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Harmony Yarns Pvt.Ltd., Surat vs Assessee

Income Tax Appellate Tribunal – Ahmedabad
 



Harmony Yarns Pvt.Ltd., Surat vs Assessee

Before Shri Rajpal Yadav, JM, & Shri Manish Borad, AM.
 ITA No.1590/Ahd/2012
Asst. Year: 2005-06

Harmony Yarns Pvt. Ltd., Surat. 105, J. K. Tower, Ring Road, Surat. PAN AAACH 5895F(Appellant)
Vs.
ITO, Wd 1(2), (Respondent)
 
Appellant by                    Shri Mehul R. Shah, AR
            Respondent by                         Shri Pradeepkumar Majmudar, Sr.DR

Date of hearing: 19/1/2016
Date of pronouncement: 01/04/2016

ORDER
PER Manish Borad, Accountant Member.

This appeal of the assessee is directed against the order of ld. CIT(A) -I, Surat, dated 26.6.2012 in appeal No.CAS-1,208/2011-12 passed against order u/s 143(3) r.w.s 147 of the IT Act, 1961 (in short the Act) for assessment year 2005-06 framed on 29.8.2011 by ITO Wd -1(2), Surat. Assessee has raised following grounds of appeal :-

1. On the facts and in circumstances of the case as well as law on the subject, the learned Commissioner of Income-tax (Appeals) has erred in confirming the action of the Assessing Officer in reopening assessment by issuing notice u/s. 148 of the Act.

Asst. Year 2005-06

2. On the facts and in circumstance of the case as well as law on the subject, the learned commissioner of Income-tax (Appeals) has erred in confirming the action of the Assessing Officer in making addition of Rs. 26,00,000/- u/s 68 of the Act on account of share application and share premium money.

3. It is therefore prayed that assessment framed u/s 143(3) r.w.s. 147 of the Act may kindly be quashed or alternatively the additions made by assessing officer and confirmed by learned Commissioner of Income-tax (Appeals) may please be deleted.

4. Appellant craves leave to add, alter or delete any ground(s) either before or in the course of hearing of the appeal.

2. Briefly stated facts as culled out from the assessment records are that assessee is a private limited company which filed its return of income at Rs.NIL on 20.09.2005. The case was selected for scrutiny assessment and order u/s 143(3) of the Act was framed on 28.12.2007 after making an addition of Rs.1,58,771/- and after giving credit to carry forward losses income was assessed at Rs.NIL. Thereafter notice u/s 148 of the Act was issued on 29/3/2011 and served upon the assessee on 31/03/2011 and in response to the notice u/s 148 of the Act assessee vide its letter dated 27.4.2011 submitted that the original return filed by the assessee company for Asst. Year 2005-06 may be treated as return filed in response of this notice. It was observed by the Assessing Officer during reassessment proceedings that assessee has taken share application money of Rs.26 lacs from following two persons :-

M/s Mihir Agency Pvt. Ltd.              Rs.11,00,000/-
M/s Buniyad Chemicals Pvt. Ltd.     Rs.15,00,000/-
Total                                                  Rs.26,00,000/-

Asst. Year 2005-06

Ld. Assessing Officer examined the share application money of Rs.26, lacs received by the assessee company, in the light of documents seized during the course of search and seizure u/s 132 in the case of M/s Mahasagar Securities Private Limited wherein it was revealed that Mahasagar Securities Pvt. Ltd. and its related group of 34 odd companies were engaged in fraudulent billing activities and in the business of providing bogus speculation profit/loss, short term/long term capital gain/loss, share application money, commodities profit/loss on commodity trading [through MCX] for many years. In the list of clients who had taken accommodation entries from these companies, the name of the present assessee i.e. M/s Harmony Yarns Pvt. Ltd. had also appeared. On the basis of statement on oath Shri Mukesh M. Choksi (the main person behind that scam and also director of all these companies) was recorded on 25.11.2009 wherein he revealed the complete modus operandi of his companies and admitted that accommodation entries for share application money he used to receive money in cash from the client and accommodation entry of that money had been provided through banking channels. During the course of re-assessment proceedings assessee submitted that statement given by a third party should not be relied and placed reliance on the judgment of Hon. Supreme Court in the case of CIT vs. Lovely Exports Pvt. Ltd. (2009) 319 ITR (St.) 5 wherein it was held that if the names of the share applicants are furnished to the department then the said amount cannot be regarded as income of the assessee company and further submitted that re-assessment proceedings cannot be initiated on the basis of Asst. Year 2005-06 statement of third party in a situation when all necessary details and documents were duly verified during the course of regular assessment proceedings u/s 143(3) of the Act and creditworthiness and genuineness of the persons giving share application money was proved.

3. However, the submissions made by appellant were not enough to convince ld. Assessing Officer who was of the view that as all the documents produced in respect of M/s Mihir Agency Pvt. Ltd. and M/s Buniyad Chemicals Pvt. Ltd. are under the signature of Shri Mukesh M. Choksi c/o M/s Mahasagar Securities Private Limited, onus to prove nature and source of cash credit in form of share application money is not discharged by the assessee satisfactorily and he went ahead to make addition of Rs.26 lacs to the income of assessee under the provisions of section 68 of the Act for unexplained source of share application and share premium money.

4. Aggrieved, assessee went in appeal before ld. CIT(A) who dismissed the appeal of assessee by observing as under :-

DECISION.

8.1 . During the course of appellant proceedings, the appellant relied on the decision of Hon'ble Supreme Court in the case of Lovely Exports (F) Ltd. Before proceeding further, it is necessary to discuss the interpretation of the above judgement by the Hon'ble Mumbai High Court in the case of M/s .Major Metals Limited reported in 19 taxman. Com 176 ( Bom ). The Hon'ble Bombay High Court in judgment dated 22. 02. 2012 has analyzed the decision of M/s Lovely Exports Pvt Ltd in detail and distinguished the same in the above case of addition related to 'Share Capital. The relevant paras of the said judgment (pages 23 to 28) are reproduced herein under:-

Asst. Year 2005-06

23. ............. .Now it is in this background that the Settlement Commission has arrived at a considered finding of fact that the transactions of the two companies were not genuine transactions; that the two companies lacked a credit standing which would have enable them to pay large amounts towards share premium of Rs 990/- on a face value of Rs 10/- per share and that neither the past performance or the 'financials of the petitioner itse1f~would-justify the payment of such a large premium. The Settlement Commission has relied upon the law laid down by the Supreme Court in Sumati DayaJ Vs CIT (1995) 214 ITR 801/ 80 Taxman 89 ( SC) in applying the test of human probabilities. Section 68 of the Income Tax Act, provides that where any sum is found credited in the books of an assessee maintained for any previous year , and the assessee offers no explanation about the nature, and source thereof or the explanation offered by him is not, in the opinion of the . Assessing Officer , satisfactory, the sum so credited may be charged to income tax as the income of the assessee of that previous year. The Supreme Court held as follows :

" It is no doubt true that in all cases in which a receipt is sought to be taxed as 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 income because it falls within exemption provided by the Act lies upon the assessee. ( See Parimisetti Seethararnamma ( 1965) 57UTR 532 at page 536) But, in view of Section 68 of the Act, where any sum is found credited in the books of assessee for any previous year, the same may be charged to income tax as the income of the assessee of that previous year if me 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 it, the said evidence being unrebutted , can be used against him by holding that it was a receipt of an income nature. While considering the explanation of the assessee the Department cannot, however, act unreasonably,

24. But, it has been urged on behalf of the petitioner that an addition within .the meaning of Section 68 would not be justified in law in its hands even if the share application money was received from bogus share holders. Counsel appearing on behalf of the petitioner submitted that in the present case the report submitted by the Commissioner U/s 245D(3) showed that the two. companies were duly identified being income tax assessees whose PANs were also furnished. Consequently, relying on the decision of the Delhi High Court in the case of CIT Vs Lovely Exports (p) Ltd, ( 2008) 299ITR 268 ( 2007) 158 Taxman 440 (Delhi) and the order rendered by the Supreme Court in a Special Leave Petition arising therefrom, it was urged that recourse to the provisions of Section 68 was not in order. Now, in order to appreciate the submission it would be .necessary to consider the Judgment of Delhi High Court in Lovely Exports (P) Ltd ( supra). The Division Bench of the Delhi High Court dealt with a batch of appeals relating to three assessees. In the case of Lovely Exports (P) Ltd( supra), the Assessing Officer had proceeded to make an addition on the, ground that the share applicants in question did not exist. The assessee had furnished necessary details such as the PAN of the share applicants. The share money had been received through banking channels. The AO made an addition only on the ground that some of the summons which were issued to the applicants were returned unserved, whereas in the case of others the summons though served, had not been complied with Now, it is in this background that the Division Bench of the Delhi High Court noted that the Assessing Officer 'did not carry out any enquiry into the income tax record of the persons who had furnished the details in order Asst. Year 2005-06 to ascertain the status of the share applicants. Significantly, the judgment of the Delhi High Court makes a distinction between a case where shares are allotted in the course of a large scale subscription to the shares of a public company on the one hand and a case of private placement on the other. In the case of allotment of shares of a public company, the company may have no identity of the subscribers. This distinction between a public issue of share capital and private placement has been made out in the following observations of the Delhi High Court.

"15 There cannot be two opinions on the aspects that the pernicious practice of conversion of unaccounted money through the masquerade or channel of investment in the share capital of a company must be firmly excoriated by the Revenue. Equally, where the preponderance of evidence indicates absence of culpability and complexity (sic) of the assessee it should not be harassed by the Revenue's insistence that it should prove the negative. In the case of a public issue, the Company concerned cannot be expected to know every details pertaining to the identity as well as financial worth of each of its subscribers. The Company must, however, maintain and make available to the Assessing Officer for his perusal, all the information contained in the statutory share application documents. In the case of private placement the legal regime would not be the same A delicate balance must be maintained while waling the tightrope of Sections 68 and 69 of the Income Tax Act. The burden of proof can seldom be discharged to the hilt by the assessee; if the A O harbours doubts of the legitimacy of any subscription he is empowered, nay duty-bound, to carry out thorough investigations. But if the AO fails to unearth any wrong or illegal dealings, he cannot obdurately adhere to his suspicions and treat the subscribed capital as the undisclosed income of the Company ( Emphasis supplied).

25, Now, it is this decision of the Delhi Court against which a Special Leave Petition before the Supreme Court came to be dismissed on 11 January 2008. In CIT Vs Lovely Exports (P) Ltd ( 2008) 6 DTR 308( SC) white dismissing the Special Leave Petition the Supreme Court observed that if the share application money was received by the assessee from allegedly bogus share holders whose names were given to the AO, the department was free to proceed, to re - open their individual assessments in accordance with law. On this ground, the Supreme Court while dismissing the Special Leave Petition found no infirmity in the judgment of the Delhi High Court, The principle which was emphasized by the Delhi High Court i/i the case of Lovely Exports was followed by another Division Bench in CIT Vs Value Capital Services (P) Ltd ( 2008) 307 ITR 334 (Delhi). In CIT Vs Oasis Hospitalities (P) Ltd(2011) 331 ITR 119. _/_19S Taxman 247/9 Taxman.com 179 ( Delhi), a Division Bench of the Delhi High Court observed that the initial burden must be upon the assesses to explain the nature and source of the share application money received. In order to discharge this burden, the assessee is required to prove (a) Identity of share holder (b) Genuineness of transaction and (c) Credit worthiness of shareholders. As far as the creditworthiness of the subscriber is concerned, that can be proved by producing a bank statement of the subscriber showing that it has sufficient balance in its account to enable it to subscribe to the share capital. The Delhi High Court held that once the initial burden has been discharged, the observations of the Supreme Court in the case of Lovely Exports (p) Ltd ( supra ) would suggest that the Department is free to proceed Asst. Year 2005-06 to reopen the individual assessments in the case of alleged bogus shareholders in accordance with law and is not remediless.

This would be more so when the assessee is a public limited company and has issued share capital to the public at large as in such cases the company cannot be expected to know every detail pertaining to the identity and financial worth of the subscriber. However, the initial burden on the assessee would be some what heavy in case the assessee is a private Limited Company where the shareholders are closely related because in such a case, the assessee cannot feign ignorance about the status of the parties. The judgment of a Division Bench of this Court in CIT Vs Creative World Telefilms Ltd (2011) 203 Taxman 36 ( Mag) 333 ITR 100/15 taxmann.com 183 (Bom) is along the same lines.
26. In the present case, it needs to be emphasized that the Settlement Commission has considered all the material on record including the material which had a bearing on the credit worthiness and financial standing of the alleged subscribing companies to the share capital of the petitioner. None of the companies was held to have a financial standing or credit worthiness which would justify making such a large investment of Rs. 6 crores at a premium of Rs 990/- per share. The allotment of shares, it must be noted, has taken place in pursuance of a private placement. The principles which have been applied in relation particularly to the public subscription of shares of a public limited company can obviously have no application to the facts of a case such as the present. The view which has been taken by the Settlement Commission is consequently, borne out on the basis of the material on record. This is not a case where the Commission has proceeded contrary to law or on the basis of no evidence. There is no per'ersity in the findings of Settlement Commission.

