Source: https://taxkeeda.com/ito-1333-mumbai-vs-vishwa-vyapar-trading-pvt-ltd-on-5-april-2019/
Timestamp: 2019-04-21 02:53:41+00:00

Document:
PER C.N. PRASAD (JM) 1. This appeal is filed by the Revenue against the order of the Learned Commissioner of Income Tax (Appeals)-21, Mumbai [hereinafter in short “Ld.CIT(A)”] dated 07.02.2017 for the Assessment Year 2012-13 in deleting the addition made u/s. 68 of the Act towards unexplained cash credit in respect of share premium received by assessee.
2 ITA NO.2888/MUM/2017 (A.Y: 2012-13) M/s. Viswa Vyapar Trading Pvt. Ltd., information received from the DGIT(Inv.), that the assessee is one of the beneficiary of the accommodation entries provided by various entities being operated by PKJ, the Assessing Officer in the course of the assessment proceedings required the assessee to prove the genuineness, identity and creditworthiness of the creditors who have invested their share capital along with premium in the assessee company and why share capital and premium should not be treated as unexplained cash credit u/s. 68 of the Act. Assessee during the course of the assessment proceedings filed various details of shareholders along with confirmations, ITR acknowledgement and copy of return, declaration from shareholders, audited financial statements of the shareholders, share application forms of the parties. Assessee submitted that all the transactions of share application money and share premium are genuine as the entire amount of share application money has been paid by the concerned parties through their banking channels, all the parties have confirmed the investment in equity shares of the assessee company and given declarations by them. It was therefore contended that all these evidences goes to show the identity, creditworthiness and genuineness of the transactions and therefore no question of treating the share premium received from parties as unexplained cash credit.
4 ITA NO.2888/MUM/2017 (A.Y: 2012-13) M/s. Viswa Vyapar Trading Pvt. Ltd., view of the statement from PKJ and accordingly the Assessing Officer treated the share premium received from the shareholders as unexplained cash credit u/s. 68 of the Act. On appeal the Ld.CIT(A) considering the evidences furnished by the assessee and also the submissions and various decisions deleted the addition made u/s. 68 of the Act.
4. Ld. DR vehemently supported the orders of the Assessing Officer.
He further submitted that, based on the information received by the investigation wing and the submissions recorded in the course of search in the case of PKJ who have categorically stated that they have provided only accommodation entries, the Assessing Officer is quite justified in treating the said transactions as non-genuine and bringing the same to tax u/s. 68 of the Act. He strongly placed reliance on the decision of the Hon’ble Delhi High Court in the case of PCIT v. NDR Promotors Pvt. Ltd., [102 taxmann.com 182].
5. AAEPR2310J 1000000 10,000,000 10,000,000 Nil Ranka Total 11,40,000 27,500,000 10,350,000 1,71,50,000 6. It has been submitted that, share capital and premium been received through banking channels, confirmations from the concerned shareholders were also furnished, ITR acknowledgement and copy of return, declaration from shareholders, audited financial statements of the shareholders, share application forms of shareholders were furnished.
Ld. Counsel for the assessee submitted that the shareholders have responded to the notices issued u/s. 133(6) of the Act by filing confirmations, acknowledgment computation of income in proof of filing return, PAN details, annual report, extracted bank statements reflecting the transactions with the assessee. Ld. Counsel for the assessee further submits that, the Assessing Officer added only the premium received from four shareholders except Smt Lalitha Ranka and the face value of the shareholders subscribed by all these shareholders have been accepted and this was not doubted by the Assessing Officer.
ITA NO.2888/MUM/2017 (A.Y: 2012-13) M/s. Viswa Vyapar Trading Pvt. Ltd., 7. Referring to the Page No. 16 of the Paper Book which is the letter addressed to the Assessing Officer in the course of the assessment proceedings the Ld. Counsel for the assessee submits that assessee furnished certified copy of transaction ledger, date of allotment of shares, copies of Board Resolution, details of ROC compliances to the Assessing Officer, therefore, Ld. Counsel for the assessee submits that all these evidence prove that the transactions are genuine. Ld. Counsel for the assessee referring to Page No. 94 of the Paper Book requested for copies of the statements and opportunity for cross examination of PKJ and the Assessing Officer never provided for any cross examination of the PKJ on whose statements he is relying on.
