corporate affairs, wherein details of the objects of the company and the name and address of its directors, authorized capital, issued capital, and its registered head office address are clearly mentioned. Therefore it proves that the identity of the alleged 48 companies is duly substantiated. -Directors have further furnished an audited financial statements of all the alleged 48 companies to prove their credentials, wherein clearly mentioned sufficient funds for providing share application money to our company.

12 M/s. Trimurti Finvest Limited Vs. DCIT, Circle-1(1), Bilaspur

-Directors have also produced rill the bank statement of many alleged companies to prove that all the share application money transactions passed through proper banking channels like RTGS/account pay cheques. Apart from the above since your good office has also compelled to the director of the assessee company during the statement recorded under section 131 dated 13/12/2016 to produce directors of all the 48 alleged companies whereas director stated that companies are located far away from Bilaspur city. Therefore kindly summon the directors as you deem fit necessary. However our company has compelled to the directors/ principal officers of all the alleged 48 companies through a written letter dated 13/12/2016 for their personal appearance along with supporting documents of the transactions between us. All such written letters were received by all the alleged 48 companies at their registered head office address on 15/12/2016 to 17/12/2016. Copy of all such receipt has already been furnished at your office on 20/12/2016 In compliance to the said compelling letters issued from our office to the all alleged 48 share holders companies, Following documents are given by the Investors companies to confirm the transactions between us and its genuineness and the source of their investments( Details of letter issued date letter received date, speed post date and speed post received by the department are enclose here with for your reference) :- Copy of share application on which face value and the premium value of our equity share, name and address of applicant company are clearly mentioned and in support of these applications money source of the investment are also attached. Genuineness of transaction- Copy of related bank accounts. Copy of share certificates. To prove identity- PAN card of their companies, A copy of the IT returns for the assessment year 20I4-15, Copy of memorandum of association. To prove credit worthiness- Copy of profit and loss accounts, balance sheet; audit report for F/Y 2013-14. in light of above facts and supporting evidences, it is quite clear that the identity, genuineness and the credit worthiness of all the 48 alleged companies has been proved and the report of Hon'ble DDIT(inv.), unit 4(1), Kolkata is issued without any basis and merely on presumptions. Moreover report of the Hon'ble DDIT (Inv.), unit 4(1), Kolkata is not specific on corroborative/cogent evidences and is based on their database not in the basis of current position of all the companies. Report also stated that out of 48 companies many of the summons issued under section 131 has been served to the many companies and the some of these summons under section 131 were unserved and returned back to them. Therefore, conclusion of the above mentioned report is confusing and without proper inquiry because of on the contrary all the 48 alleged companies have well responded directly to your office and submitted, all the supporting evidences to prove their identity, genuineness and credentials of their companies.”

13 M/s. Trimurti Finvest Limited Vs. DCIT, Circle-1(1), Bilaspur

14 M/s. Trimurti Finvest Limited Vs. DCIT, Circle-1(1), Bilaspur amounts were received through the banking channels. The A.O. observed that the assessee company was obligated to have filed supporting documentary evidence revealing that the share applicant/subscriber companies had made genuine investments and had not merely acted as angel investors. The A.O. believed that simply furnishing contact details PAN of the share applicant companies, i.e., private limited companies, would not suffice to establish their identity. Elaborating on his view above, it was observed by the A.O. that the identification of the persons would include their place of work, the staff, the fact that it was carrying on business, and recognition of the said company in the eyes of the public.

15 M/s. Trimurti Finvest Limited Vs. DCIT, Circle-1(1), Bilaspur to file the other requisite details as were required per the mandate of Section 68 of the Act; therefore, the entire amount of share capital/premium of Rs.112.37 crore (approx.) received by it during the year under consideration was to be treated as unexplained cash credit within the meaning of the said section. Accordingly, the A.O. vide his order passed u/s. 143(3) of the Act dated 28.12.2016, after making the addition described above of Rs.112.37 crore (approx.) u/s.68 of the Act, brought the same to tax u/s 115BBE of the Act and determined the income of the assessee company at Rs.111.19 crore (approx.).