27. Before leaving this aspect of the matter, it would be necessary to advert to two decisions of the Supreme Court, the first being in C!T Vs P. Mohanakala (2007) 161Taxman 169 / 291 ITR 278 ( SC).
While considering the scope of section 68, the Supreme Court observed as follows:-
"15. ..... When and in what circumstances Section 68 of the Act would come into play?
That a bare reading of Section Q8 suggests that there has to be credit of amounts in the books .maintained by an assesses; such credit has to be of a sum during the previous year; and the assessee offer no explanation abut the nature and source of such credit found in the books; or the explanation offered by the assessees in the opinion of the AO is not satisfactory. It is only (hen the sum so credited may be charged to income - tax as the income of the assessee of that previous year. The expression ' the assesses offer no explanation * means where the assessees offer no proper, reasonable and acceptable explanation as regards the sums found credited in the books maintained by the assessees. It Is true the opinion of the AO for not accepting the explanation offered by the assessee as not satisfactory is required, to be bases on proper appreciation of material and other attending circumstances available on record. The opinion of the AO is required to be formed objectively with reference to the material available on record.

Application of mind is the sine qua non for forming the opinion...........................' Asst. Year 2005-06
The Supreme Court noted, following the earlier decision in CIT Vs Orissa Corpn (p) Ltd : ( 1986) 159 ITR 78/25 Taxman 80 ( SO) that where the conclusion, of the Tribunal was not reasonable or perverse or based on no evidence, no question of law as such would arise for consideration. The Court further observed thus:

'25, The doubtful nature of the transaction and the manner in which the sums were found credited in the books of accounts maintained by the assessee have been duly taken into consideration by the authorities below. The transactions though apparent were held to be not real one. May be the money came by way of bank cheques and paid through the process of banking transaction but that itself is of no consequence. "

'28. In a more recent judgment of the Supreme Court in Vijay Kumar Talwar Vs CIT (2011) 330 ITR 1/196 Taxman / 136(2010) 8 Taxman. Com 264 (SC), the same principle was applied in the following observations :-

" 24 All the authorities below, in particular the 'Tribunal, have observed in unison that the assessee did not produce any evidence to rebut the presumption drawn against him under section 68 of the Act, by producing the parties in. whose name the amounts in question bid- been credited by the assessee in-his books of account. In the absence of any cogent evidence, a bald explanation furnished by the assessee about the source of the credits in question viz, realization from the debtors of the erstwhile firm, in the opinion of the AO, was not satisfactory . It is well settled that in view of section 68 of the Act, where any sum is found credited in the books of the assessee for previous year, the same may be 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...............' 8.2 In this background we may examine the judgement of Hon. Supreme Court in the case of M/s Lovely Exports (P) Ltd. which is reproduced herein below "1 ....... Delay condoned.

2. Can the amount of share money be regarded as undisclosed income under section 68 of the IT Act,1961? We find no merit in this Special Leave Petition for the simple reason that if the share application money is received by the assessee company from alleged bogus shareholders, whose names are given to the AO, then the Department is free to proceed to re - open their individual assessments in accordance with law. Hence, we find no infirmity with the impugned judgment.

3. Subject to the above, Special Leave Petition is dismissed........................... ...."

Asst. Year 2005-06 Since this decision was given in respect of the decision of the Hon "ble Delhi Court against which, the SLP was filed, the findings of the Honble Supreme Court are to be inferred in the background of the facts of the said case. It is pertinent to mention here that in the case of M/s Lovely Exports Pvt Ltd, the Assessing Officer had made an addition only on the ground that some Summons 'were returned 'un-served' and some parties did not comply with the Summons issued.'

Further, the Hobble Delhi High Court held that in this case , the Assessing Officer did not carry out any further inquiries and therefore, the onus did not shift back to the assessee.

8.3 During the course of appellate proceedings, vide order sheet entry dt.7.2.2012 the appellant confirmed that the share application money was by private placement and fresh confirmation from Shri. Mukesh M Choksi cannot .be filed. The appellant was also asked to file the present statuses issued in the name of those two companies i.e. whether the shares in the name of those Companies or have been transferred to else. However, the said details were not filed by the appellant.' 8.4 On the basis of facts of the case and in the interpretation of decision in the case of M/s Lovely Exports by the Hon'ble Murnbai High Court's (supra), i apparent .that the decision of M/s Lovely Exports does not apply in the case as it was a case of private placement and collusive transactions. cash was paid for taking accommodation entries. Evidence of the same found in the form of lists maintained by the entry provider. It is not a case where addition has been made only on the basis of statement of entry provider. The lists found during the course of search were maintained by the entry provider in the normal course of his business. The appellant was informed of the evidence gathered but, it neither requested for cross - examination of entry provider nor furnished his fresh confirmation.

The statement on oath of Shri Mukesh M. Choksi, Director of those two companies was also recorded during the course of search operation. ......

8.5 As discussed supra, appellant did not give the ownership details of those shares as on date. Subsequent movement of shares after allotment til! - date, is c crucial evidence in this case which is in the possession of the appellant, but it not to furnish the same.

8.6 The mere fact that both the companies have allotted by PAN and have been registered with ROC does not help the case of the appellant, as it case of collusive transaction. It is not a case where the assessee is being asked to establish source of source of funds. It is a case where appellant has cash for taking accommodation entries. The 'appellant is neither in a ;n to furnish the Asst. Year 2005-06 confirmation of Shri Mukesh M Choksi as on date nor the present contact addresses of these two-companies.

Since the decision of Hon *ble Supreme Court in the case of M/s Lovely Export (P) Ltd. was in respect of earlier decision of Hon. Delhi High Court it is worthwhile to reproduce the observations of the Hon. Delhi High Court's recent judgment dt.15.02.2012. In the case of Nova Promoters & Finlease (P) Ltd. reported in (2012) 206 taxman 207 (Delhi). The facts of the case are similar to the facts in the case of the appellant. In that case also, the issue involved was of an entry provider and evidence was gathered by the investigation Wing. The relevant portion of the said judgment is reproduced hereinunder :-

" 38. The ration of a decision is to be understood and appreciated in the background of the facts of that case. So understood, it will be seen that where the complete particulars of the share applicants such as their names and addresses, income tax file numbers, their creditworthiness, share application forms and share holders' register, share transfer register etc. are furnished to the Assessing Officer and the assessing Officer has not conducted any enquiry into the same or has no material in his possession to show that those particulars are false and cannot be acted upon, then no addition can be made in the hands of the company under sec. 68 and the remedy open to the revenue is to go after the share applicants in accordance with law. We are afraid that we cannot apply the ratio to a case, such as the present one, where the Assessing Officer is in possession of material that discredits and impeaches the particulars furnished by the assessee and also establishes the link between self - confessed accommodation ' entry providers' whose business it is to help assesses bring into their books of account 'their unaccounted monies through the medium of share subscription, and the assessee. The ratio is inapplicable to a case, again such .as the present one, where the involvement of the assessee in such modus operand! Is clearly indicated by valid material made available to the Assessing Officer as a result of investigations carried out by the revenue authorities into the activities of such 'entry providers'. The existence with the Assessing .Officer of material showing that the share subscriptions were collected as part of a pre - mediated part of a pre mediated plan- a smokescreen - conceived and executed with the connivance or involvement of the assessee excludes the applicability of the ratio. In our understanding, the ratio is attracted to a case where it is a simple question of whether the assessee has discharged the burden placed upon him under sec. 68 to prove and establish the identity and creditworthiness of the share applicant and the genuineness of the transaction. In such a case, the Assessing Officer cannot sit back with folded hands till the assessee exhausts all the evidence or material in his possession and then come forward to merely reject the same, without carrying out any verification or enquiry into the material placed before him. The case before us does not" fall under this category and it would be a travesty of truth and justice to express a view to the contrary....,...............'

10. From a perusal of the judgement, it is apparent that this judgement of Hon'ble Delhi High Court is squarely applies in the case of the appellant. In view of the legal position discussed above, the appellant's appeal deserves to be Asst. Year 2005-06 dismissed. Therefore, the addition made by the Assessing Officer is confirmed and the appeal is dismissed.

11. In the result, appeal is DISMISSED.

5. Aggrieved, assessee is now in appeal before the Tribunal.

6. First we take up ground no.2 raised against the action of ld. CIT(A) confirming the addition of Rs.26 lacs u/s 68 of the Act on account of share application and share premium money received by the assessee.

7. At the outset ld. AR submitted that the issue raised in this ground is squarely covered in favour of assessee by the decision of the co-ordinate bench in the case of M/s Pankaj Enka Pvt. Ltd. vs. DCIT in ITA No.816/Ahd/2013 for Asst. Year 2005-06 vide order dated 15.4.2015.

8. On the other hand ld. DR supported the orders of lower authorities.

9. We have heard the rival contentions and perused the material on record. The issue before us is in regard to action of ld. CIT(A) in confirming the addition of Rs.26 lacs made u/s 68 of the Act for share application and share premium money received by assessee during the year and addition was made in the proceedings u/s 143(3) r.w.s.147 of the Act pursuant to notice u/s 148 of the Act. We observe that ld. AR has placed reliance on the decision of co-ordinate bench Asst. Year 2005-06 in the case of M/s Pankaj Enka Pvt. Ltd. vs. DCIT (supra). The facts in the appeal before us are identical to the facts adjudicated in the case of M/s Pankaj Enka Pvt. Ltd. vs. DCIT (supra). In order to examine the same we reproduce the notice u/s 148 of the Act raised in the case of assessee at page 13 of the paper book.

Reasons recorded for reopening the assessment.

The return of income was filed on 20.09.2O05 declaring the income of Rs. NIL/. Order u/s!43(3) of the Act was completed on 28.12.2007 making an addition of Es.85,005/- en account of excess depreciation and Rs.73,766/- on account of valuation of work in progress.

A search and seizure action u/s. 132 of the Income tax act *?.~ciz conducted in the case of M/s. Mahasagar Securities Private limited by Investigation wing of Income-tax department, Mumbai, on 25-11-2009. The search was conducted on the basis of information received in an FIU alert from New Delhi regarding suspicious transactions taking place in the bank accounts of this company and its related companies. The directors of these companies were one Mukesh M.Choksi and Jayesh K.Sampat. During the course of the search it was revealed that the Mahasagar Securities private Limited and its related group of 34 odd companies (the prominent ones being Alliance Intermediaries & Network Private Limited, M/s. Mihir Agencies Private limited, M/s. Goldstar Finvest Private limited etc- all run by Mukesh Choksi) were engaged in. fraudulent billing activities and in the business of providing Bogus speculation profit/loss, short term/long term capital gain/loss, Share application money, commodities profit/loss on commodity trading (Through MCXJ and had been continuing this business for Many years.

In the list of clients who have taken accommodation entries from these companies, the name of this assessee i.e Harmony Yarn pvt. Ltd.. is also appearing. During the course the proceedings the statement of Shri Mukesh Choksi, main person behind this scam, was also recorded on 25-11-2009.
In his statement recorded on oath he has admitted that these transactions are bogus. Asst. Year 2005-06 From the details submitted by the Investigation Wing it is seen that the assessee has obtained the shares application money of Rs.11,00,000/- from Mihir Agency Pvt. Ltd. one of company run by Mukesh Chokshi, during the financial year 2004-05 (A.Y.2005-06). In view of this new fact, I have reason to believe that income chargeable to tax has escaped assessment within the meaning of section 147 of the Act The approval of the CIT-I, Surat is therefore sought for issue of notice under the provisions of section 151(2) of the Act.

10. We further find that similar reasons were recorded in the notice raised u/s 147 of the Act in the case of M/s Pankaj Enka Pvt. Ltd. which is reproduced below :-

Reg: M/s. Pankaj Enka Pvt. Ltd., The return of income was filed on 17.10.2005 declaring the income of Rs 96,552/-The same is processed u/s. 143(1) of the Act. On 20.03.2006. accepting the returned income. No order u/s 143(3) passed in this case.

A search and seizure action u/s. 132 of the Income tax act was conducted in the case of m/s. Mahasagar Securities Pvt. Ltd., by Dy. DIT (Inv.)-Unit -(4), Mumbai, on 25.11.2009. The search was conducted on-the basis of information received in an FIU alert from New Delhi regarding suspicious transactions taking place in the bank accounts of this company and its related companies. The directors of theses companies were one Mukesh M. Chokshi and Jayesh K. Sampat. During the course of the search it was revealed that the Mahasagar Securities Pvt. Ltd., and its related group of 34 odd companies ( the prominent ones being Alliance Intermediates & Network Private Limited, M/s, Mihir Agencies Private Limited, M/s. Gold star Finvest Private Limited etc. all run by Mukesh Chokshi) were engaged in fraudulent billing activities and in the business of providing Bogus speculation profit/loss, short term/long term capital gain/loss, share application money, commodities profit/loss on commodity trading (through MCX) and had been continuing this business for many years.