8. It has been argued that the assessee has established the identity, genuineness and creditworthiness of the shareholders and primary onus cast on the assessee has been discharged. It is further submitted that the Assessing Officer disregarded all the evidences and proofs furnished by the assessee and merely relied on the statements of PKJ which had already retracted by him and only the share premium received from other four parties except the shareholder Smt Lalitha Ranka was considered as unexplained cash credit and treated as addition u/s. 68 of the Act.
7 ITA NO.2888/MUM/2017 (A.Y: 2012-13) M/s. Viswa Vyapar Trading Pvt. Ltd., case of ACIT v. Shreedham Builders in ITA.No. 5589/Mum/2017 dated 22.06.2018. Ld. Counsel for the assessee also further placed reliance on the on the decision of the Hon’ble Jurisdictional High Court in the case of CIT v Gangandeep Infrastructure (P) Ltd., [394 ITR 680] wherein it has been held that, if the department took the view that the amount of share application money had been received from bogus shareholders then it was for the assessing authority to proceed by reopening the assessment of such shareholders and assess them to tax. It was also held that department is not entitled to add the money received by the assessee as its income and as unexplained cash credit.
8 ITA NO.2888/MUM/2017 (A.Y: 2012-13) M/s. Viswa Vyapar Trading Pvt. Ltd., filed various evidences to prove its claim that there cannot be any addition u/s. 68 of the Act.
a. Confirmations b. ITR acknowledgement and copy of return c. declaration from shareholders d. audited financial statements of the shareholders e. share application forms of shareholders f. Certified copy of transaction ledger g. date of allotment of shares h. copies of Board Resolution i. details of ROC compliances 12. In response to notices issued u/s. 133(6) of the Act to the shareholders, they have filed the requisite information as called for by Assessing Officer to substantiate the transactions entered into by them with the assessee. The Assessing Officer completely ignoring all the evidences and proceeded to treat the transactions as non-genuine solely based on the statement said to have been recorded from PKJ. We also notice that the Assessing Officer not provided the statements to the assessee on which he is placing reliance for treating these transactions as non-genuine. We also find that no cross examination has been provided by the Assessing Officer to the assessee on the third party statements on which he is relying on.
“12. I have examined the contentions of the appellant as well as the assessment order and the remand report carefully. A perusal of the assessment order shows that though the conclusions of the investigation wing has been reproduced in the assessment order, there are no specific reference to the appellant company. There are no evidences brought on record to show that there is any cash trail in respect of the amounts received by the appellant company from the investors. Though the AO was specifically asked to furnish specific incriminating evidences, it is noted that the AO has not been able to pin point the specific evidences which would clearly show that the share application money has been received in lieu of cash. In the assessment order the assessing officer has referred to the statement of Shri Pravin Jain recorded at the time of search in which Shri Praveen Jain had confirmed that he was a director in M/s Sumukh Commercial P. Ltd. and that other companies controlled and managed by his associates were M/s Atharva Business P. Ltd., M/s Josh Trading P. Ltd. and M/s Viraj Mercantile P. Ltd. However, in the proceedings, in response to summons u/s 131 Shri Praveen Jain in his letter dated 19.10.2016 has stated that in his personal capacity, no transactions has been carried out with the appellant company. Hence there was no question of his producing any books of accounts in respect of transaction carried out with the appellant company. It was further stated that statement recorded at the time of search was under undue pressure and that such statements had been retracted. Similar was the reply of Shri Dinesh Choudhary.
13. The fact remains that the investor companies are assessed to tax and have filed their returns of income. Summons u/s 131 were served on the investors and therefore it cannot be said that the parties did not exist at their addresses. Copy of bank statement, ledger account, income tax return and audited accounts of the investor companies have been filed before the assessing officer and also in the appellate proceedings.