16 M/s. Trimurti Finvest Limited Vs. DCIT, Circle-1(1), Bilaspur on his deliberations above, the CIT(Appeals) upheld the addition of Rs.112.37 crore (supra) that the A.O made u/s 68 of the Act. For the sake of clarity, the relevant observations of the CIT(Appeals) are culled out as under:

"2.3 I have gone through the assessment order and considered the submission made by the assessee. Basically, the submission of the assessee is that in view of the documents such as PAN, ROC certificate, bank statements, etc., furnished in respect of share applicants, the A.O. should have accepted the credit of share application money as genuine. In his submission filed on 22.12.2017, the Ld. A.R. contended that in the report of the DDIT, Inv. name of the assessee company was not mentioned. Assessee company's name is not mentioned also in the list of companies providing accommodation entry. Assessee company files I.T. return regularly, which have been assessed in respect of A.Y.s 2005- 06 to 2009-10, 2012-13, and 2013-14. Documents such as PAN, MOA, AOA, share application forms, and audited financial statements in respect of some of the investor companies; were submitted and were duly accepted by the A.O.; therefore, similar documents in the current assessment year should also be accepted. In the AY 2012-13 and 2013-14, the A.O. had issued notices u/s 133(6) to all alleged investor companies, and these companies furnished all required information to establish identity, creditworthiness, and genuineness. The Ld. A.R. wants the Department to accept a certain set of papers on the ground that similar papers were accepted in earlier years also. However, estoppels do not apply in I.T. proceedings, and each assessment year is separate and exclusive from earlier years. Moreover, there was no inquiry caused through the DDIT Inv at Kolkata in earlier years as has been caused in the current year with findings adverse to the assessee. If, on an inquiry, different facts are found, and it is revealed that the directors and persons related to the purported share application companies have accepted having provided accommodation entries to the assessee company, then the share application money of the assessee company becomes doubtful, and unexplained. Once doubt is cast on the genuineness of a fact this year, the very documents become suspicious and unacceptable, and it cannot be accepted for the reason that similar documents were accepted in earlier years also. To mitigate the doubt and establish genuineness, the appellant must furnish further evidence. The A.O. has provided the opportunity to the appellant to produce directors of purported share application companies who could have given statements and added further to what was said before the DDIT and establish the genuineness of share application mono and creditworthiness of their respective companies. But the assessee refused to avail the opportunity and instead tried to shift the onus on the A.O., which is not permissible prior to the assessee discharging his onus.

17 M/s. Trimurti Finvest Limited Vs. DCIT, Circle-1(1), Bilaspur

The Director Shri Darak has not produced the directors of companies advancing share application money and has, in turn, requested the A.O. to summon these persons. When a person claims certain facts as true, the onus is on him to produce necessary witnesses to support his claim. He cannot shift the onus on the A.O. Only after Shri Darak produces his witnesses; the onus will shift on the A.O. It is on record that these directors were already summoned by the Deputy Director of Income-tax (DDIT) (Inv) at Kolkata. In several cases, the summons could not be served at the addresses, and in other cases where the summons were served, the directors of these companies failed to appear before the DDIT Inv. In light of these facts, the A.O. asked the assessee company to produce the directors of companies making share application. Why and for what reasons a share premium would be payable to a company like the applicant company, which has no net worth, is beyond comprehension. It is highly implausible that some persons would invest their money, without adequate protection and ensuring appropriate returns, in a company that did not have a proven, reputable, and reliable record. Any and every reasonable person is normally expected to practice due diligence while investing its hard- earned money, let alone purchase shares of an unknown company. In fact, such a high premium is not commanded even by blue chip quoted companies. It is not a case where angel investors had invested upon being satisfied with the innovativeness and entrepreneurial skills of the management. With the amendment to section 68, applicable w.e.f from AY 2013-13, not only is the assessee required to explain the source of share application money, but in case the applicant is a company, then the said applicant company is also required to explain the source of money in is handing out of which the amount of share application money was advanced to the assessee. In the present case, none of the share applicants has appeared and explained its finances, out of which the amount was advanced to the assessee. In conclusion, the credit in the assessee's books as share application money is unexplained. The addition of the amount of Rs.112,37,50,000/-in the hands of the assessee, made in the assessment order, is hereby sustained, and the ground of the assessee is dismissed."