Asst. Year 2005-06 In the list of clients who have taken accommodation entries from these companies, the name of this assessee i.e. Pankaj Enka Pvt. Ltd., is also appearing. During the course the search and seizure proceedings the statement of Shri Mukesh Chokshi. main person behind the scam, was also recorded on 25.011.2009. In his statement recorded on Oath he has admitted that these transactions are bogus.

From the details submitted by the Investigation wing, Mumbai, it is seen that the assessee has obtained entry of the share application money of Rs. 11,00,000/- from Mihir Agency Pvt. Ltd., one of company run by Shri Mukesh Chokshi, during the financial year 2004-05 (A.Y. 2005-06). In view of this new fact, I have reason 10 believe that income chargeable to tax has escaped assessment within the meaning oi section 147 of the Act.

In view of the above, income to the extent being more than Rs.1,00,000/-has escaped assessment within the meaning of section 147 of the Act. Therefore, Notice u/s 148 need to be issued.

The approval of the Addl. CIT Range-I, Surat is therefore, sought for issue of notice under the provisions of section 151(2) of the Act.

11. From comparison of both the notices raised in the case of assessee and M/s Pankaj Enka P. Ltd. we observe that the reasons recorded are verbatim similar except the change of figure, name of assessee and date of issue and some minor changes.

12. We further observe that assessee has submitted all details and supporting documents to prove the identity, creditworthiness and genuineness of both the parties M/s Mihir Agency Pvt. Ltd. And M/s Buniyad Chemicals Pvt. Ltd. from whom share application and share premium money of Rs.11 lacs and Rs.15 lacs respectively were received by the assessee in the year under appeal. These documents included registration certificates with Registrar of Companies, PAN Asst. Year 2005-06 allotted by the Department, copies of income-tax returns of both the companies, financial statement and relevant portion of bank statement along with duly signed share application form in relation to both the parties namely M/s Mihir Agency Pvt. Ltd. and M/s Buniyad Chemicals Pvt. Ltd. And further no specific defects have been brought on record by the lower authorities in respect of genuineness of the documents submitted by the assessee in regard to identity, genuineness and creditworthiness of M/s Mihir Agency Pvt. Ltd. and M/s Buniyad Chemicals Pvt. Ltd. We further find that co-ordinate bench in the case of M/s Pankaj Enka P. Ltd. vs. DCIT in ITA No.816/Ahd/2013 for Asst. Year 2005-06 has duly considered and decided similar issue in favour of assessee, in regard to addition of Rs.85 lacs from 12 parties in regard to share application and share premium money, by observing as under :-

6.13 Regarding addition of Rs. 85,00,000/- on account of share, application money and share premium money, we find that assessee has received Rs. 85,00,000/- towards share application money and share premium. List of the said parties is as under:-

Sr. No.        Name of the Party                                      Share Application Money
1, M/s Hiteshwari Marketing PvtA.td. Kolkata             5,00,000/-
2. M/s JMD Mercantile Pvt. Ltd., Kolkata                     5,00,000/-
3. M/s Sunflower Vinimay Pvt. Ltd., Kolkata               5,00,000/-
4. M/s Sugam Commercial Pvt. Ltd., Kolkata               5,00,000/-
5. Edmond Commercial Pvt. Ltd.                                  5,00,000/-
6. M/s Bhagyalaxmi Mercantile Pvt. Ltd.,                     5,00,000/-
Kolkata
7. M/s Komal Commercial Ltd., Mumbai                      10,00,000/-
Asst. Year 2005-06
8. Dhawani Marketing Pvt. Ltd.                                    15,00,000/-
9. Emerald System Eng. Ltd.                                         5,00,000/-
10. M/s Larite Industries Ltd., Mumbai                         15,00,000/-
11. M/s Sargossa Investment & Finance Pvt. Ltd., Mumbai 5,00,000/-
12. Study Sales Pvt. Ltd.                                                         5,00,000/
Total 85,00,000/-

Assesses filed list of applicants of share application money vide letter dated 22.02.2012. A notice u/s. 133(6) of the Act was issued on 12.03.2012 to all parties. Assessing officer observed that no reply is received from parties at Sr. Nos. 5, 8, 9 85 12.

6.14 Further in assessment order, Assessing Officer observed that assessee has not tiled any confirmation as well as original share application form in respect of above 4 parties and therefore he made addition. In respect of 8 parties, a notice dated 12.03.2012 u/s 133(6) of the Act was issued and subsequently a reminder dated 03.04.2012 was issued. Assessing officer observed that all the parties have given same K replies on the same day. A show cause notice dated 23.04.2012 was issued to assessee and Assessing Officer requested to supply details along with confirmation. Assessee asked for more time for submission of details. However, Assessing Officer without providing sufficient opportunity went on finalizing assessment order. In assessment order, he concluded that assessee has not submitted details required and failed to establish nature and source of credit. On this basis, he made addition of Rs. 85,00,000/- u/s 68 of the Act to the total income of assessee.

6.15 During remand proceedings, assessee was again requested to produce original share application from its record in respect of 4 parties. Assessee vide letter dated 09.08.2012 submitted copy of application for share along with copy of acknowledgement of return, audited statement and copy of relevant portion of bank statement together with their reply in response to notice u/s. 133(6) in respect of 3 out of 4 parties. In case of Sturdy Sales Pvt. Ltd., no such details have been given by assessee. On verification of copy of share application form, Assessing Officer observed that share application forms were not bearing date.

Asst. Year 2005-06 6.16 Further, during remand proceedings, assessee again filed all details in regard to 8 parties who filed replies before Assessing Officer in response to notice u/s. 133(6) of the Act. Assessee filed acknowledgement of return of their income and audited financial statements and copy of relevant portion of bank statements of the parties. Assessee also produced original share application forms during the remand proceedings.

6.17 We find that all the transactions were duly supported by the Share application form, acknowledgement of return of income, audited financial statements 85 bank statements, Memorandum of Association (hereinafter referred as "MOA") and Articles of Association (hereinafter referred as "AOA") of the share applicant. All the share application monies have been received through proper banking channel and there is no evidence that assessee has paid any money in cash to the share applicant in consideration of cheque received from share. No inquiry is made by the Assessing Gmcer once the assessee has discharged his primary onus to prove the identity, genuineness and creditworthiness of the share applicants. On perusal of the bank statements of share applicant, it can be seen that no cash has been deposited by them before issue of cheque to assessee towards share application money. None of the parties are related to assessee company. The assessee has proved all the three ingredients of proving a genuine cash credit by establishing identity (limited/listed companies), genuineness (transactions through normal banking channel) and creditworthiness (IT returns and balance sheet with huge share capital). If the Assessing Officer doubts the source of the source of the source, he was free to conduct inquiries in the case of persons from whom assessee has received funds. However, on that count, addition cannot be made u/s 68 in the hands of the assessee once the assessee discharges the onus on it as per the requirement of section 68. The Honourable Supreme Court in case of Lovely Exports (P) Ltd. [216 CTR 195] has held that "If share application money is received by the assessee company from alleged bogus shareholders, whose names are given to the Assessing Officer, then Department is free to proceed to reopen their individual assessments in accordance with law, but it cannot be regarded as undisclosed income of assessee company. Honourable Delhi High Court in case of CIT v. Kamdhenu Steel & Alloys Ltd. (2012) 361 ITR 220 (Delhi) held that though initial burden is upon the assessee, once he proves the identity of credit/share applications by either furnishing permanent account numbers or copies of bank accounts and shows the genuineness of the Asst. Year 2005-06 transaction by showing money in the banks is by account payee cheques or by draft, etc., then the onus to would shift to the revenue. After assessee furnished the required details to the revenue, onus shifted to the revenue and revenue has not thereafter proved the transaction of the share application as non-genuine. It has been further held in this judgement that once adequate evidence/material is given, which would prima facie discharge the burden of the assessee in proving the identity of shareholders, genuineness of the transaction and creditworthiness of the shareholders, thereafter in case such evidence is to be disregarded or it is proved that it has "created" evidence, the revenue is supposed to make thorough probe before it could nail the assessee and fasten the assessee with such a liability u/s 68 of the Act. The assessing officer failed to carry his suspicion to logical conclusion by further investigation and therefore addition u/s 68 was not sustainable. The above judgment is squarely applicable to the facts of the case of assessee. The Assessing Officer and CIT (A) has relied upon the decision of Delhi High Court in the case of Nova Promoters Finlease Pvt. Ltd. which has been distinguished and differed by the same Delhi High Court in the case of CIT vs. Gangeshwari Metal (P.) Ltd. 30 taxmann.com 328 wherein it was held that when an assessee brings various documentary evidences in support of its claim that share application money is genuine, no addition can be made u/s 68 of Act. In the ratio of Nova Promoters Finlease Pvt. Ltd, two types of cases have been indicated. One in which the assessing officer carries out the exercise which is required in law and the other in which the assessing officer 'sits back with folded hands' till the assessee exhausts all the evidence or material in his possession and then comes forward to merely reject the same on the presumptions. The facts of Nova Promoters and Finlease (P) Ltd, fall in the former category as the Assessing Officer had rejected the affidavits filed by applicants on merits; further the AO had also initiated inquiries through issuance of summons u/s 131 which returned _unserved, and that is why the Court decided in favour of the revenue in said case. However, the facts of the present case are clearly distinguishable and fall in the second category and are more in line with facts of Lovely Exports (P) Ltd. (supra). In the remand report, the Assessing Officer himself has stated that the assessee has requested to issue summons u/s 131 but no further probe was made by the Assessing Officer. Thus there was a clear lack of inquiry on the part of the assessing officer once the assessee had furnished all the material which has already been referred to above. Further in the case of Nova Promoters Finlease Pvt. Ltd., the shareholders didn't confirm the transactions of share capital and admitted before Additional Commissioner (Investigation) that they Asst. Year 2005-06 were acting as accommodation entry providers and thereafter later on they have filed the affidavit retracting their statement. The affidavits were not notarized and the deponents of the affidavit didn't appear before assessing officer for cross examination. So ratio of Nova Promoters Finlease Pvt. Ltd. Does not support case of revenue. In view of above legal and factual discussion on merit, the addition made by Assessing Officer of Rs. 1,06,00,000/- [Rs.21,00,000/- +Rs.85,00,000/-) on, account of share application money under provision of Section 68 of Act is directed to be deleted.

7. In result, appeal filed by the assessee is allowed.

13. Respectfully following the decision of the co-ordinate bench in the above referred case, we are of the view that the facts dealt in by the co-ordinate bench in the case of M/s Pankaj Enka P. Ltd. vs. DCIT (supra) are similar to the facts of the case of assessee, and therefore, in our opinion that assessee has been able to explain the source of share application and share premium money of Rs.26 lacs received from M/s Mihir Agency Pvt. Ltd. and M/s Buniyad Chemicals Pvt. Ltd. accordingly the addition made u/s 68 of the Act is deleted. This ground of assessee is allowed.

14. Now we take up ground nos.1 & 3 which have been raised by the assessee against the action of ld. CIT(A) confirming the reopening of assessment made by ld. Assessing Officer by issuing notice u/s 148 of the Act and framing the assessment u/s 143(3) r.w.s. 147 of the Act.

Asst. Year 2005-06 14.1 From perusal of the order of ld. CIT(A) we observe that in form no.35 filed by assessee at the time of filing of appeal before ld. CIT(A) following three grounds have been raised:-

1. The learned Income Tax Officer has grossly erred in making addition of Rs. 26, 00,000/- in the total income of the appellant company u/s 68 of the IT Act.

2. The action of the learned AO is not justified to consider the share application money received by the company as bogus and unreliable just based on the statement provided by a third party.

3 The appellant craves leave to change, amend, alter, add or delete any of the grounds of appeal.

From going through the above grounds of appeal raised by the assessee before ld. CIT(A), we find that assessee has not raised the ground against the action of Assessing Officer for issuing notice u/s 148 of the Act and further framing assessment u/s 143(3) r.w.s. 147. Normally grounds of appeal which are raised before the Tribunal ought to have been raised before ld. CIT(A) which in this case has not been so. However, looking to the facts of the case discussed by us while adjudicating ground no.2 of this appeal, where we have applied the decision of the co-ordinate bench in the case of M/s Pankaj Enka Pvt. Ltd. vs. DCIT (supra), ground relating to issuing of notice u/s 148 and assessment framed u/s 143(3) r.w.s. 147 of the Act was decided in favour of assessee and thereafter when Revenue went in appeal before the Hon. Jurisdictional High Court in the case of Principal CIT vs. Pankaj Enka Pvt. Ltd., the Tax Appeal No.967 of 2015 of Revenue was dismissed vide order dated 5.1.2016. We, therefore, are of the view that as the issue has been settled on similar facts by Hon. Gujarat High Court then it will not be desirable to set Asst. Year 2005-06 aside these ground nos.1 & 3 raised by the appellant in this appeal to the file of ld. CIT(A) for adjudication and, therefore, we deal with these grounds of appeal.

15. At the outset ld. AR referred and relied on the decision of Hon. Jurisdictional High Court in the case of Principal CIT vs. Pankaj Enka Pvt. Ltd. (supra) wherein Tax Appeal of the Revenue was dismissed for lack of question of law and the order of the co-ordinate bench in the case of M/s Pankaj Enka Pvt. Ltd. vs. DCIT was upheld.