14. From further details called from the appellant for subsequent period, it is noted that the shares subscribed to by these four investor companies were subsequently sold/transferred to Colorunion International P. Ltd., Idani Trading P. Ltd., Bhuvaneshwari Securities P. Ltd. and Prajan Trading P. Ltd. These new investor companies paid up the balance 75 % of face value and premium i.e. Rs 7,50 towards share capital and Rs 367.50 towards share premium per share. Thus a total of Rs 525,00,000 was paid up by these four investor companies in respect of the partly paid up shares. These further payments were examined and accepted by the assessing officer for AY 2013-14 in the assessment order u/s 143(3) dated 23.3.2016 and no addition u/s 68 was made. The premium thus has been accepted by the same assessing officer in the subsequent year.
genuineness of the transaction has to be established.
“If the share application money is received by the assessee company from alleged bogus shareholders who’s name are given to the Assessing Officer 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”.
“If the share application money is received by -the assessee company from alleged bogus share holders who’s name are given to the Assessing Officer then the department can always proceed against them and if necessary reopen their individual assessments.
11 ITA NO.2888/MUM/2017 (A.Y: 2012-13) M/s. Viswa Vyapar Trading Pvt. Ltd., ought to have found out their details through PAN cards, bank reholders. Thus, the view taken by the Tribunal could not be faulted.
“That in this case the respondent had given the names and addresses of the alleged creditors. It was in the knowledge of the Revenue that the said creditors were income-tax assessee’s. Their index numbers were in the file of the Revenue. The Revenue, apart from issuing notice under section 131 at the instance of the respondent, did not pursue the matter further. The Revenue did not examine the source of income of the said alleged creditors to find out whether they are creditworthy. There was no effort made to pursue the so-called alleged creditors. In those circumstances, the respondent could not do anything further. In the premises, if the Tribunal came to the conclusion that the Respondent had discharged the burden that lay on it, then it could not be said that such a conclusion was unreasonable or perverse or based on no evidence”.
i Hon’ble Delhi High Court in case of Commissioner of Income Tax v/s. Value Capital Services P.Ltd. (2008) 307 ITR 334 (Delhi).
ii Hon’ble Punjab and Haryana High Court in the case of Commissioner of Income Tax v/s. GP International Ltd. (2010) 325 ITR 25 (P&H).
iii. Hon’ble Madras High Court in the case of Commissioner of Income Tax v/s. Electro Polychem Ltd (2007) 294 ITR 661 (Mad).
iv. Hon’ble Rajasthan High Court in case of Commissioner of Income Tax v/s. AKJ Granites P.Ltd. (2008) 301 ITR 298 (Raj.) v. Hon’ble Delhi High Court in case of Commissioner of Income Tax v/s. Oasis Hospitalities (Pvt.) Ltd. (2011) 51 DTR 74 (Delhi).
Sec. 69 places the burden of proof on the tax payer to explain the nature and source of any credit found in the books. But, when assessee proves or submit the basic information like identification, genuineness of transactions and creditworthiness of the creditors, onus is discharged by him and if Assessing Officer disbelieve the genuineness of the same, he has to prove otherwise, merely, doubting or pointing out some discrepancy is not the foundation for discarding the genuineness of the deposit or share money or substance of the matter, held by the Hon’ble Supreme Court in the case of CIT v. Gujarat Heavy Chemicals Ltd. (2002) 256 ITR 795 (SC).
18. Further, Hon’ble jurisdictional ITAT in the case of ITO-10(2)(3) vs. M/s J.J.
“24.4 In this case also no cross examination was allowed to the assessee. Therefore, adverse inference cannot be drawn only on the statement of Shri MukeshChoksi. We further noted that all other necessary details have been filed before AG. Amounts were received through account payee cheque. Both the companies are assessed to tax in Mumbai. Confirmation along with copies of share certificate, bank statement, memorandum of articles, copy of share application money, audited balance sheet and P&L a/c of these parties were filed. These are similar details as were filed in case of three other companies for asst. yr. 2005-06. We have already disposed of the appeal for asst. yr. 2005-06 whereby we have held that the assessee has discharged its onus by filing necessary details and further have relied on the decisions of Hon’ble Supreme Court and Hon’ble Delhi High Court alongwith various other decisions of Tribunal and have held that addition cannot be made under S. 68 in the hands of the assessee company. Therefore, in view of the same reasoning, we cancel the entire addition made and confirmed by the lower authorities here also.