18 M/s. Trimurti Finvest Limited Vs. DCIT, Circle-1(1), Bilaspur involving identical facts was pending before the ITAT, Kolkata Bench, therefore, the hearing of the appeal in its case be adjourned till disposal of the appeal of the sister concern. Along with the application for adjournment, the assessee company had placed on record certain documents/orders pertaining to M/s. Jayganga Exim India Pvt. Ltd. (supra), viz. assessment order, CIT(A)’s order, Form-36 filed before the ITAT (Kolkata), status of appeal before the ITAT, Kolkata, and a comparative chart of additions made in the case of sister concern vis-à-vis assessee company and other group concerns. As the present appeal had earlier been adjourned on twelve occasions, out of which, on two occasions, it was adjourned on the request of the assessee, while on three occasions, the matter had to be adjourned as the assessee appellant had failed to put up an appearance, therefore, finding no justification in the reason based on which the hearing of the appeal was requested to be adjourned, i.e. request for adjourning the hearing of the appeal till the disposal of the appeal of the sister concern, the same was in all fairness posted for final hearing on 08.06.2023. On 08.06.2023, the Ld. AR sought liberty for placing on record “Paper Book Volume-2” (sic) (comprising of Page 1-43), which subject to no objection of the Ld. DR was admitted, and the appeal of the assessee appellant was heard at length and the order was reserved.

19 M/s. Trimurti Finvest Limited Vs. DCIT, Circle-1(1), Bilaspur received an application of the assessee appellant company (in multiple sets) seeking permission to place on record Written submissions/Synopsis and an "affidavit" of the director in support of the grounds of appeal raised before us. The assessee appellant, to support its claim that though the written submissions /synopsis/affidavit were being filed after the culmination of the appellate proceedings, the same in all fairness were required to be considered, had relied on the judgment of the Hon’ble Supreme Court in the case of Aurangabad Electricals Ltd. Vs. Commissioner of Central Excise & Customs, Aurangabad (2011)

1. STD 118. In the aforesaid case, the assessee appellant claimed that the Hon’ble Apex Court had observed that technicalities should not defeat the rendering of justice to a litigant. Referring to the facts involved in the case mentioned above, the assessee appellant stated that the Court had remanded the matter to the file of the Tribunal with a direction to consider the document/certificate that the appellant had filed with the latter after hearing of the appeal was concluded and order was reserved, and decide the matter afresh. Also, the assessee appellant had, along with its aforesaid application filed a short synopsis/written submission in support of the grounds raised in the memorandum of appeal a/w an affidavit of Shri Rohit Darak, director of the assessee company.

16. As the aforesaid application seeking to place on the record the written submission/synopsis a/w. the affidavit of the director of the assessee company after the culmination of the appellate proceedings was not in conformity with the 20 M/s. Trimurti Finvest Limited Vs. DCIT, Circle-1(1), Bilaspur procedure contemplated in Rule 18 of the Income Tax (Appellate Tribunal) Rules, 1963, regulating the mode and manner for an appellant or a respondent who proposes to refer or rely upon any document or statements or other papers on the file of or referred to in the assessment or appellate orders; therefore, initially, we were of the view that the same did not merit admission. Our conviction above was fortified by sub-rule (7) of Rule 18, as per which any paper/paper book filed in a manner that does not conform with that prescribed under Rule 18 is to be ignored. For the sake of clarity, Rule 18 of the Income Tax (Appellate Tribunal) Rules, 1963 is culled out as under: “18. Preparation of paper books, etc.- (1) If the appellant or the respondent as the case may be, proposes to refer or rely upon any document or statements or other papers on the file of or referred to in the assessment or appellate orders, he may submit a paper book in duplicate containing such papers duly indexed and paged at least a day before the date of hearing of the appeal along with proof of service of a copy of the same on the other side at least a week before: Provided, however, the Bench may in an appropriate case condone the delay and admit the paper book. (2) The Tribunal may suo motu direct the preparation of a paper book in triplicate by and at the cost of the appellant or the respondent containing copies of such statements, papers and documents as it may consider necessary for the proper disposal of the appeal. (3) The papers referred to in sub-rule (1) above must always be legibly written or type-written in double space or printed. If xerox copy of a document is filed, then the same should be legible. Each paper should be certified as true copy by the party filing the same, or his authorised representative and indexed in such a manner as to give the brief description of the relevance of the document, with page numbers and the Authority before whom it was filed. (4) The additional evidence, if any, shall not form part of the same paper book. If any party desires to file additional evidence, then the same shall be filed by way of a separate paper book containing such particulars as are referred to in sub-rule (3) accompanied by an application stating the reasons for filing such additional evidence. (5) The parties shall not be entitled to submit any supplementary paper book, except with the leave of the Bench.

