Case: PRINCIPAL COMMISSIONER OF INCOME TAX(CENTRAL) 1 Vs. NRA IRON AND STEEL PVT. LTD. THROUGH DIRECTOR

3. The facts of the case, briefly stated are as under :      3.1. The instant case pertains to the Assessment Year of 2009–10, for which the Respondent Company – Assessee had filed the original Return of Income on 29.9.2009 declaring a total income of Rs.7,01,870. A Notice was issued u/S. 148 of the Act to re-open the assessment on 13.04.2012 for the reasons recorded therein.      3.2. The Assessee filed submissions on 23.04.2012 to the Notice u/S. 148, and objections on 30.04.2012. The objections were rejected on 13.08.2012. A Show Cause Notice was issued on 13.01.2014. The Assessee filed detailed Written Submissions on 22.01.2014.      3.3. The Assessee Company in its Return showed that money aggregating to Rs. 17,60,00,000/- had been received through Share Capital/Premium during the Financial Year 2009-10 from the following companies situated at Mumbai, Kolkatta, and Guwahati:      chart      It is pertinent to mention that the shares had a face value of Rs. 10 per share, were subscribed by the investor companies at Rs. 190 per share.      3.4. The issue before the Assessing Officer (hereinafter referred to as AO) was whether the amount of Rs. 17,60,00,000/-allegedly raised by the Respondent through share capital/premium were genuine transactions or not.      3.5. The Respondent Company – Assessee was called upon to furnish details of the amounts received, and provide evidence to establish the identity of the investor companies, credit-worthiness of the creditors, and genuineness of the transaction.      The AO issued a detailed questionnaire to the Assessee to provide information with respect to the amount of Rs. 17,60,00,000 shown to have been received as Share Capital/Premium from various legal entities.      The AO gave various opportunities to the A.R. of the Assessee to attend the proceedings, and file necessary clarification on the queries raised.      3.6. The Assessee inter alia submitted that the entire Share Capital had been received by the Assessee through normal banking channels by account payee cheques/demand drafts, and produced documents such as income tax return acknowledgments to establish the identity and genuineness of the transaction. It was submitted that, there was no cause to take recourse to Section 68 of the Act, and that the onus on the Assessee Company stood fully discharged.      3.7. The AO had issued summons to the representatives of the investor companies. Despite the summons having been served, nobody appeared on behalf of any of the investor companies. The Department only received submissions through dak, which created a doubt about the identity of the investor companies.      3.8. The AO independently got field enquiries conducted with respect to the identity and credit-worthiness of the investor companies, and to examine the genuineness of the transaction. Enquiries were made at Mumbai, Kolkatta, and Guwahati where these Companies were stated to be situated.      The result of the enquiry is summarised by the A.O. in his Order as under :      chart      The AO recorded that the enquiries at Mumbai revealed that out of the four companies at Mumbai, two companies were found to be non-existent at the address furnished.      With respect to the Kolkata companies, the response came through dak only. However, nobody appeared, nor did they produce their bank statements to substantiate the source of the funds from which the alleged investments were made.      With respect to the Guwahati companies – Ispat Sheet Ltd. and Novelty Traders Ltd., enquiries revealed that they were non-existent at the given address.      3.9. On the basis of the detailed enquiries conducted, the A.O. held that the Assessee had failed to prove the existence of the identity of the investor companies and genuineness of the transaction. The A.O. found that :i. None of the investor-companies which had invested amounts ranging between Rs. 90,00,000 and Rs. 95,00,000 as share capital in the Respondent Company – Assessee during the A.Y. 2009-10, could justify making investment at such a high premium of Rs. 190 for each share, when the face value of the shares was only Rs. 10;      ii. Some of the investor companies were found to be non- existent;      iii. Almost none of the companies produced the bank statements to establish the source of funds for making such a huge investment in the shares, even though they were declaring a very meagre income in their returns;      iv. None of the investor-companies appeared before the A.O., but merely sent a written response through dakThe AO held that the Assessee had failed to discharge the onus by cogent evidence either of the credit worthiness of the so-called investor-companies, or genuineness of the transaction.      As a consequence, the amount of Rs. 17,60,00,000/- was added back to the total income of the Assessee for the assessment year in question.      