15. None of the above findings have been controverted with evidences.
16. The Hon’ble Delhi High Court in the case of MOD Creations Pvt.
“13. In the light of the above principle, let us examine as to what the authorities below found vis-à-vis the genuineness of the transactions and the creditworthiness of their creditors.
ITA NO.2888/MUM/2017 (A.Y: 2012-13) M/s. Viswa Vyapar Trading Pvt. Ltd., (i) The fact that there was sufficient balance available with the creditors when cheques have been issued to the assessee company was established.
(ii) It was also established that the funds available at the relevant point in time were not infused into the bank accounts of the creditors by way of cash but were in fact credited to their account again by way of cheques largely on account of commissions received by them save and except two transactions of ` 1 lac each received by two creditors from verifiable donors.
(iii) The bank accounts as well as returns filed by the creditors who were assessable to tax alongwith their PANs‟ were also available with the A.O.
(iv) The assessee in turn had received the monies by way of cheques in respect of which credits were made in their books of accounts.
(v) The creditors had also placed on record receipts of commission as well as the gift deeds in respect of gifts made to the donors.
(vi) The identity and addresses of sub creditors was also available.
14. With this material on record in our view as far as the assessee was concerned, it had discharged initial onus placed on it. In the event the revenue still had a doubt with regard to the genuineness of the transactions in issue, or as regards the credit worthiness of the creditors, it would have had to discharge the onus which had shifted on to it. A bald assertion by the A.O. that the credits were a circular route adopted by the assessee to plough back its own undisclosed income into its accounts, can be of no avail. The revenue was required to prove this allegation. An allegation by itself which is based on assumption will not pass muster in law. The revenue would be required to bridge the gap between the suspicions and proof in order to bring home this allegation. The ITAT, in our view, without adverting to the aforementioned principle laid stress on the fact that despite opportunities, the assessee and/or the creditors had not proved the genuineness of the transaction. Based on this the ITAT construed the intentions of the assessee as being malafide. In our view the ITAT ought to have analyzed the material rather than be burdened by the fact that some of the creditors had chosen not to make a personal appearance before the A.O. If the A.O. had any doubt about the material placed on record, which was largely bank statements of the creditors and their income tax returns, it could gather the necessary information from the sources to which the said information was attributable to. No such exercise had been conducted by the A.O. In any event what both the A.O. and the ITAT lost track of was that it was dealing with the assessment of the company, i.e., the recipient of the loan and not that of its directors and shareholders or that of the sub- creditors. If it had any doubts with regard to their credit worthiness, the revenue could always bring it to tax in the hands of the creditors and/or sub-creditors. [See CIT Vs. Divine Leasing & Finance Ltd., (2008) 299 ITR 268 (Delhi) and CIT Vs. M/s. Lovely Exports (P) Ltd. (2008) 216 CTR 195 (SC)].
“6.2 HELD: – I have carefully perused the Assessment Order, written arguments of the appellant, counter arguments of the ld. AR and have considered the evidences on record and assessment record called for during the appellate proceedings. I find that eh Ld. Assessing Officer has merely doubted the loans taken by the appellant from (1) Mohit International amount to ₹.10,00,000/- and (2) Natsha Enterprises amounting to Rs.10,00,000/- aggregating at Rs. 20,00,000/-. I find force in the argument of the Ld. AR. It is very important to mention here that the appellant has discharged his onus and the Ld. Assessing offices has not proved otherwise than doubting the loans. Apparently, Ld. Assessing officer has not substantiated his presumption, his doubt with any verifiable documents. He has merely described the statement of Shri. Pravin Kumar Jain and as communicated by the investigation wing. Thus, it is very evident that the Ld. Assessing officer has not made any independent enquiry in order to establish the in-genuineness of loans if any, with contrary evidence. The statements referred to and relied upon by the assessing officer have never been disclosed to the appellant opportunity for cross examination was also not given, hence such statement could not be utilized against the appellant without giving full and proper opportunity of cross examination as has been held vide Mahesh Gulabral Joshi Vs. CIT(A) (2005) 95 lTD 300 Mumbai ITAT and Hon’ble Supreme Court decision in the case of KishanchandChellaram Vs. CIT (125 ITR 713 (SC)).