15.1 On the other hand ld. DR could not controvert the submissions of ld. AR.

16. On going through the decision of the Tribunal in the case of M/s Pankaj Enka Pvt. Ltd. vs. DCIT we find that the co-ordinate bench has decided the issue by observing as under :-

5. After going through rival submissions and material on record. Assessee is engaged in business of high seas sales of imported goods, yearn, plastic granules etc. On the point of reopening, we find that Return of Income was filed by assessee on 17.10.2005 declaring total income at Rs.96,520/- for A.Y. 2005-06. Return was accompanied with audited accounts as per audit report in Form no. 3CB and 3CD as discussed above. In this case, no assessment was made under scrutiny assessment and return was accepted u/s. 143(1) on 20.03.2006. Thereafter, Assessing Officer issued notice u/s. 148 on 01.07.2011 after recording reasons dated 23.06.2011 on the basis of details submitted by Investigation Wing of Mumbai. The relevant extracts of reasons recorded are as under:

Asst. Year 2005-06 "The return of income was filed on 17.10.2005 declaring total income of Rs. 96,552/-, The same is processed u/s 143(1) on 20.03.2006 accepting the returned income. No order u/s 143(3) passed in this case.

A search and seizure action u/s. 132 of the Income tax act was conducted in the case of M/s Mahasagar Securities Pvt. Ltd., by Dy. DIT (Inv.)-Unit - (4), Mumbai, on 25.11.2009. The search was conducted on the basis of information received in an FIU alert from New Delhi regarding suspicious transactions taking place in the bank accounts of this company and its related companies. The directors of these companies were one Mukesh M. Chokshi and Jayesh K. Sampat. During the course of the search it was revealed that the Mahasagar Securities Pvt. Ltd., and its related group of 34 odd companies (the prominent ones being Alliance Intermediaries 85 Network Private Limited, M/s Mihir Agencies Private Limited, M/s Gold Star Finest Private Limited etc. all run by Mukesh Chokshi) were engaged in fraudulent billing activities and in the business of providing Bogus speculation profit/loss, short term/long term capital gain/loss, share application money, commodities profit/loss on commodity trading (through MCX) and had been continuing this business for many years.

In the list of clients who have taken accommodation entries from these companies, the name of this assessee i.e. Pankaj Enka Pvt. Ltd., is also appearing. During the course the search and seizure proceedings the statement of Shri Mukesh Chokshi, main person behind the scam, was also recorded on 25.11.2009. In his statement recorded on Oath he has admitted that these transactions are bogus.

From the details submitted by the Investigation wing, Mumbai, it is seen that the assessee has obtained entry of the share application money of Rs. 11,00,000/- from Mihir Agency Pvt. Ltd., one of company run by Shri Mukesh Chokshi, during the financial year 2004-05 (A.Y. 2005-06). In the view of this new fact, I have reason to believe that income chargeable to tax has escaped assessment within the meaning of section 147 of the Act.

In view of the above, income to the extent being more than Rs.1,00,000/- has escaped assessment within the meaning of section 147 of the Act. Therefore, Notice u/s.148 need to be issued.

The approval of the Addl CIT Range-I, Surat is therefore, sought for issue of notice under the provisions of section 151(2) of the Act"

Asst. Year 2005-06 5.1 The plain reading of reasons recorded by assessee makes it clear that notice u/s. 148 was issued as per information received from Investigation wing from Mumbai. The reasons recorded by Assessing Officer only indicate that as per information of Investigation wing from Mumbai, certain companies of Mukesh Chokshi group were operating and allegedly providing accommodation entries and assessee has also received share application money from such company.

Assessing Officer just made general observation about information supplied by Investigation Wing and sought to reopen the assessment without pointing out how information coming in his possession has nexus with escapement of income. The primary condition of Section 148 of the Act is that Assessing Officer must have reason to believe that income has escaped assessment and this satisfaction should be of Assessing Officer himself and not a borrowed satisfaction.

Therefore, notice so issued to assessee was illegal and bad in law on fact of it.

5.2 As per the provisions of Section 147/148, it is clear that for taking action u/s 147 of the Act, Assessing Officer must have reason to believe that an income chargeable to tax has escaped assessment for any assessment year. Therefore, Assessing Officer must satisfy himself regarding escapement of income. He should not act mechanically or on information supplied by any other person. In the present case, Assessing Officer acted on information supplied by the Directorate of Income Tax (Inv.), Mumbai but he has not applied his independent mind and reassessment proceedings were initiated only on the basis of information received from above investigation wing Mumbai. Hon'ble Delhi High Court in case of CIT v. Kamdhenu Steel & Alloys Ltd, (2012) 361 ITR 220 (Delhi) observed that where Assessing Officer acted mechanically on information supplied by the Directorate of IT (Inv.) about the alleged bogus/accommodation entries provided by certain individuals/companies, without applying his own mind, he was not justified in invoking jurisdiction u/s. 147. Hon'ble Apex Court in case of Calcutta Discount Co. Ltd. (1961) 41 ITR 191 (SC) analysed Asst. Year 2005-06 the Phrase "reason to believe" and observed that "It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn."

5.3 The case of assessee is squarely covered by the decision of ITAT, Jodhpur Bench in case of M/s Surbhi Mmchem Pvt. Ltd. (ITA Nos. 102 & 103/Jodh/2014). In said case, case was reopened u/s. 148 on the basis of same statement of Mukesh Choksi dated 25.11.2009, the director of Mahasagar Group of companies and on this point it was held as under:

" the reason recorded by the Assessing Officer were merely on the basis of information received from DDIT (Inv.) Udaipur and Mumbai, therefore, from the so called reason, it was not at all discernable as to whether the Assessing Officer had applied his mind to the information and independently arrived at a belief that on the basis of the material which he had before him the income had escaped assessment, therefore, the reassessment u/s 147 of the Act was not valid and accordingly the same is quashed. Since we have quashed the reassessment order, therefore, no findings are being given for the grounds raised by the assessee on merit."

The reasons recorded in case of M/s. Surbhi Minchem Pvt. Ltd. (supra) u/s. 148 are reproduced as under:

"In due course, the information have received from the DDIT (Inv.-2), Udaipur alongwith report of the DDIT (Inv.), Unit-1 (4), Mumbai that search & seizure action under section 132 of the Income Tax Act, 1961 was undertaken in the case of Mahasagar Group of Companies Mumbai on 25.11.2009 on the basis of information received in an FIU alert from New Delhi regarding suspicious transactions taking place in the bank accounts of M/s Mahasagar Securities Private Limited and its related companies. The directors of these companies were one Mukesh Choksi and Jayesh K. Sampat. During the course of search it was revealed that the Mahasagar Securities Private Limited and its related group of 34 odd companies (the prominent ones being M/s. Alliance Intermediateries & Network Private Limited, M/s Mihir Agencies Asst. Year 2005-06 Private Limited, M/s. Goldstar Finvest Private Limited, etc. all run by Mukesh Choksi) were engaged in fraudulent billing activities and in the business of providing bogus speculation profit/toss, short term/long term gain/loss, share application money, commodities profit/loss on commodity trading (through MCX) and had been continuing this business from many years"

In this background, we find that language used in above reasons recorded is exactly same as in case of assessee and hence the case of assessee is squarely covered by case of M/s Surbhi Minchem Pvt. Ltd. (supra). In fact para no. 2 of reasons recorded in case of assessee and above para of reasons recorded in case of Surbhi Minchem Pvt. Ltd. was exactly same. In the said case, case was reopened u/s 148 by Assessing Officer merely on the basis of information received from Investigation wing, Murnbai, and therefore, from reason recorded, it was not at all discernable as to whether Assessing Officer had applied his mind to the information and independently arrived at belief on the basis of material which he had before him that if any income had escaped assessment and therefore, assessment framed u/s. 143(3) r.w.s. 147 was requested to be quashed. Nothing contrary was brought to our knowledge with regards to decision taken in similar facts and circumstances in case of M/s. Surbhi Minchem Pvt. Ltd. (supra) wherein reopening was quashed on the ground reopening u/s. 148 of the Act by Assessing Officer was done merely on the basis of information from Investigation Wing, Mumbai. Even in case before us, it cannot be inferred that concern Assessing Officer has applied his mind information and independently arrived at certain belief on the basis of material before him that any income had escaped assessment. In view of above legal discussion, assessment framed u/s. 143(3) r.w.s. 147 of Act is quashed.

17. Further on going through the decision of Hon. Jurisdictional High Court in the case of Principal CIT vs. M/s Pankaj Enka Pvt. Ltd. we find that Revenue went in appeal against the order of the Tribunal and their Lordships have dismissed the Tax Appeal No.967 of 2015 Asst. Year 2005-06 of Revenue as they were of the view that no question of law arose in the appeal, by observing as under:-
2. Essentially three questions are raised. First is with respect to reopening of assessment beyond a period of four years. The Tribunal recorded that the Assessing Officer only on the base of information supplied by the investigation wind at Mumbai that the assessee had received share application money from one of the tainted companies, issued notice. The Tribunal was of the opinion that the Assessing Officer himself did not satisfy about the requirement and issued notice under section 148 of the Act without forming a reason to believe that the income of the assessee had escaped - assessment. The Tribunal regardlessly proceeded to examine the issue on merits and deleted the addition of Rs.21 lacs and further deleted addition of Rs.85 lacs towards share application money. Upon perusal of the judgement of the Tribunal with the assistance of learned counsel for the Revenue, we are of the opinion that the issues raised are fundamentally questions of facts. The Tribunal having perused the facts on record come to the factual findings. No question of law arises. Under the circumstances quite apart from the validity of reopening, in our opinion, judgement does not require any further consideration. Tax Appeal is therefore, dismissed.

18. Respectfully following the decision of Hon. Jurisdictional High Court in the case of Principal CIT vs. Pankaj Enka Pvt. Ltd. (supra) and the decision of the co-ordinate bench in the case of M/s Pankaj Enka Pvt. Ltd. vs. DCIT (supra), we allow the grounds of assessee and quash the assessment framed u/s 143(3) r.w.s. 147 of the Act.

Asst. Year 2005-06

19. Ground no.4 is general in nature, which needs no adjudication.

20. In the result, appeal of assessee is allowed.

Order pronounced in the open Court on 01/04/2016

Sd/-                                                                                                                              Sd/-
(Rajpal Yadav)                                                                                                      (Manish Borad)
Judicial Member                                                                                                   Accountant Member

Dated 01/ 04 /2016

Mahata/-

Copy of the order forwarded to:
1. The Appellant
2. The Respondent
3. The CIT concerned
4. The CIT(A) concerned
5. The DR, ITAT, Ahmedabad
6. Guard File
BY ORDER
Asst. Registrar, ITAT, Ahmedabad


Acit, New Delhi vs Nra Iron Steel Pvt. Ltd.

Income Tax Appellate Tribunal – Delhi


 
Acit, New Delhi vs Nra Iron Steel Pvt. Ltd., New Delhi
BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER
AND
SHRI L.P. SAHU, ACCOUNTANT MEMBER
ITA.No.3611/Del./2014

Assessment Year 2009-2010

The ACIT, Central Circle-13Room No.332, ARA Centre, Jhandewalan Extn., New Delhi. (Appellant)
vs.
 NRA Iron & Steel Pvt. Ltd., 310, 3rd Floor, E-Block, International Trade Tower, Nehru Place, New Delhi. PAN AACCN7222Q  (Respondent)
C.O.No.263/Del./2015

Arising out of
ITA.No.3611/Del./2015 - Assessment Year 2009-2010

NRA Iron & Steel Pvt. Ltd., 310, 3rd Floor, E-Block, International Trade Tower, Nehru Place, New Delhi. PAN AACCN7222Q   (Cross-Objector)
vs.
The ACIT, Central Circle-13Room No.332, ARA Centre, Jhandewalan Extn., New Delhi. (Respondent)

For Revenue : Ms. Renu Amitabh, CIT-DR
For Assessee : Shri Ashwani Kumar, Advocate
And
Shri Aditya Kumar, C.A.

Date of Hearing : 28.09.2017
Date of Pronouncement : 16.10.2017
 
ITA.No.3611/Del./2014 & CO.No.263/Del./2015
NRA Iron & Steel Private Limited, New Delhi.
 
ORDER
 
PER BHAVNESH SAINI, J.M.
The Departmental appeal as well as cross-objection by the assessee are directed against the order of the Ld. CIT(A)-1, New Delhi, dated 11th April, 2014 for the A.Y. 2009-2010.

1.1. The Revenue in the departmental appeal challenged the order of the Ld. CIT(A) in deleting the addition of Rs.17.60 crores on account of unexplained share capital/share premium. The assessee in the cross-objection challenged the reopening of the assessment under section 148 of the I.T. Act, 1961.

2. Briefly the facts of the case are that A.O. issued notice under section 148 of the I.T. Act after recording the reasons for reopening. The assessee submitted before A.O. that return already filed may be treated as return having been filed in response to notice under section 148 of the I.T. Act. The A.O. issued detailed questionnaire on the above issue of share capital and the assessee filed necessary details and clarifications before A.O. time to time. The assessee filed objections to the reopening of the assessment under section 148 of the I.T. Act, which was rejected on 13th August, 2012.