21 M/s. Trimurti Finvest Limited Vs. DCIT, Circle-1(1), Bilaspur

(6) Documents that are referred to and relied upon by the parties during the course of arguments shall alone be treated as part of the record of the Tribunal. (7) Paper/paper books not conforming to the above rules are liable to be ignored.”

(emphasis supplied by us) Further, we may herein observe that there is also nothing discernible from the documents forwarded through speed post by the assesse appellant company (after the appeal was heard), which would reveal that the copies of the same were also sent to the respondent department. The assessee appellant to impress upon us that the written submission/synopsis/affidavit that were being filed with us, though after the culmination of the hearing of the appeal, therein merit admission, had relied on the judgment of the Hon’ble Apex Court in the case of Aurangabad Electricals Ltd. Vs. Commissioner of Central Excise & Customs, Aurangabad (supra).

Facts in the case before the Hon’ble Apex Court – Re: Aurangabad Electricals Ltd.: 18. In the case before the Hon’ble Supreme Court, the allegation against the appellants, viz. Aurangabad Electricals Ltd., who were manufacturers of “Magneto Assemblies,” was that they were receiving inputs from M/s Bajaj Auto Ltd., which was the primary consumer of their goods, at an under-valued landed

22 M/s. Trimurti Finvest Limited Vs. DCIT, Circle-1(1), Bilaspur cost by not including an element of the landed cost of inputs incurred on account of Sales Tax, Octroi, Freight, Insurance, loading, unloading and handling charges. It was alleged that the appellant company was further undervaluing the clearances effected by them to M/s Bajaj Auto Ltd. since they were already receiving the price compensation in terms of inputs at reduced landed cost, and thereby were aiding each other for mutual business interest so that the production cost by both of them be kept at a minimum, and the central excise duty is discharged at a lower value. Before the Hon’ble Apex Court, it was claimed by the appellant company that both the adjudicating commissioner and the Tribunal had non-suited it because the details of the final product and the landed cost of the material supplied were not provided. Also, it was observed that the appellant company had not furnished any material/data as regards the actual expenses incurred on account of freight, loading, unloading charges, profit margin, etc. The appellant company produced before the Hon’ble Apex Court a Certificate issued by a Chartered Accountant (CA) in respect of the valuation of the normal price of “Magneto assemblies,” which were manufactured and sold by it to M/s Bajaj Auto Ltd. in wholesale, which was in support of costing. Also, the said Certificate pointed out freight charges incurred by the appellant company for getting material from M/s Bajaj Auto Ltd. a/w loading and unloading charges, consumable overheads, and profit. The Hon’ble Apex Court observed that the appellant had produced the Certificate along with other documents before the Tribunal after the appeals were heard and reserved

23 M/s. Trimurti Finvest Limited Vs. DCIT, Circle-1(1), Bilaspur for judgment. It was observed by the Hon’ble Apex Court that as technicalities should not defeat rendering of complete justice to a litigant, therefore, the matter in all fairness required to be remanded to the Tribunal with a direction to consider as to whether the Certificate placed on record by the appellant, would assist them in support of their claim.

24 M/s. Trimurti Finvest Limited Vs. DCIT, Circle-1(1), Bilaspur

25 M/s. Trimurti Finvest Limited Vs. DCIT, Circle-1(1), Bilaspur

26 M/s. Trimurti Finvest Limited Vs. DCIT, Circle-1(1), Bilaspur

27 M/s. Trimurti Finvest Limited Vs. DCIT, Circle-1(1), Bilaspur application money from the investor companies, furnished copies of PAN, returns of income, audit reports, and bank statements, etc. of the share applicant/subscriber companies. Regarding the A.O.'s direction to produce the directors of the share applicant/subscriber companies for necessary examination before him, Shri Sarad Kumar Darak (supra) expressed his inability to do so and requested the A.O. to summon them. However, the A.O. not losing sight of the fact that the summons that were earlier issued u/s.131 of the Act by the DDIT (Inv.) Unit-4(1), Kolkata (on a commission issued to him u/s 131(1)(d) of the Act) seeking personal attendance of the directors/principal officers of the aforesaid share applicant/subscriber companies were either not complied with or were returned unserved, thus, knowing well that the repetition of the said exercise of summoning the persons above on his part would be nothing but futile and of no use, refrained from doing so.