6.3. Further during the course of assessment proceedings, the appellant has produced copy of a comprehensive Affidavit of Shri. Pravin Kumar Jain dated 25.04.2014 retracting, the statements made before the Investigation Wing. Assessing officer has not given opportunity to the appellant for cross examination of Shri Pravin Kumar Jain. Going by the discussion contained above, it is obvious that the inference drawn by the Assessing officer against the appellant is not sustainable for the simple reason that the principles of natural justice have not been followed. First and foremost, the appellant has not been given any access to the material (reports, intimations, statement etc.) used against it. Secondly, by withholding the said material the assessing officer has denied to the appellant an opportunity to refute the evidence by cross examining the witnesses, statements, if any made by whom, incriminated the appellant. On both counts, the impugned assessment order fails squarely.
15 ITA NO.2888/MUM/2017 (A.Y: 2012-13) M/s. Viswa Vyapar Trading Pvt. Ltd., summoning them. However as seen from the assessment order, he did not do any such thing. Further, if the assessing officer was satisfied with what had been given to him by the appellant, he was duty bound to specify what more material he wanted from the appellant to furnish. The assessing officer never asked for any further material. This leads to the inescapable conclusion that the Assessing Officer could not think of any further material to ask for and proceeded to reject the appellant’s claims, relying upon the information/ material, which he never even brought to the notice of the appellant for any rebuttal. The unequivocal conclusion is that all the three ingredients having been satisfied.
6.5. The AO did not consider the evidences provided by the appellant as satisfactory. According to him, submissions and statements given by Sh. Pravin Kumar Jain confirmed that they had issued only bogus bills/accommodation entries to the interested parties. However, he did not bring out the relevant extract from the statement where they have admitted that they have given accommodation entries to the appellant. Moreover, he had just referred to the statement of Shri Pravin Kumar Jain Group without giving specific details as to who is the person who is giving the statement and what exactly did he admit. Instead of stating that the party did not exist, he should have summoned the party and recorded the statement. As the AO, has not brought anything in record to show that the evidences filed by the appellant are false, the loan received and repaid by the appellant cannot be treated as bogus. The addition cannot be made merely on the basis of suspicion, surmises and conjectures. There has to be some concrete evidence whether direct or circumstantial. In this case, no such evidence is present. On the contrary, the appellant is showing from the record that he has received loan through account payee cheques from above TWO PARTIES. He has shown that the loans have been repaid through account payee cheque and as long as he was holding the loan, he has paid the interest after deducting TDS. With regard to the disallowance of interest on loans taken from afore-mentioned parties, the appellant submitted that the AO has also ignored the fact that the said interest expenses were incurred wholly, exclusively & necessarily for business of the Appellant. The interest paid on loans was subject to TDS. During the present proceedings, the appellant also submitted the details of the TDS made on the loans wherever it is applicable and the details of amount of TDS paid into the Government account. In the appellant case the addition made towards the said loans is deleted after discussing the issue in detail in the above paragraphs.
6.6. Thus, above discussion and various explanations leads to the conclusions that the Ld. Assessing officer has made addition of ₹.20,00,000/- and interest given to the parties, disregarding the evidence on record and without discharging his onus and without establishing anything to the contrary to the submissions of the appellant and without verifying the bank account, existence of entities who have extended loans to the appellant and without making fruitful investigation. Therefore, the Assessing officer is directed to delete the addition made of Rs.20,00,000/- on account of unexplained unsecured loans and ₹.2,35,246/- made on account interest on the same. The grounds of appeal are allowed.
18. In the case ACIT v. M/s. H.K. Pujara Builders in ITA.No.
6. We have heard the rival submissions, perused the orders of the authorities below. Assessing Officer made addition by placing reliance merely on the statements of Shri Praveen Kumar Jain Group and Shri Bhanwarlal Jain Group which were recorded u/s. 132(4) of the Act. No independent enquiry was carried out by the Assessing Officer, he has not brought any corroborative evidence to substantiate that the transactions are non-genuine. Assessee provided various evidences to establish that the transactions are genuine, creditors are identifiable and credit worthiness is proved. Following information is furnished by the assessee.