4. The Respondent Company – Assessee filed an Appeal before the Commissioner of Income Tax (Appeals)-I, New Delhi. Reliance was placed on the decision of the Delhi High Court in CIT v. Lovely Exports Pvt. Ltd (2008) 299 ITR 268 . wherein it was held that :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 cannels;      (3) the creditworthiness or financial strength of the creditor/subscriber;      (4) if relevant details of the address of PAN indetity of the creditor/subscriber alongwith 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 notice; 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. The SLP filed against the judgment was dismissed.The Commissioner of Income Tax (Appeals)-I, New Delhi vide Order dated 11.04.2014 deleted the addition made by the A.O. on the ground that the Respondent had filed confirmations from the investor companies, their Income Tax Return, acknowledgments with PAN numbers, copies of their bank account to show that the entire amount had been paid through normal banking channels, and hence discharged the initial onus under Section 68 of the Act, for establishing the credibility and identity of the shareholders.      5. The Revenue filed an Appeal before the Income Tax Appellate Tribunal (hereinafter referred to as ITAT). The ITAT dismissed the appeal, and confirmed the order of the CIT(A) vide Order dated 16.10.2017 on the ground that the Assessee had discharged their primary onus to establish the identity and credit-worthiness of the investors, especially when the investor companies had filed their returns and were being assessed.      6. The Revenue filed an Appeal bearing I.T.A. No. 244/2018 u/S. 260A of the Act before the Delhi High Court to challenge the order of the Tribunal. The Respondent Company – Assessee did not appear before the High Court. Hence, the matter proceeded ex-parte. The High Court dismissed the Appeal filed by the Revenue vide the Impugned Order dated 26.02.2018, and affirmed the decision of the Tribunal on the ground that the issues raised before it, were urged on facts, and the lower appellate authorities had taken sufficient care to consider the relevant circumstances. Hence no substantial question of law arose for their consideration.      7. Aggrieved by the Order passed by the High Court, the Revenue filed the present S.L.P. (C) No. 29855/2018 before this Court. This Court issued Notice on 12.11.2018 returnable in six weeks. After service was effected on the Respondent Company – Assessee, the matter was listed on 02.01.2019. However, none appeared on behalf of the Respondent Company – Assessee. Consequently, the matter was adjourned for two weeks, and posted on 18.01.2019, when it was ordered that in case the Respondent Company – Assessee chooses not to enter appearance, the matter would be disposed of ex-parte. The matter was thereafter listed again on 23.01.2019, when the following Order was passed:Notice was issued in the matter on 12.11.2018, Office report dated 22.12.2018 indicated that notice was served upon the sole Respondent but none had entered appearance. By order dated 02.01.2019, last opportunity was given to the Respondent and it was indicated that if the Respondent chose not to enter appearance, the matter would be disposed of ex-parte. Even then none has entered appearance.      Having gone through the matter, we give one more opportunity to the Respondent to enter appearance and make submissions with respect to the merits of the matter. If the Respondent still chooses not to appear, the matter shall definitely be decided ex-parteThe Respondent Company – Assessee however remained unrepresented even on the subsequent dates i.e. on 31.01.2019 and 05.02.2019. The matter was finally heard on 05.02.2019, when judgment was reserved.      8. We have heard the Ld. Counsel for the Revenue, and examined the material on record.

Court's reasoning:
Mr. Sanjeev Narayan admittedly being the Power of Attorney holder of the Applicant – M/s. NRA Iron & Steel Pvt. Ltd. for the A.Y. 2009 – 10 was the agent of the Assesse – Company, and hence Notice could be served on him as the agent of the Assessee – Company in this case.The ground taken by Mr. Sanjeev Narayan that even though Notice was served on 13.12.2018, he assumed that theywere ?some Income Tax Return Documents? lacks credibility. It is difficult to accept that the envelope containing the dasti Notice from this Court was considered to be ?some Income Tax Return documents?. The deponent does not at all disclose as to when the envelope containing the dasti Notice was everthe ground urged that the Chartered Accountant was suffering from an advanced stage of cataract, and hence was constrained from informing his clients is again not worthy of credence. The dasti Notice was admittedly served on him on 13.12.2018 at his office, which was much prior to his surgery which he states took place on 04.01.2019. Mr. Narayan had sufficient time to inform the Applicant – Company of the proceedings, prior to hisMr. Narayan appeared before the Income Tax Authorities to represent the Applicant – Company and its sister concerns on various dates prior to his surgery i.e. on 14.12.2018, 21.12.2018, 28.12.2018 and 29.12.2018.Keeping in view the above-mentioned facts and circumstances, this Court is satisfied that the Applicant – Company was duly served through their authorized representative, and were provided sufficient opportunities to appear before this Court, and contest the matter. The Applicant – Company chose to let the matter proceed ex- parte. The grounds for Re-call of the Judgment are devoid of any merit whatsoever.