28 M/s. Trimurti Finvest Limited Vs. DCIT, Circle-1(1), Bilaspur companies, thus, for verifying the factual position referred to the financial statements of the share applicant/subscriber companies, which revealed that they had virtually no worth and no fixed assets, as under:

29 M/s. Trimurti Finvest Limited Vs. DCIT, Circle-1(1), Bilaspur Based on the facts above, the A.O. held a firm conviction that the share applicant/subscriber companies lacked creditworthiness to make investments aggregating to Rs.112.37 Crore (approx.) with the assessee company. Also, it was observed by the A.O. that since incorporation, the aforementioned share applicant/subscriber companies had yet to carry out any actual business activities. Apart from that, it was observed by the A.O. that the financial statements of the aforementioned share applicant/subscriber companies revealed that despite the huge amounts in securities premium account vis-à-vis non-current investments in the shares of private limited companies, they were since incorporation not carrying out any actual business activities. The A.O. further observed that the features of the share applicant/subscriber companies were peculiar features of shell/paper companies which were incorporated to facilitate the nefarious activities of laundering unaccounted money. Considering the fact that the assessee company had failed to substantiate the identity and creditworthiness of the share applicant/subscriber companies, and genuineness of the transactions of receipt of the share application money from 30 M/s. Trimurti Finvest Limited Vs. DCIT, Circle-1(1), Bilaspur them, the A.O. concluded that having failed to do so, the amounts in question were to be held as unexplained cash credits u/s.68 of the Act.

33 M/s. Trimurti Finvest Limited Vs. DCIT, Circle-1(1), Bilaspur (Delhi), that in a case where the assessee had adopted an evasive approach and had deliberately and intentionally failed to produce evidence before the A.O. with the desire to prevent inquiry or investigation, then adverse view should be taken. At this stage, we may herein observe that Shri Sarad Kumar Darak (supra), in his statement recorded on oath by the A.O. on 13.12.2016 on being directed to produce the principal officers/directors of the share subscriber/applicant companies, had expressed his inability to do so and had requested that the Department may summon the said persons. In our considered view, now when neither of the aforementioned persons had complied with the summons issued to them u/s. 131 of the Act by the DDIT (Inv.), Unit-4(1), Kolkata; therefore, the A.O. being well aware of the fact that the summoning of the said persons on his part would be a futile exercise, had thus rightly refrained from acceding to the said request of the assessee. Considering the totality of the facts involved in the present case, wherein the principal officers/directors of the share applicant/subscriber companies were evading their participation and compliance to the summons that were issued by the DDIT(Inv.)-4(1), Kolkata on a commission issued by the A.O. to him, we are of the considered view that the assessee company being well aware of the aforesaid state of affairs could not have shifted the onus that was cast upon it as regards proving the authenticity of the transactions of receipt of genuine share application money from the aforesaid share applicant/subscriber companies by seeking summoning of the said persons by the A.O. As the 34 M/s. Trimurti Finvest Limited Vs. DCIT, Circle-1(1), Bilaspur aforesaid share applicant/subscriber companies had not complied with the summons that were issued to them u/s 131 of the Act by the DDIT(Inv.)-4(1), Kolkata, therefore, the assesse company in discharge of the onus that was cast upon it to prove the authenticity of the transactions of receipt of the share application money from them statutorily remained under an obligation to have complied with the directions of the A.O and produced the concerned persons for necessary examination before him. On a careful perusal of the orders of the lower authorities, we would not hesitate to observe that the assessee company had absolutely adopted an evasive approach and except for placing on record certain documentary evidence, i.e., copies of PAN, returns of income, audit reports and bank statements, etc. of the share applicant/subscriber companies, and harping on the fact that transactions were carried out through banking channel, had however failed to substantiate the set of conditions envisaged u/s. 68 of the Act, i.e. (i) proving the identity and creditworthiness of the share applicant/subscriber companies; and (iii) establishing the genuineness of the transactions under consideration based on irrefutable supporting documentary evidence. As the DDIT(Inv.), Unit-4(1), Kolkata had vide his report dated 21.11.2016, i.e., pursuant to the commission issued u/s.131(1)(d) of the Act by the A.O., therein stated that share applicant/subscriber companies had doubtful credentials and lacked identity, creditworthiness, and genuineness, which fact was brought by the A.O. to the notice of the assessee company, therefore, in our considered view a very heavy onus was cast upon the assessee company