(1) Confirmation of A/c. by the parties.
(2) Income tax returns of the parties for A.Y.2012-13.
(3) Bank Statements of the parties showing the loan transactions.
“5.9. From the assessment order, it transpires that the AO has solely relied upon the statement of Mr. Pravin Kumar Jain and did not carry out any worthwhile independent inquiry in the matter. He has totally ignored the documentary evidences submitted by the appellant. The AO in the assessment order has admitted existence of these details. The AO has not pointed out any defect in the above mentioned documentary evidences submitted during assessment proceedings. Without pointing out any lacuna in the evidences submitted by the appellant, the sources and the genuineness of transaction cannot be doubted. Once evidences related to a transaction is submitted before the A.O., the onus shifts on him to prove these as non-genuine. The A.O. has not discharged the onus casted on him. In my opinion, merely based on the statement of a third person without any corroborative evidence will not make the loan transactions, in question, as accommodation entries. As such, in the absence of any contrary evidence placed on record, the transaction cannot be treated as accommodation entries.
conclude that all transactions are accommodation entries.
of Shaf Broadcast Pvt. Ltd Vs. ACIT, Cir-9(3), Mumbai in ITA No.l819/Mum/2012.
the form of share application money.
1. Sec. 68 can be invoked when there is a credit of amounts in the books maintained by the assessee, such credit is a sum of money during the previous year and either the assessee offers no explanation about the nature and source of such credits or the explanation by the assessee in the opinion of the AO is not satisfactory.
2. The opinion of the AO for not accepting the explanation offered by the assessee as not satisfactory is required to be formed objectively with reference to the material on record.
3. Courts are of the firm view that the evidence produced by the assessee cannot be brushed aside in a casual manner.
4. The onus of proof is not static. The initial burden lies on the assessee to establish the identity and the credit worthiness of the creditor as well as the genuineness of transaction.
5. The identity of creditors an be established by either furnishing their PANs or assessment orders. The genuineness of the transaction can be proved if it was shown that the money was received by Account payee Cheque. Creditworthiness of the lender can be established by attending circumstances.
18 ITA NO.2888/MUM/2017 (A.Y: 2012-13) M/s. Viswa Vyapar Trading Pvt. Ltd., case under consideration, it can be seen that the identity of the creditors has been established as they are having PAN and they are regularly filing return of income. The genuineness of the transaction is established from the fact that both the acceptance and repayment of loan has been through banking channels. The creditworthiness of the lenders can be established from the statements. In the assessment order, the A.O. did not at all discuss the merit of submission made by the appellant and casually brushed aside the details filed by the appellant. Further, the appellant has stated that he had furnished all the relevant details during the course of the assessment proceedings and accordingly had duly discharged its onus by furnishing the identity and address of the parties. Further, the source of receipt through banking channels to substantiate the genuineness of the credits reflected in its books of Account.
“68. Where any sum is found credited in the books of an assesses 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.
5.15. The phraseology of section 68 is clear. The Legislature has laid down that in the absence of a satisfactory explanation, the unexplained cash credit may be charged to income-tax as the income of the assessee of that previous year. In this, case the legislative mandate is not in terms of the words “shall be charged to income-tax as the income of the assessee of that previous year”. The Supreme Court while interpreting similar phraseology used in section 69 has held that in creating the legal fiction the phraseology employs the word “may” and not “shall”. Thus the unsatisfactoriness of the explanation does not and need not automatically result in deeming the amount credited in the books as the income of the assessee as held by the Supreme Court in the case of CIT v. Smt. P. K. Noorjahan  237 ITR 570.
a. Copy of acknowledgment of income tax return filed for A.Y. 2007-08.
the dummy Director of some of the companies of Shri Praveen Kumar Jam.
the assessee has duly discharged his onus as laid down on it u/s. 68 of the I.T.Act.
u/s. 68 can be made.
CIT vs. Jansampark Advertising & Marketing Pvt. Ltd. in ITA.No.525/2014.