The assessee submitted before A.O. that it has raised money aggregating to Rs.17.60 crores through share capital/share premium during the assessment year under appeal from various parties which are Mumbai based companies, Kolkata based companies and Gauhati based companies. The details of which are noted at pages 2 and 3 of the assessment order. It was submitted that assessee has already filed copies of the confirmations, income tax return acknowledgments and bank accounts in respect of these companies, duly establishing the identity, genuineness and source of transaction regarding share capital and share premium. The entire share capital/ application money has been received by the assessee-company through normal banking channels by account payee cheques/demand drafts. Furthermore, the said confirmations also clearly reveal the source of funds, particulars of bank accounts through which payment have been received and income tax particulars which go to establish their identity and creditworthiness. It was therefore, submitted that there were no cause exists to make a recourse to the provisions of Section 68 of the I.T. Act, 1961. In the instant case, there is no material on record to prove or even remotely suggest that the share application money received actually emanate from the assessee-company. The share application money was received from independent legally incorporated Companies through banking channels. The initial onus upon assessee has thus been discharged. The assessee relied upon the decision of the Delhi High Court in the case of CIT vs. Steller Investment Ltd., (1991) 192 ITR 287 (Del.) in which it was held that any increased capital is not assessable in the hands of the assessee which has been confirmed by the Hon'ble Supreme Court in the case of CIT vs. Steller Investment Ltd., (2001) 251 ITR 263 (SC). The assessee also relied upon the decision of the Hon'ble Supreme Court in the case of CIT vs. Lovely Exports Pvt. Ltd., 216 CTR 195 in which it was held that "if the share application money is received by the assessee-company from alleged bogus share holders whose names are given to the A.O, then the Department is free to proceed to reopen their individual assessments in accordance with law". The assessee relied upon several decisions in support of the contention. The A.O. however, did not accept the contention of the assessee on the basis of the enquiries conducted by him. It was found that existence of investment companies and genuineness of the transactions has not been proved. The A.O. noted that as regards Mumbai based Companies, some notices were served and some could not be served and no reply have been received from them. In respect of Kolkata based Companies, they have filed their reply through Dak counter confirming the transaction with the assessee, but copy of the bank account has not been enclosed. In respect of Guwahati based company, it was noted that this company do not exist at the address. Therefore, it was held that assessee failed to prove the genuineness of the transaction and accordingly, addition of Rs.17.60 crores was made in the hands of the assessee.

3. The assessee challenged the reopening of the assessment as well as addition on merits before Ld. CIT(A). The detailed contention of the assessee as regards reopening of the assessment has been noted in the impugned order. However, the Ld. CIT(A), confirmed the reopening of the assessment and dismissed this ground of appeal of assessee, particularly, when he has allowed the relief to the assessee on merit. Therefore, no detailed reasoning have been given because it was found that the issue is left with academic discussion only. 

4. The assessee as regards the addition, on merit, reiterated the same submissions before Ld. CIT(A) and it was submitted that A.O. made the addition arbitrarily and unjustifiably. The assessee produced all the relevant documents before A.O. which have not been doubted. The assessee filed confirmations of all the share applicants, copy of their income tax returns, bank accounts and copy of annual accounts. Therefore, no adverse inference has been drawn against the assessee. The Ld. CIT(A) on going through the documents and material on record, deleted the entire addition of Rs.17.60 crores and allowed the appeal of assessee. His findings in paras 3.3 to 3.5 of the impugned order are reproduced as under:

"3.3. I have considered the rival claims. The fact that appellant filed the requisite documents before the AO is undisputed. Thus, the appellant had discharged its primary onus of establishing the identity of the share holders / applicant ire source of the money. The only reason for the revenue to cause further verification was the report relating to survey conducted at the premises of the appellant which forms part of the satisfaction recorded for reopening the assessment proceedings. From the said report it transpires that the business premises of the appellant actually belonged to M/s Bhushan Steel Ltd. and several other companies were having their registered offices in the same premises. This led to the suspicion that these companies were paper companies. During further verification of the identity of the shareholders in Mumbai, some summons were served but parties did not respond. In Guwahati, both parties were not found at the given address. In Kolkata, all 11 parties responded by post but no one appeared.

3.4. There is no law that more than one company cannot have its registered office at one address. There is no law that companies cannot change their registered office. Several companies can have the same registered office. Businesses raise capital and such capital is rotated in economy increasing production and trade and for making more efficient use of capital. Companies change hands, sometimes in quick succession. This is the normal formation of capital in any open economy and the process of capital formation cannot be taken to be representing only unaccounted funds or impeded. All the companies having registered office at that premises undisputedly belonged to Bhushan Group. The sources of capital introduced in these companies were established during the respective assessment proceedings, including in the case of this appellant company. No evidence was found during the search to indicate introduction of unaccounted cash / funds in the form of share capital in these companies. Therefore, the conclusion based on the facts relied upon by the revenue that the share capital introduced in the companies belonging to Bhushan Group, including the appellant company, are unexplained, is at best premature. 3.5. In the above facts and circumstances of the matter, and in view of the case laws relied upon by the Ld. AR, the addition made cannot be legally sustained and is deleted. This ground of appeal is allowed."

5. The Ld. D.R. relied upon the orders of the A.O. and submitted that some parties did not file reply before A.O. and many parties filed reply at the Dak counter. No reasons have been given for the higher premium paid. Copy of the bank statements were not filed before A.O. The income declared by assessee and the share applicant companies were very small. Therefore, addition was correctly made by the A.O. The Ld. D.R. relied upon the following decisions.

i. CIT vs. Precision Finance (P) Ltd., (1994) 208 ITR 465 (Cal.) ii. CIT vs. United Commercial & Industries Co. (P) Ltd., (1991) 187 ITR 596 (Cal.) iii. CIT vs. Nipun Builders & Developers (P) Ltd.,  (2013) 350 ITR 407 (Del.) iv. CIT vs. Nova Promoters & Finlease (P) Ltd., (2012) 342 ITR 169 (Del.).

v. Mukesh Shah vs. ITO (2012) 246 CTR 82 (Jharkhand) vi. CIT vs. N.R. Portfolio (P) Ltd., (2013) 263 CTR 456 (Del.) vii. CIT vs. Empire Buildtech (P) Ltd., (2014) 366 ITR 110 (Del.) viii. CIT vs. Focus Exports (P) Ltd., (2014) 51 taxmann.com 46 (Del.).

6. On the other hand, Learned Counsel for the Assessee, reiterated the submissions made before the authorities below and relied upon the order of the ITAT, Delhi Bench in the case of ACIT vs. M/s. Adamine Construction Pvt. Ltd., New Delhi ITA.No.6175/Del./ 2013 and C.O.No.259/Del./2015 dated 18th August, 2017, in which, on identical issue, the Departmental appeal and cross-objection of the assessee have been dismissed. He has submitted that most of the parties are similar in this case as have been considered in the case of the assessee on identical facts. It is the case of sister concern of the assessee. He has submitted that all the documents were filed before A.O. which proved the identity of the share applicants, their creditworthiness and genuineness of the transaction. All companies are registered with Registrar of Companies and filed their bank statements. No cash have been deposited in bank accounts of the share applicants. They were having sufficient funds with them to make investment in the assessee-company. He has submitted that the issue is covered in favour of the assessee by the order of the ITAT, Delhi Bench, in the case of M/s. Adamine Construction Pvt. Ltd.,(supra).

7. We have considered the rival contentions and perused the material available on record. It is not in dispute that assessee company filed copies of the confirmations, income tax return acknowledgments and bank accounts of the share applicant companies before A.O. All the investors are registered with Registrar of Companies and have filed their PAN also. The assessee filed list of share applicants in the paper book supported by all the above documents and evidences. In all their confirmations, they have certified in making investment in assessee-company through banking channel and their PAN as well. The copies of the bank statements also show that share applicants were having sufficient bank balance to make investment in assessee-company. The assessee received the share capital/premium through banking channel from the following companies situated at Mumbai, Kolkata and Guwahati as under :

S Name of the shareholder                                                                Amount
(A) Mumbai Based Companies
1. Clifton Securities Pvt. Ltd.,                                                            95,00,000
2. Lexus Infotech Ltd.,                                                                       95,00,000
3. Nicco Securities Pvt. Ltd.,                                                              95,00,000
4. Real Gold Trading Company Pvt. Ltd.,                                          90,00,000
5. Hema Trading Company Pvt. Ltd.,                                                 95,00,000
6. Eternity Multi-trade Pvt. Ltd.,                                                        90,00,000

(B) Kolkata Based Companies
1. Neha Cassettes Pvt. Ltd.,                                                                90,00,000
2. Warner Multimedia Ltd.,                                                                95,00,000
3. Gopikar Supply Pvt. Ltd.,                                                              90,00,000
4. Ganga Builders Ltd.,                                                                      90,00,000
5. Gromore Fund Management Co. Ltd.,                                          95,00,000
6. Bayanwala Brothers Pvt. Ltd.,                                                      95,00,000
7. Super Finance Ltd.,                                                                       90,00,000
8. Shivalaxmi Export Ltd.,                                                                95,00,000
9. Natraj Vinimay Pvt. Ltd.,                                                              95,00,000
10. Neelkanth Commodities Pvt. Ltd.,                                              95,00,000
11. Prominent Vyapaar Pvt. Ltd.,                                                      95,00,000

(C) Guwahati based companies
1. Ispat Sheets Ltd.,                                                                           90,00,000
2. Novelty Traders Ltd.,                                                                    90,00,000

Total Amount                                                                      17,60,00,000

8. The Learned Counsel for the Assessee relied upon the order of the ITAT, Delhi Bench in the case of ACIT, Central Circle-13, New Delhi vs. M/s. Adamine Construction Pvt. Ltd., (supra), in which the departmental appeal, on the identical question have been dismissed. The findings of the Tribunal in paras 10 to 18 of the Tribunal are reproduced as under :

10. The Revenue has questioned first appellate order on the following grounds :-

" 1. The order of Ld. CIT (Appeals) is not correct in law and facts;

  2. On the facts and circumstances of the case the ld. CIT (Appeals) has erred in deleting the addition of Rs.4,65,00,000/- being unexplained share capital including share premium and Rs.50,00,000/- being unexplained share application money made by Assessing Officer without appreciating the fact that the identity and the creditworthiness of the investors were not established as all the investors were showing a nominal income."

11. It is relating to deletion of addition of Rs.4,65,00,000/- on account of unexplained share capital and share premium and a sum of Rs.50,00,000/- on account of unexplained share application money received by the Appellant Company from various companies made by the Assessing Officer on the ground that :-

(i) the creditworthiness of the investor companies was not established as all the investors were showing a nominal income;

(ii) neither the investors companies nor the Appellant Company had produced any proof to substantiate the credit worthiness of the Investors; and

(iii) the genuineness of the transactions was also in doubt.

12. The relevant facts are that the appellant company had filed its original return of income declaring a total income of Rs.715/- on 25.09.2008 vide receipt No.39312931250908. The return was processed under section 143(1) of the Income Tax Act, 1961 at the returned income. Subsequently, a search, seizure and survey operation under section 132 and 133A respectively of the Income Tax Act, 1961 was carried out in the Bhushan Group of cases on 3.03.2010. The appellant company was also covered in the said survey operation and its jurisdiction was subsequently transferred to the Office of the ACIT, Central Circle - 13, New Delhi.

13. The case of the appellant company for the assessment year 2008-09 was reopened under section 147 of the Income Tax Act, 1961 and notice under section 148 was issued on 19.09.2011. In response to the said notice the appellant company filed a reply dated 26.09.2011 stating that original return of income filed earlier by it on 25.09.2008 vide receipt No. 39312931250908 may be treated as return filed in response thereto.

14. The assessment was completed vide order dated 28.03.2013 at an income of Rs.5,15,00,715/- wherein the ld. Assessing Officer has proceeded to add back a sum of Rs.5,15,00,000/- on account of alleged unexplained share capital received by the appellant company from various companies situated at Mumbai and Kolkata. The ld. CIT (Appeals) has, however, deleted the addition being convinced with the submissions of the assessee.

15. In support of the ground, the ld. Sr. DR has basically placed reliance on the assessment order with this contention that assessee has thoroughly failed to establish creditworthiness of the investor companies as well as genuineness of the transaction. Some of the parties were not found on the given address and some of them did not respond to the notices issued by the Assessing Officer to them nor the assessee has been able to produce them for verification before the Assessing Officer. In absence of compliance of these requirements the Assessing Officer was very much justified in making the addition of Rs.5,15,00,000/- under section 68 of the Act on account of unexplained share capital and share premium received by the assessee company from various companies. Ignoring these material aspects the ld. CIT (Appeals) has erred in deleting the addition.