35 M/s. Trimurti Finvest Limited Vs. DCIT, Circle-1(1), Bilaspur to dispel the said adverse observations by placing on record supporting documentary evidence, and such other material which would have substantiated the authenticity of the transactions of receipt of genuine share application money from the said share applicant/subscriber companies. However, we find that the assessee company had failed to discharge the primary onus that was cast upon it for proving the authenticity of the transactions of receipt of the share application money from the share applicant/subscriber companies based on any irrefutable documentary evidence. As observed by us hereinabove, it is though the claim of the Ld. AR that the assessee company on the basis of supporting documents/material had duly discharged the onus that was cast upon it as regards proving the authenticity of its claim of having received genuine share application money from the 41 investors companies, which, as claimed by him had not been considered by the A.O, but we find that neither any such documents/ material so heavily relied upon by the Ld. AR were produced before the CIT(Appeals) or before us.

36 M/s. Trimurti Finvest Limited Vs. DCIT, Circle-1(1), Bilaspur would have made genuine investments aggregating to a towering sum of Rs. 112.37 crores (supra) with the assessee company, then it is not only beyond comprehension but also beyond human probability that they would have shirked from or evaded compliance of the summons that were issued to them u/s 131 of the Act by the DDIT(Inv.)-4(1), Kolkata. We have a firm conviction that had it been a case of genuine investments made by the 41 share applicant/subscriber companies mentioned above, then there was no reason as to why they would not have complied with the summons issued to them u/s 131 of the Act and appeared before the DDIT(Inv.)-4(1), Kolkata and confirmed their respective investments along with the source of making the same. The evasive approach adopted both by the assessee company and all of the so-called 41 share applicant/subscriber companies speaks for itself, and reveals that the latter were merely name-sake investors forming part of a well-knit chain of paper/shell companies managed by entry operators who had facilitated the laundering of the unaccounted money of the assessee company in the guise of share capital/premium. Our aforesaid view is fortified by the judgment of the Hon'ble Supreme Court in the Case of Pr. CIT, Circle-1 Vs. NRA Iron & Steel Pvt. Ltd. (2019) 103 taxmann.com 48 (S.C.). In the said case, the Hon'ble Apex Court had observed that where the assessee company had received share capital/premium but had failed to establish the creditworthiness of the investor company, then the A.O. was justified in treating the said amount as an unexplained cash credit u/s.68 of the Act. The Hon'ble Apex Court, while

37 M/s. Trimurti Finvest Limited Vs. DCIT, Circle-1(1), Bilaspur concluding as hereinabove had, inter alia observed that the A.O. is duty bound to investigate the creditworthiness 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. The Hon'ble Apex Court, while concluding as hereinabove, had laid down the principles which emerge where sums of money are credited as Share Capital/Premium, as under:

"11. 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 the creditworthiness of the investors who should have the financial capacity to invest in question to the satisfaction of the A.O., 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 ascertain whether the transaction is genuine or these are bogus name-lender entries. iii. If the inquiries and investigations reveal that the identity of the creditors is dubious or doubtful, or lacks creditworthiness, 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 of the Act." (emphasis supplied by us)

38 M/s. Trimurti Finvest Limited Vs. DCIT, Circle-1(1), Bilaspur established the source of funds from which they invested the high share premium; and (iv) that mere mention of the income tax file number of an investor was not sufficient to discharge the onus that was cast upon the assessee u/s. 68 of the Act. Also, the peculiar fact involved in the present case before us, which can also be traced in the facts involved in the case before the Hon'ble Apex Court, was that the A.O. [DDIT(Inv.)-4(1), Kolkata in the case of the present assessee company before us] had issued summons to the investor companies, who despite having validly been served failed to put up an appearance before him. Also, in the case before the Hon'ble Apex Court, the Kolkata-based companies had responded to the notices issued by the A.O. only through 'Dak' and had failed to substantiate the source of funds from where they made the alleged investments.