20 ITA NO.2888/MUM/2017 (A.Y: 2012-13) M/s. Viswa Vyapar Trading Pvt. Ltd., could not discharge the onus as laid down by section 68 of the Act. Similarly, in the case of CIT vs. Jansampark Advertising & Marketing Pvt. Ltd. (supra), the additions have been made u/s. 68 in respect of the share capital received by the assessee from various companies and during the course of investigation, it was found that the share capital has been received from three entry operators, who are allegedly in the business of providing accommodation entries. Notices issued u/s. 131 to these parties were returned undelivered by the postal authorities with the remark “left”/ “no such person”. Under these circumstances, the Hon’ble High Court took a view that the assessee failed to discharge the burden to prove the credit worthiness as well as the genuineness of the transactions.
10. But in the impugned case, we noted that the assessee has submitted all the evidences including the confirmation of the creditors. This is not a case where the creditors have not given confirmations rather they have duly confirmed to giving loan to the assessee, the loans were received and returned through banking channels. The assessee has also submitted copies of bank accounts. The lender has not deposited cash into bank account. The assessee has duly discharged the onus with regard to identity of the lender, credit worthiness of the party and all supporting evidences as required u/s. 68 of the I.T.Act. Therefore, in our opinion the decisions relied upon by the DR does not assist the Revenue to the facts of the present case.
A plain reading of the assessment order demonstrates that the AO merely went by the Investigation done by the office of D G. I T (Investigation), Mumbai. No enquiries or investigation was carried out. No evidence to controvert the claims of the Assessee was brought on the record by the AO. Even the statement of Shri Praveen Kumar was supplied. Nothing is on record about the result If investigations done by DGIT (Inv), Mumbai. The papers filed by the assessee do demonstrate the identity, creditworthiness and genuineness of the transaction. The addition is made merely on surmises and conjectures.
In view of the above, we hold that the addition made under section 68 of the Act is bad in law. We noted that in the said case also loan had been received from Javda India Impex Ltd.
12. Being consistent with the view taken by this co-ordinate Bench in the case of Komal Agrotech Pvt. Ltd. (supra), and in view of the facts and circumstances, we do not find any illegality or infirmity in the orders of the CIT(A). It is accordingly, confirmed for both the years under appeal.
20. In the case of M/s. Shree Laxmi Estate Pvt ltd., v. ITO in ITA.No.
5954/Mum/2016 and M/s. Shree Laxmi Developers v. ITO in ITA.No.
21 ITA NO.2888/MUM/2017 (A.Y: 2012-13) M/s. Viswa Vyapar Trading Pvt. Ltd., discharged his initial burden the burden shifts to the Assessing Officer to prove otherwise. The Coordinate Bench considered the submissions as well as the material placed before the lower authorities concluded that when once the assessee furnished all the details in respect of the loan transactions assessee has discharged its initial burden and the burden shifts to the assessee. It was held that no addition can be made only on the basis of information received from the investigation wing without there being any evidences to disprove the loan transactions from the creditors.
“4. The first issue that came up for our consideration is addition made by the AO towards unsecured loan u/s 68 of the Act. The AO made addition towards unsecured loans alongwith interest thereon received from Josh Trading Company Pvt Ltd and Viraj Mercantile Pvt Ltd on the ground that these are bogus accommodation entries received from group companies of Shri Pravinkumar Jain. According to the AO, the assessee is the beneficiary of accommodation entries provided by Shri Pravinkumar Jain from his bogus companies. The AO further observed that though the assessee has furnished details of identity, failed to prove genuineness of transactions and creditworthiness of the parties in the backdrop of clear findings of Investigation Wing that Shri Pravinkumar Jain has admitted that he was indulging in providing accommodation entries. This fact has been further confirmed by Shri Dinesh Choudhary, broker involved in arranging accommodation entries with Shri Pravinkumar Jain, who stated that Shri Pravinkumar Jain is indulging in providing accommodation entries, therefore, the AO opined that unsecured loans stated to be received from those companies are unexplained credit and hence made addition u/s 68 of the Act. It is the contention of the assessee that loans received from Josh Trading Company Pvt Ltd and Viraj Mercantile Pvt Ltd are supported by valid documents. The assessee further submitted that it has furnished confirmation letters alongwith copies of their bank statement and acknowledgement of IT returns showing the above transactions. The assessee further contended that in response to notices u/s 133(6) issued by AO, the above parties replied alongwith documents mentioned in the notice, therefore, there is no reason for the AO to doubt the transactions only on the basis of information received from Investigation Wing that too, without providing any opportunity of cross examination of the parties. In this regard, he relied upon plethora of judgements including the judgement of Hon’ble Bombay High Court in the case of CIT vs Gagandeep Infrastructure Pvt Ltd 394 ITR 680 (Bom) and Hon’ble Supreme Court in the case of Lovely Exports Pvt Ltd vs CIT 216 CTR 295(SC).