16. The ld. AR, on the other hand, placed reliance on the first appellate order and reiterated following submissions made before the ld. CIT (Appeals) :-

(1) By way of a brief introduction, it is submitted that the Appellant Company had raised money amounting to Rs.5,15,00,000/- through share capital/application money during the financial year.2007-08 from various parties situated at Mumbai and Kolkata. The details of the parties from whom Share Capital and Share Premium had been received are as under :-

 S No.     Name of the Investor   Address   Amount(Share Company Capital/Application money/ Premium) (in Rs.)  
1. Vanguard Jewels Ltd            G-3, Silver Anket Yari Road, Versova, Mumbai -400061                                      95,00,000
2.  Ganga Builders Ltd  Stephen House, Room No. 102, 6th Floor, 4BBD Bagh (East), Kolkata -700001            95,00,000/-
3. Shivlaxmi Exports Ltd  102, Stephen House, 4BBD BAG(E)    Kolkata -700001                                               90,00,000/-
4. Lexus Infotech Ltd  CS-1, Silver Anket, Yari Road, Versova, Andheri (W), Mumbai 400061                            90,00,000/-
5. Hema Trading Co Pvt  303-B Minal Park, C.S Road, Dahisar Ltd (East) Mumbai 400068                                95,00,000/-    
6.Realgold Trading Pvt  BIG Tree Bldg Chamber No. 6, 1st Ltd Floor, Marine Street, Mumbai 400002                50,00,000/-
Total                                                                                                                                                                         5,15,00,000/-                                                                                                                                                                                                              
(2) The Assessing Officer in the course of assessment proceedings had desired the Appellant Company to furnish the details of the amount received and evidence in support of identity and creditworthiness of the parties and also the genuineness of the transaction of all the parties from whom the share capital and share premium had been received. In response, the Appellant Company vide letter dated 13.08.2012 filed with the Assessing Officer copies of bank accounts, confirmation and Income Tax Return acknowledgements from all the parties to establish the identity, genuineness and sources of transaction regarding share capital and share premium.

The entire amount had been received by the Appellant Company through normal banking channels by account cheques / demand drafts. Furthermore, the said confirmations also clearly reveal the source of funds, particulars of the bank account through which payment has been received and the Income-Tax particulars which go on to establish the identity and creditworthiness of the respective share applicants authoritatively and conclusively. (2) On the basis of the documents/details submitted, the Learned Assessing Officer, has summarized as follows :-

S.No.                       Name of the Share Holder                                       Returned Assessment Income                                     Year
 1                               Vanguard Jewels Ltd                                             Rs. 3,42,600/-                                                            2008-09
2.                                Ganga Builders Ltd                                             (Rs. 2,910/-)                                                                2008-09
3.                                  Shivlaxmi Exports Ltd                                                      Nil                                                                  2008-09
4.                           Lexus Infotech Ltd                                                      15,64,590/-                                                                2008-09   
5.                        Hema Trading Co Pvt Ltd                                               17,16,207/-                                                                2008-09

 (4) In order to further verify the genuineness of all the parties commissions u/s 131 were sent by the Learned Assessing Officer to the respective Investigation agencies in Mumbai and Kolkata response to which reports were received from the office of Addl. CIT, Range-10(2),Mumbai and Assistant Director of Income Tax (Inv) Unit-III(3), Kolkata. The Addl Commissioner of Income Tax, Range 10(2), Mumbai and AssistantDirector of Income Tax (Inv), Unit-III(3), Kolkata also deputed Inspectors of Income Tax to serve the summons and conduct field enquiries. The results of the said enquiries are as follows:-

Report from Mumbai S No. Name of the Shareholder Report as received in response to commission from Mumbai

1. Vanguard Jewels Ltd Party has responded to the summons and the details are annexed. Details annexed as Exhibit-C

2. Lexus Infotech Ltd Party has responded to the summons and the details are annexed. Details annexed as Exhibit-D.

3. Hema Trading Co Pvt Ltd The address is residential address of D V Jain, as per report of Inspector dated 30.11.2011, no such person has ever resided in such premises. Report of Shri Ajay Kumar Inspector is enclosed as annexure. (Annexure -20)

4. Realgold Trading Company The address is office address of N Chandulal Pvt Ltd & Co.CA. As per report of Inspector dated 30.11.2011 no such person has ever resided in such premises. Report of Shri Ajay Kumar Inspector is enclosed as Annexure (Annexure - 20) Report from Kolkata S No. Name of the Shareholder Report as received in response to commission from Kolkata

1. Ganga Builders Ltd Assessee made a submission through dak and submitted that the company has applied for share of M/s Adamine Construction Pvt Ltd in F.Y 2007-08. The assessee has not specified for how many shares and at what premium.

The assessee has enclosed bank statement showing payment was made by cheque no.875638 dated 07.02.2008 for Rs. 55,00,000/- and cheque no. 875656 dated 07.02.2008 for Rs. 40,00,000/- drawn on Deutsche Bank.

The assesee has not enclosed the bank statement showing the source of fund for share application money. The company has shown Nil income for A.Y. 2008-09.

2. Shivlaxmi Exports Ltd Assessee made a submission through dak and submitted that the company has applied for 90000 equity share of Rs. 10/- of M/s Adamine Construction Pvt Ltd each at a premium of Rs. 90/- and allotted the same.

The assessee has not given the reason for paying such a high premium. The assessee has enclosed bank statement showing payment was made by cheque no. 611654 dated 08.02.2008 for Rs. 50,00,000/- and cheque no. 611515 dated 08.02.2008 for Rs 40,00,000/- drawn on Deutsche Bank. The assessee has not enclosed the bank statement showing the source of fund for share application money. The company has shown Nil income for A.Y. 2008-09.

(5) On the basis of the said exercise, the Learned Assessing Officer has observed and concluded as follows:- The identity and the creditworthiness of the investors are not established as all the investors are showing a nominal income. Neither the investor company and nor the assessee company has produced any proof to substantiate the credit worthiness of the investors (for example balance sheet of the investor company); The genuineness of the transactions is also in doubt as the investors have not enclosed the bank statement showing the source of fund for share application money.

(6) The Learned Assessing Officer has accordingly held that the creditworthiness of the investors and the genuineness of the transactions is in doubt and has accordingly treated share capital/application money and share premium amounting to Rs.5,15,00,000/- as unexplained and added this same to the taxable income of the Appellant Company u/s 68 of the Income Tax Act, 1961. 

(7) The Assessing Officer in the course of assessment proceedings had desired the Appellant Company to furnish the details of the amount received and evidence in support of identity and creditworthiness of the applicants and also the genuineness of the transaction of all the parties situated at Mumbai and Kolkata from whom the share capital and share premium had been received. In response, the Appellant Company filed copies of confirmations, Income Tax Return acknowledgements and bank accounts from all the parties establishing the identity, genuineness and sources of transaction regarding share capital and share premium with the Assessing Officer. The entire share application money had been received by the Appellant Company through normal banking channels by account payee cheques/demand drafts.

Furthermore, the said confirmations also clearly reveal the source of funds, particulars of the bank account through which payment has been received and the Income-Tax particulars which go on to establish the identity and creditworthiness of the various parties authoritatively and conclusively.

(8) As a result of the above documents being filed before the Learned Assessing Officer in respect of all the parties in respect of which no cause exists as to recourse to the provisions of Section 68 of the Income-tax Act, 1961 in as much as the onus cast on the Appellant Company vis-à-vis the genuineness of the transaction and credit worthiness of the parties has been effectively and completely discharged. The action of the Learned Assessing Officer is not only against the spirit but also letter of the provisions relating to establishing the identity of cash creditors as embodied in the Income -tax Act, 1961. Independent investigations from parties over which an Appellant Company does not have any control cannot be used to form any conclusion, adverse of otherwise in respect of the Appellant Company. As such the said addition is neither warranted nor justified or sustainable on the facts of the case.

(9) The above factual statements and arguments can be further buttressed and reinforced by an analysis of the relevant legal provisions and legal pronouncements on the issue. Before proceeding further with the matter it would be worthwhile to reproduce the provisions of S.68 of the Income tax Act, 1961 which reads as follows:-

"S 68. Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year.

(10) The above Section enjoins upon an Appellant Company, the duty to adequately, satisfactorily and substantively explain the source of any cash credit in his books of accounts and no further. To put it differently an Appellant Company's burden of proof would stand discharged if he is able to prove the nature and source of the cash credit received and thus his onus of proof cannot extend to failure to prove the source of the proof with a view to arrive at the ultimate source of funds. As long as the nature, source and identity of the investor is established, no further onus of proof can be enjoined on it.

In the instant case no case can be made out to doubt the genuineness, existence or identity of the investors and as such no cause exists for the invocation of S. 68.

(11) An analysis of the provisions of Section 68 of the Income- tax Act, 1961 would make it clear that in order to discharge the onus, the Assessee must prove the following:-

(i) identity of the creditor;
(ii) capacity of the creditor to advance money; and
(iii) genuineness of the transaction.

(12) The question of the manner in which the onus u/s 68 has to be discharged is to be looked at with different perspectives and varying parameters in each different circumstance and no standards/ guidelines can be lead out in this regard.

 (13) In the instant case there is no material on record to prove or even remotely suggest that the share application money received actually emanated for the Appellant Company. In fact it may be reiterated that the share application money was received from independent legally incorporated companies through normal and regular banking channels which fact stands duly corroborated and confirmed by the confirmations bank statements and Income Tax Returns of the share applicants duly placed on record. In fact, no evidence, direct or indirect, conclusive, or even circumstantial, exists to doubt in any manner the identity and credit worthiness of the parties and genuineness of the transactions entered into.

 (14) The Appellant Company has discharged its onus by satisfactorily dealing with all the issues in respect of which onus has been cast on it u/s 68 of the Income-   tax Act, 1961 as would be clear from the following discussion:-

(i) With respect to the identity of the creditors the names, addresses and PANs of the Assessee has been duly furnished and provided to the Ld Assessing Officer during the course of the assessment proceedings and no error or short coming has either been determined or pointed out therein since all the share applicants are duly identified with duly allotted PANs which are subsisting in the record of the Income Tax Department. Moreover all the share applicants are companies duly incorporated after following the procedure laid out in the Companies Act, 1956. Thus, no doubt exists or even arises with respect to the identity of the creditors.

(ii) With respect to the capacity/credit worthiness of the share applicants to advance money and the genuineness of the transactions it needs to be understood, reiterated and re-emphasized that the entire transaction was consummated through account payee cheques through regular banking channels which fact has not been disputed or denied in any manner. As such given the entire factual situation of the case no doubt arises and remains as to the capacity and credit worthiness of the parties and genuineness of the transactions.

(15) In this connection Your Honour's attention is also invited to the decision of the Hon'ble Delhi High Court in the case of Commissioner of Income-Tax vs. Steller Investments Limited [(1991) 192 ITR 287 (Delhi)] wherein it has been clearly held that any increased capital is not assessable in the hands of the company. The relevant observations of the Learned Judges are as follows:-

"It is evident that even if it be assumed that the subscribers to the increased share capital were not genuine, nevertheless, under no circumstances, can the amount of share capital be regarded as undisclosed income of the assessee. It may be that there are some bogus shareholders in whose names shares had been issued and the money may have been provided by some other persons. If the assessment of the persons who are alleged to have really advanced the money is sought to be reopened, that would have made some sense but we fail to understand as to how this amount of increased share capital can be assessed in the hands of the company itself."

(16) Subsequent to the above an appeal filed by the Department against the judgement/observations of the Supreme Court was also dismissed and the Hon'ble Supreme Court did not find any reason to interfere with the order of the High Court in the case of CIT vs Steller Investment Ltd [(2001) 251 ITR 263 (SC)]. As such the observations of the Hon'ble Delhi High Court have obtained the approval of their Lordship of the Supreme Court and accordingly attained judicial finality and stamp of approval. (17) In addition, Your Honor's kind attention is also invited to the following judgement of the Delhi High Court in the case of Commissioner of Income Tax v Lovely Exports Pvt Ltd [(2008) 299 ITR 268 (Delhi)] has held as follows :-

" In the case of a company the following are the propositions of law under section 68. The assessee has to prima facie prove (1) the identity of the creditor/ subscriber; (2) the genuineness of the transaction, namely, whether it has been transmitted through banking or other indisputable channels; (3) the creditworthiness or financial strength of the creditor / subscriber; (4) if relevant details of the address or PAN identity of the creditor / subscriber are furnished to the Department along with copies of the shareholders' register, share application forms, share transfer register, etc, it would constitute acceptable proof or acceptable explanation by the assessee; (5) the Department would not be justified in drawing an adverse inference only because the creditor/ subscriber fails or neglects to respond to its notices; (6) the onus would not stand discharged if the creditor / subscriber denies or repudiates the transaction set up by the assessee nor should the Assessing Officer take such repudiation at face value and construe it, without more, against the assessee; and

(17) the Assessing Officer is duty bound to investigate the creditworthiness of the creditor/ subscriber the genuineness of the transaction and the veracity of the repudiation. In the case of a public issue, the company concerned cannot be expected to know every detail pertaining to the identity as well as financial worth of each of its subscribes. The company must, however, maintain and make available to the Assessing Officer for his perusal, all the information contained in the statutory share application documents. A delicate balance must be maintained while walking the tightrope of sections 68 and 69 of the Income -Tax Act. The burden of proof can seldom be discharged to the hilt by the assessee; if the Assessing Officer harbours doubts of the legitimacy of any subscription, he is empowered, to carry out thorough investigations. But if the Assessing Officer fails to unearth any wrong or illegal dealings, he cannot adhere to his suspicions and treat the subscribed capital as the undisclosed income of the company".