40 M/s. Trimurti Finvest Limited Vs. DCIT, Circle-1(1), Bilaspur four corners of the same. As observed by the Hon'ble Apex Court, though the assessee company in the present case before us had also filed copies of PAN, returns of income, audit reports, and bank statements of the share applicant/subscriber companies in the course of the assessment proceedings, the same on such standalone basis would not justify discharge of the onus that was cast upon it as regards proving the identity and creditworthiness of the share applicant/subscriber companies, and also the genuineness of the transactions of receipt of share application money from them. Apart from that, we find that a reference to the financial statements of the share applicant/subscriber companies as culled out by the A.O in the body of the assessment order (reproduced hereinabove) reveals that the aforesaid 41 investor companies had no financial means to invest such huge amounts aggregating to Rs.112.37 crore (approx.) with the assessee company. Also, the fact that the said 41 investor companies had subscribed the shares of the assessee company, a loss-making company, of the face value of Rs.100/- per share at a premium of Rs.2400/- per share does not inspire any confidence as regards the authenticity of the transactions under consideration. Also, we may observe that as the aforesaid judgment of the Hon'ble Apex Court in the Case of Pr. CIT, Circle-1 Vs. NRA Iron & Steel Pvt. Ltd. (supra) was rendered in the context of pre-amended Sec. 68 of the Act; therefore, pursuant to the insertion of the "1st proviso" to Sec. 68 of the Act vide the Finance Act, 2012 w.e.f 01.04.2013 which applies to the case of the present assesse company before

41 M/s. Trimurti Finvest Limited Vs. DCIT, Circle-1(1), Bilaspur us, a much heavier onus was therein cast upon it to substantiate the authenticity of the share application money that was credited in its books of accounts. Apropos the claim of the assessee company that the lower authorities had miserably failed to establish that the assessee’s unaccounted money was routed back to its coffers in the guise of share application money received from the share applicant/subscribers companies, therefore, the amount so received could not be held as its unexplained cash credit u/s.68 of the Act, we are unable to concur with the same. We, say so, for the reason that as held by the Hon’ble Supreme Court in the case of NRA Iron & Steel Pvt. Ltd. (supra), if the assessee is not able to provide a satisfactory explanation of the nature and source of the investments made, then 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 particulars source.

share application money, share capital, share premium, or any such amount by whatever name called, any explanation offered by such assessee-company shall be deemed to be not satisfactory, unless— (a) the person, being a resident in whose name such credit is recorded in the books of such company, also offers an explanation about the nature and source of such sum so credited; and (b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory: Provided further that nothing contained in the first proviso shall apply if the person, in whose name the sum referred to therein is recorded, is a venture capital fund or a venture capital company as referred to in clause (23FB) of section 10."

As per the "1st Proviso" to Section 68 of the Act an additional obligation was fastened upon the assessee company to substantiate the authenticity of its claim of having received genuine share application money, and the respective investors were required to offer an explanation as regards the nature and source of the sum so credited against their name in the books of account of the assessee company. To sum up, the claim of the assessee company of having received share application money from the 41 share applicant/subscriber companies did further cast an obligation upon it to mandatorily supplement the same with the explanations of the respective investor companies about the nature and source of such sum credited against their names in the books of account of the assesse company. However, we find that in the present case before us, not only the assessee company had failed to substantiate to the hilt the nature and source of the amount credited in its books of account based on any clinching documentary evidence, but also, there is no whisper in the orders

43 M/s. Trimurti Finvest Limited Vs. DCIT, Circle-1(1), Bilaspur of the lower authorities about any explanation of the respective investor companies about the nature and source of such sum so credited against their names in the books of account of the assessee company.

(A) Chhattisgarh Metaliks and Alloys (P.) Ltd. Vs. ITO, (2023) 147 Taxmann.com 441 (Raipur-Trib)

44 M/s. Trimurti Finvest Limited Vs. DCIT, Circle-1(1), Bilaspur out of its “opening balance” of Rs.89.18 lac on 01.04.2014 as a partner with M/s. Sri Balaji Iron & Steel Traders, Visakhapatnam, and not out of any fresh amount parked in its capital account during the year under consideration. Considering the duly substantiated explanation as regards the source of investment of share application money by the investor company, viz. M/s. Aayush Steelco (P) Ltd. and other supporting documentary evidence that the assessee had filed in the course of the proceedings before the lower authorities, it was observed by the Tribunal that the onus cast upon the assessee company for proving nature and source of the share application money a/w. additional burden that was cast upon it as per the “1st Proviso” to Section 68 of the Act was duly discharged.

46 M/s. Trimurti Finvest Limited Vs. DCIT, Circle-1(1), Bilaspur (C) ACIT Vs. Shri Pramod Kumar Sethi, & 383/Ind/2014 dated 06.11.2018

47 M/s. Trimurti Finvest Limited Vs. DCIT, Circle-1(1), Bilaspur in question before us, would by no means come to the rescue of the assessee company.