(18) Further Your Honor's kind attention is also invited to the decision of their Lordship of the Hon'ble Supreme Court in the case of CIT vs Lovely Exports Pvt Ltd [(2008) 216 CTR 195 (SC)] wherein the special leave petition filed by the Department against the order of the Delhi High Court has been dismissed with the following remarks :-

"We find no merit in this Special Leave Petition for the simple reason that if the share application money is received by the Assessee Company from alleged bogus shareholders, whose names are given to the AO, then the Department is free to proceed to reopen their individual assessments in accordance with law. Hence, we find no infirmity with the impugned judgement".

(19) The above decision of the Hon'ble Supreme Court follows the earlier decision of the Hon'ble Supreme Court in the case of Steller Investment Ltd, cited supra and further reinforces the arguments put forward for and on behalf of the Appellant Company.

(20) In particular, with regard to the issue of establishing the creditworthiness of the parties, Your Honour's attention is invited to the following recent judgements wherein it has been conclusively held relying on the decisions in the case of M/s Lovely Exports Pvt Ltd cited above, that as long as the identity of the share applicant was proved, the burden of proving the creditworthiness was not on the Assessee:-

Commissioner of Income-tax, Udaipur v. Bhaval Synthetics [(2013) 35 Taxmann.com 83 (Rajasthan)];
Shree Barkha Synthetics Ltd v. Assistant Commissioner of Income-tax [(2006) 155 Taxman 289 (Raj)];
Commissioner of Income-tax, Bhopal (M.P) v. Peoples General Hospital Ltd [(2013) 35 taxmann.com 444(Madhya Pradesh);
Commissioner of Income-tax, Meerut v. Kamna Medical Centre (P) Ltd [(2013) 35 taxmann.com 470(Allahabad)];
Commissioner of Income-tax, Faridabad v. GP International Ltd [(2010) 186 Taxman 229 (Pun &Har)];
CIT v Dwarkadhish Investment Pvt Ltd and Dwarkadhish Capital Pvt Ltd [(2011) 330 ITR 298 (Delhi)];
CIT v. Winstral Petrochemicals Pvt Ltd [(2011) 330 ITR 603 (Delhi)]; Commissioner of Income Tax v. Gangour Investment Ltd [(2011) 335 ITR 359 (Delhi)];
MOD Creations Pvt Ltd vs. Income Tax Officer [(2012) 354 ITR 282 (Delhi)].

(21) It should be specifically noted in the instant case there was no denial at any stage of the investigation or the assessment proceedings by any of the subscribers to the share capital of their having invested money by way of share application money in the Appellant Company. Moreover there is no shred of evidence, direct,  indirect or even peripheral of the share application money having emanated from the coffers of the Appellant Company. In fact, the investor companies, in their replies filed before the Department (in response to summons u/s 131 of the Act), have duly confirmed, the factum of their having made the investment and have further buttressed the same with the following documents :-

(a) Confirmations;
(b) Acknowledgement for filing of Income Tax Returns;
(c) Bank statements reflecting the transactions with the Appellant Company;
(d) Copies of Annual Accounts.

(22) In view of the above, no doubt remains as to the identity of the investors, their credit worthiness and the genuineness of the transactions and correspondingly no adverse inference is called for.

(23) In fact, in the instant case, reliance is placed on the decision of the Delhi High Court in the case of CIT vs Kamdhenu Steel & Alloys Limited and Others [(2012)206 Taxman 254(Delhi)] wherein the following has been held :-

"38. Even in that instant case, it is projected by the Revenue that the Directorate of Income Tax (Investigation) had purportedly found such a racket of floating bogus companies with sole purpose of landing entries. But, it is unfortunate that all this exercise is going in vain as few more steps which should have been taken by the Revenue in order to find out causal connection between the cash deposited in the bank accounts of the applicant banks and the assessee were not taken. It is necessary to link the assessee with the source when that link is missing, it is difficult to fasten the assessee with such a liability.

39. We may repeat what is often said, that a delicate balance has to be maintained while walking on the tight rope of sections 68 and 69 of the Act. On the one hand, no doubt, such kind of dubious practices are rampant, on the other hand, merely because there is an acknowledgement of such practices would not mean that in any of such cases coming before the Court, the Court has to presume that the assessee in questions as indulged in that practice. To make the assessee responsible, there has to be proper evidence. It is equally important that an innocent person cannot be fastened with liability without cogent evidence. One has to see the matter from the point of view of such companies (like the assessee herein) who invite the share application money from different sources or even public at large. It would be asking for a moon if such companies are asked to find out from each and every share applicant/subscribers to first satisfy the assessee companies about the source of their funds before investing. It is for this reason the balance is struck by catena of judgements in laying down that the Department is not remediless and is free to proceed to reopen the individual assessment of such alleged bogus shareholders in accordance with the law. That was precisely the observation of the Supreme Court in Lovely Export (supra) which holds the fields and is binding.

40. In conclusion, we are of the opinion that once adequate evidence/material is given, as stated by us above, which would prima facie discharge the burden of the assessee in proving the identity of shareholders, genuineness of the transaction and creditworthiness of the shareholders, thereafter in case such evidence is to be discarded or it is proved that it has 'created" evidence, the Revenue is supposed to make thorough probe of the nature indicated above before it could nail the assessee and fasten the assessee with such a liability under Sections 68 and 69 of the Act.  (24) It would also be pertinent, topical and relevant to mention here that the Special Leave Petition field before the Hon'ble Supreme Court by the Revenue against the above decision of the Hon'ble Delhi High Court has been subsequently dismissed by Their Lordship of the Supreme Courts and as such the decision of the Delhi High Court in the case of CIT vs Kamdhenu Steel & Alloys Limited and Others (supra) has attained conclusive judicial finality. (25) To conclude it may be said that on the basis of the facts discussed supra and the ratio of the above judgements makes it clear that if the share applicants are identified and it is established that they have deposited money in the Company, no recourse can be made to the provisions of S 68. The Appellant Company had provided all the requisite particulars to establish the identity of the share applicants in the confirmations, ITRs and bank statements already filed before the Assessing Officer. The various arguments advanced by the Learned Assessing Officer are frivolous and irrelevant and the onus enjoined upon the Appellant Company by the provisions of section 68 stands not only adequately but also completed satisfied. (26) Accordingly since it is clear that if the shareholders / share applicants are identified and it is established that they have invested money in the purchase of shares, no recourse can be made to the provisions of S 68. In the instant case the Appellant Company had provided all the requisite particulars to establish the identity of the share applicants in the confirmations already filed before the Assessing Officer.

The ld. AR also placed reliance on the following decisions :-

(i) CIT Vs. Gangeshwari Metal Pvt. Ltd. ITA. No. 597/2012 [judgement dated 21.01.2013 (Delhi High Court);
(ii) Pr. CIT Vs. N. C. Cables Ltd. (2017) 391 ITR 11 (Del.);
(iii) Pr. CIT Vs. Softline Creations P. Ltd. (2016) 387 ITR 636 (Del.);
(iv) CIT Vs. Real Time Marketing P. Ltd. (2008) 306 ITR 35 (Del.);
(v) CIT Vs. Value Capital Sergvices P. Ltd. (2008) 307 ITR 334 (Del.);
 (vi) CIT Vs. Orbital Communication (P) Ltd. (2010) 327 ITR 560 (Del.);
(vii) CIT Vs. Winstral Petrochemicals P. Ltd. (2011) 330 ITR 603 (Del.);
 (viii) CIT Vs. Kamdhenu Steel and Alloys Ltd. (2014) 361 ITR 220 (Del.).

17. Having gone through the above cited decisions, we find that the ratio laid down therein is that the primary onus lies upon the assessee to establish identity and creditworthiness of the creditors/ investors as well as genuineness of the transaction and after discharging of the same, onus shifts upon the Revenue to prove the documents filed by the assessee while discharging its primary onus, as false to attract addition under section 68 of the Act. In its recent decision dated 11.01.2017 in the case of Pr. CIT Vs. N.C. Cables Ltd. (supra) the Hon'ble jurisdictional High Court of Delhi has been pleased to hold that no addition can be made under section 68 of the I.T. Act where assessee in the case of share application money had furnished documents to evidence genuineness of transactions and identity and creditworthiness of parties, but there was failure on the part of the Assessing Officer to conduct adequate and proper enquiry into materials while invoking section 68 of the Act.
Again in the case of Pr. CIT Vs. Softline Creations P. Ltd. (supra), the assessee in support of receipt of share application money had furnished PANs, bank details of share applicants and affidavits of Directors of those share applicant companies. The Hon'ble High Court of Delhi has been pleased to hold that share application money cannot be considered as unexplained cash credits in the hands of the assessee. In the case of CIT Vs. Value Capital Services P. Ltd. (supra) the Hon'ble jurisdictional High Court of Delhi while dismissing the appeal of the Revenue has been pleased to hold that the additional burden was on the Department to show that even if the share applicants did not have the means to make the investment, investment made by them actually emanated from the coffers of the assessee so as to enable it to be treated as the undisclosed income of the assessee. In the case of CIT Vs. Orbital Communication P. Ltd. (supra) the Hon'ble jurisdictional High Court of Delhi in the case of the claimed share application money has been pleased to hold that where substantial evidence has been produced by the assessee to prove creditworthiness of the creditors and genuineness of share applications, failure to produce creditor is not material. In the case of CIT Vs. Winstral Petro Chemical P. Ltd. (supra) in the case of cash credits/share application money, the Hon'ble jurisdictional High Court of Delhi on the issue of burden of proof, has been pleased to hold that initial burden is on assessee to prove identity of creditors, the burden then shifts to Revenue to prove that credits were not genuine. In that case while dismissing the appeal of the Revenue, the Hon'ble High Court was pleased to hold that it had not been disputed that the share application money was received by the assessee company by way of account payee cheques through normal banking channels. Admittedly, copies of application for allotment of shares were also provided to the Assessing Officer. Since the applicant companies were duly incorporated, were issued PAN Cards and had bank accounts from which money was transferred to the assessee by way of account payee cheques, they could not be said to be non-existent, even if they, after submitting the share applications, had changed their addresses or had stop functioning, held the Hon'ble High Court.

18. When we examine the facts of the present case in view of the above cited ratio laid down by the Hon'ble jurisdictional High Court of Delhi, we find that facts are almost similar. In the present case there were 6 investor companies claimed to have invested Rs.5,15,00,000/- in total in the assessee company. In support of their identity and creditworthiness as well as genuineness of the transactions, as discussed above, the assessee had filed before the Assessing Officer, their (investor companies) confirmations, Income Tax return acknowledgements, bank accounts with this submission that entire amount had been received by the assessee company through normal banking channels by account payee cheques/ demand drafts. The confirmations filed revealed the source of funds, particulars of the bank account through which payments were received and the Income Tax particulars establishing the identity and creditworthiness of the respective share applicants. We thus find that the assessee had discharged its primary onus to establish identity and creditworthiness of the investor companies as well as genuineness of the transactions, as per the ratio laid down in the above cited decisions of the Hon'ble High Court. The Assessing Officer, on the other hand, had doubted the genuineness of the claimed receipt on the basis that some of the investor companies could not be found at the given address and that some of the investor companies responded to the summons by post, but had not caused appearance before him. The Assessing Officer also held that income of many of the investor companies was too low or meager to enable them to make such large investments in the share capital of the assessee company. The Assessing Officer also observed that there appeared no justification for large components of share premium paid to the assessee along with the share capital. The Assessing Officer also remained suspicious about the claimed investor companies on the basis of reasons recorded for initiation of reopening of assessment proceedings based on the report relating to conducted at the premises of the assessee that the business premises of the assessee actually belong to Bhushan Steel Ltd. and several other companies were having their Registered offices in the same premises. The submission of the assessee in this regard remained that there is no law that more than one company cannot have its Registered office at one address and that there is no law that companies cannot change their Registered offices. It was submitted that business raise capital and such capital is rotated in economy for increasing production and trade and for making more efficient use of capital. Companies change and, sometimes in quick succession. This is the normal formation of capital in any open economy and the process of capital formation cannot be taken to be representing only unaccounted funds or impeded. It was submitted that all the companies having Registered office at the premises undisputedly belonged to Bhushan Group. The sources of capital introduced in these companies were established during the respective assessment proceedings. It was further contended that no evidence was found during search to indicate introduction of cash in the form of share capital. It is also pertinent to mention over here that out of total 6 investor companies, notices could not be served in case of 2 companies as they were not available on the given addresses and in case of 1 company notice could not be served as the premises was found locked on various days. The remaining 4 companies had responded and had filed their submissions. However, there is no dispute that in case of all the 6 investor companies, the assessee had filed primary documents and had accordingly discharged its initial onus to establish identity and creditworthiness of the investor companies and genuineness of the transaction as there is no dispute that all the transactions have been done through banking channels i.e. through account payee cheques and demand drafts. We thus find that the Assessing Officer has failed to discharge its onus to prove that the documents filed by the assessee, as discussed above, were false or fabricated as the Assessing Officer has not made any efforts to verify those documents especially when there is no dispute that all the investor companies were filing their returns of income and were being assessed by the Department. The Assessing Officer on the contrary remained suspicious on the claimed receipt from the investor companies on some other factors like some of them were not found on their given addresses, some of them had furnished their submissions through posts and some of them were not having sufficient income etc. as discussed above. Under these circumstances, we are of the view that the ld. CIT (Appeals) was justified in deleting the addition of Rs.5,15,00,000./- made under section 68 of the Act on account of unexplained share capital and share premium. Since the first appellate order is based upon the ratio laid down in the above cited decisions of the Hon'ble jurisdictional High Court of Delhi, we do not find reason to interfere therewith. The same is upheld. The ground is accordingly rejected."

9. It may be noted here that in this case five parties from Mumbai and Kolkata are same as have been considered in the present Departmental appeal. Even if Mumbai based companies have not responded to the letter issued by the A.O, however, three of them have already been found existing and genuine Companies and two of the Companies from Kolkata based are also found existing and genuine in the case of ACIT, Central Circle-13, New Delhi vs. M/s. Adamine Construction Pvt. Ltd., (supra). All Kolkata parties confirmed genuineness of transactions in their reply before A.O.

Therefore, the issue is covered in favour of the assessee by the above said judgments. The Hon'ble Rajasthan High Court in the case of CIT vs. ARL Infratech Ltd., 394 ITR 383 considered the identical issue of share application money in which the assessee filed PAN and other details of the investor companies. No direct relation was also found between assessee and the investor companies. Therefore, additions deleted, were found fully justified.

10. The Hon'ble Supreme Court in the case of CIT vs. Lovely Exports Pvt. Ltd., (2008) 216 CTR 195 held as under :

 (i) "If the share application money is received by the assessee company from alleged bogus shareholders, whose names are given to the AO, then the Department is free to proceed to reopen their individual assessments in accordance with law, but it cannot be regarded as undisclosed income of assessee company."

11. The Hon'ble Delhi High Court in the case of CIT vs. Kamdhenu Steel & Alloys Ltd., & Ors. 361 ITR 220 (Del.) held as under : "Once adequate evidence/material is given, which would prima facie discharge the burden of the assessee in proving the identity of shareholders, genuineness of the transaction and creditworthiness of the shareholders, thereafter in case such evidence is to be discarded or it is proved that it has "created" evidence, the Revenue is supposed to make thorough probe before it could nail the assessee and fasten the assessee with such a liability unders. 6 8 ; A O failed to carry his suspicion to logical conclusion by further investigation and therefore addition under s.68 was not sustainable."

12. The Hon'ble Delhi High Court in the case of CIT vs. Vrindavan Farms P. Ltd. Etc. in ITA.No.71/2015 dated 12.08.2015 in which the sole basis for the Revenue to doubt their creditworthiness was the low income as reflected in their return of income. It was observed by the ITAT that the AO had not undertaken any investigation of the veracity of the documents submitted by the assessee, the departmental appeal was dismissed by the Hon'ble High Court.

13. The Hon'ble Delhi High Court in the case of CIT vs. Laxman Industrial Resources Pvt. Ltd., in ITA.No.169 of 2017 dated 14.03.2017 in which the CIT(A) took note of the material filed by the assessee and provided opportunity to the AO in Remand proceedings. The AO merely objected to the material furnished but did not undertake any verification. The CIT(A) deleted the addition by relying upon the decision of the Hon'ble Apex Court in the case of Lovely Exports Pvt.Ltd. (supra) and judgement of Delhi High Court in the case of CIT vs Divine Leasing & Finance Ltd. [2008] 299 ITR 268. The ITAT confirmed the opinion of the Ld.CIT(A). Hon'ble High Court in view of the above findings noted that the assessee had provided several documents that could have showed light into whether truly the transactions were genuine. The assessee provided details of share applicants i.e. copy of the PAN, Assessment particulars, mode of amount invested through banking channel, copy of resolution and copies of the balance sheet. The AO failed to conduct any scrutiny of the document, the departmental appeal was accordingly dismissed.

14. The Hon'ble Supreme Court in the case of  Earthmetal Electrical Pvt. Ltd., vs. CIT dated 30th July, 2010 in SLP. No.21073/99 in which Hon'ble Apex Court held "we have examined the position, we find that the shareholders are genuine parties.

They are not bogus and fictitious therefore, the impugned order is set aside." In this case, the Hon'ble Bombay High Court and the ITAT, Mumbai Bench, which was the subject matter in SLP before Hon'ble Supreme Court observed that assessee failed to produce any evidence regarding confirmation of the amount supposed to have been received as share capital from third party. The case of the assessee is therefore, on better footing as against the decision of the Hon'ble Supreme Court in the case of Earthmetal Electrical Pvt. Ltd., vs. CIT (supra). The decision of the Hon'ble Delhi High Court in the case of  Pr. CIT vs. Laxman Industrial Resources Pvt. Ltd., (supra), clearly apply to the facts of the case of the assessee that the assessee received genuine share application money from the investor Companies. The assessee on the basis of the documentary evidences have been able to establish that the share holders are genuine parties and they are not bogus and fictitious. The Hon'ble Delhi High Court in the case of CIT vs. Divine Leasing & Fin. Ltd., 299 ITR 268 held that "no adverse inference should be drawn if shareholders failed to respond to the notice by AO."

15. The Hon'ble M.P. High Court in the case of CIT vs. Peoples General Hospital Ltd., (2013) 356 ITR 65 held that "dismissing the appeals, that if the assessee had received subscriptions to the public or rights issue through banking channels and furnished complete details of the shareholders, no addition could be made under section 68 of the Income-tax Act, 1961, in the absence of any positive material or evidence to indicate that the shareholders were benamidars or fictitious persons or that any part of the share capital represented the company's own income from undisclosed sources. It was nobody's case that the non-resident Indian company was a bogus or non-existent company or that the amount subscribed by the company by way of share subscription was in fact the money of the assessee. The assessee had established the identity of the investor who had provided the share subscription and that the transaction was genuine. Though the assessee's contention was that the creditworthiness of the creditor was also established, in this case, the establishment of the identity of the investor alone was to be seen. Thus, the addition was rightly deleted.

16. The Hon'ble Delhi High Court in the case of CIT vs. Dwarkadhish Investment P. Ltd., (ITA.No.911 of 2010) and Dwarkadhish Capital P. Ltd., (2011) 330 ITR 298 (Del.) held "In any matter, the onus of proof is not a static one. Though in section 68 of the Income Tax Act, 1961, the initial burden of proof lies on the assesses yet once he proves the identity of the creditors/share applicants by either furnishing their PAN number or income-tax assessment number and shows the genuineness of transaction by showing money in his books either by account payee cheque or by draft or by any other mode, then the onus of proof would shift to the Revenue. Just because the creditors/share applicants could not be found at the address given, it would not give the Revenue the right to invoke section 68. One must not lose sight of the fact that it is the Revenue which has all the power and wherewithal to trace any person. Moreover, it is settled law that the assessee need not to prove the "source of source". The assessee-company was engaged in the business of financing and trading of shares. For the assessment year 2001-02 on scrutiny of accounts, the Assessing Officer found an addition of Rs.71,75,000 in the share capital of the assessee. The Assessing Officer sought an explanation of the assessee about this addition in the share capital. The assessee offered a detailed explanation.

However, according to the Assessing Officer, the assessee failed to explain the addition of share application money from five of its subscribers. Accordingly, the Assessing Officer made an addition of Rs.35,50,000/- with the aid of section 68 of the Act, 1961 on account of unexplained cash credits appearing in the books of the assessee. However, in appeal, the Commissioner of Income-tax (Appeals) deleted the addition on the ground that the assessee had proved the existence of the shareholders and the genuineness of the transaction. The Income-tax Appellate Tribunal confirmed the order of the Commissioner of Income-tax (Appeals) as it was also of the opinion that the assessee had been able to prove the identity of the share applicants and the share application money had been received by way of account payee cheques. On appeal to the High Court: Held, dismissing the appeals, that the deletion of addition was justified."

17. The Hon'ble Delhi High Court in the case of CIT vs. Winstral Petrochemicals P. Ltd., 330 ITR 603 (Del.) held that "dismissing the appeal, that it had not been disputed that the share application money was received by the assessee-company by way of account payee cheques, through normal banking channels. Admittedly, copies of application for allotment of shares were also provided to the Assessing Officer. Since the applicant companies were duly incorporated, were issued PAN cards and had bank accounts from which money was transferred to the assessee by way of account payee cheques, they could not be said to be non-existent, even if they, after submitting the share applications had changed their addresses or had stopped functioning. Therefore, the Commissioner (Appeals) and the Tribunal were justified in holding that the genuineness of the transactions had been duly established by the assessee."

18. The Hon'ble Delhi High Court in the case of CIT vs. Value Capital Services P. Ltd., (2008) 307 ITR 334 (Del.) in which it was held that "dismissing the appeal, that the additional burden was on the Department to show that even if the share applicants did not have the means to make the investment, the investment made by them actually emanated from the coffers of the assessee so as to enable it to be treated as the undisclosed income of the assessee. No substantial question of law arose."

19. It may be noted here that investor companies have confirmed making investments in assessee-company who were having sufficient net worth to make investment in assessee-company. Assessee filed I.T. returns, PAN, Bank Statements of investor Company to prove they are existing assessees of Department and are genuine parties. No efforts are made by A.O. for production of investors at assessment stage. Therefore, the assessee has been able to prove identity of the share applicants, their creditworthiness and genuineness of the transactions in the matter. The Ld. CIT(A), on examination of the material on record, further found that the only reason for the Revenue to goes for further verification was the report relating to survey conducted at the premises of the assessee- company which forms part of satisfaction recorded for reopening of the assessment proceedings. From the said report, Ld. CIT(A) found that the business premises of the assessee actually belong to M/s. Bhushan Steel Ltd., and several other Companies having their Registered Offices at the same address. This created a suspicion in the mind of the Revenue. The Ld. CIT(A) therefore, rightly noted that there is no law that more than one Company cannot have its Registered Office at one address. The Companies could have change their address later on. It is also an admitted fact that source of the capital investment companies were established during their respective assessment proceedings including in the case of the present assessee-company as per the findings of the Ld. CIT(A). Ld. CIT(A) also found that no evidence was found during the course of survey to indicate introduction of unaccounted cash/funds in the form of share capital in these companies. These findings of fact recorded by the Ld. CIT(A) have not been rebutted through any evidence or material on record. No evidence has been brought on record that money so invested in assessee-company came from coffers of assessee-company. All objections of A.O. have been considered by Ld. CIT(A) and various case law referred to above support the findings of Ld. CIT(A) that addition has been correctly deleted.

20. The Ld. D.R. relied upon the decision of various Hon'ble High Courts and Delhi High Court referred to above. In these cases, the gist of the findings are that the assessee failed either to prove the identity or capacity of the subscriber companies or that the amount was received as accommodation entries. However, the assessee- company, in the present case, has been able to prove the identity of the investors, creditworthiness and genuineness of the transaction in the matter. Therefore, Ld. CIT(A) on proper appreciation of evidence and material on record, correctly deleted the addition of Rs.17.60 crores. The Departmental appeal fails and is accordingly, dismissed.

21. In the result, appeal of the Revenue is dismissed.

22. The assessee in the cross-objection has challenged the reopening of the assessment. Learned Counsel for the Assessee however, fairly conceded that in the case of M/s. Adamine Construction Pvt. Ltd., (supra), the Tribunal has confirmed the reopening of the assessment on same set of facts.
He has submitted that since the issue is covered on merit in favour of the assessee- company by the aforecited decision of the Tribunal, therefore, the issue of reopening of the assessment is covered against the assessee- company by the same judgment. We may also note here that Ld. CIT(A) on deleting the addition on merit noted that since relief is already allowed to the assessee-company on merit, therefore, this ground is left for academic discussion only. In view of the above, we do not find any reason to interfere with the reopening of the assessment in the matter.
We, accordingly, confirm the reopening of the assessment and dismiss the cross objection of the assessee.

23. In the result, cross objection of the assessee is dismissed.

24. To sum-up, appeal of the Revenue as well as cross objection of the assessee are dismissed.

Order pronounced in the open Court.

 Sd/-                                                                                                                Sd/-

(L.P. SAHU)                                                                                           (BHAVNESH SAINI)

ACCOUNTANT MEMBER                                                                    JUDICIAL MEMBER

Delhi, Dated 16th October, 2017

VBP/-

Copy to
1. The appellant
2. The respondent
3. CIT(A) concerned
4. CIT concerned
5. D.R. ITAT 'E' Bench, Delhi
6. Guard File.
// BY Order //

Asst. Registrar : ITAT Delhi Benches : Delhi.

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