evidences including their financial statements, bank statements and IT returns.
Trading Company Pvt Ltd and Viraj Mercantile Pvt Ltd are active in MCA website.
unexplained credits u/s 68 of the Act.
“8. The next issue relates to the addition of loan of ₹.10.00 Lakhs taken from M/s. Falak Trading company P. Ltd, a company belonging to Praveen Kumar Jain who has confessed that he had provided only accommodation entries. A perusal of the record would show that the AO had issued notices u/s. 133(6) of the Act to the above said company and it has also furnished all the details, viz., confirmation, copies of financial statements, copies of income tax returns filed by it etc. and thus has confirmed the loan transactions. Thus, we notice that the assessee has also furnished the relevant details to prove the cash credits and the same has also been confirmed by the lender also in response to the notice issued by the AO U/s. 133(6) of the Act.
22. In the case on hand also, the assessee has discharged its initial onus of proving the identity, genuineness and creditworthiness of the creditors by providing all necessary details and thus the assessee has discharged identity, genuineness and creditworthiness of the parties.
filed by the assessee and provided an opportunity to the AO to remand proceedings.
“13. There cannot be two opinions on the aspect 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 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 detail 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 do cuments. In the case of private placement the legal regime would not be the same. A delicate balance must be maintained while walking the tightrope of sections 68 and 69 of the IT 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, nay duty-bound, to carry out thorough investigations. But if the Assessing Officer fails to unearth any wrong or illegal dealings, he cannot obdurately adher e to his suspicions and treat the subscribed capital as the undisclosed income of the Company.
25 ITA NO.2888/MUM/2017 (A.Y: 2012-13) M/s. Viswa Vyapar Trading Pvt. Ltd., 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 assess cc nor should the Assessing Officer take such repudiation at face value and construe it, without more, against the assess cc.
(7) 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.
“5. While setting aside the order of the Commissioner of Income- tax (Appeals), the Tribunal relied upon two decisions of this court, namely CIT v. Stellar Investment Ltd. [1991J 192 ITR 287 and a Full Bench decision in CIT v. Sophia Finance Ltd  205 ITR 98. Several oth er dec is ions hav e been rend e red by this Cour t following the above two decisions. The principle that has been laid down by the various decisions rendered by this Court from time to ti/ne is that if the existence of the applicant is proved, normally no further inquiry is necessary.
6. Learned counsel for the Revenue submits that the creditworthiness of the applicants can nevertheless be examined by the Assessing Officer. It is quite obvious that is very difficult for the assessee to show the credit-worthiness of strangers. If the Revenue has any doubt with regard to their ability to make the investment. Their returns may be reopened by the Department.
6. In any case what is clinching is the additional burden on the Revenue. It must show that even if the applicant does not have the means to make the investment, the investment made by the applicant actually emanated from the coffers of the assessee so as to enable it to be treated as the undisclosed income of the assess cc. This has not been done in so far as the present case is concerned and that has been noted by the Tribunal also.
7. Under the circumstances, we are of the view that the Tribunal has not committed any error in deleting the addition.
C’IT(A) had not considered the matter in the right perspective.
which has not been done by him.
AO relies on the on the statement of the witness for making addition.
27 ITA NO.2888/MUM/2017 (A.Y: 2012-13) M/s. Viswa Vyapar Trading Pvt. Ltd., v. Pradeep’ Kumar Gupta and- Vijay Gupta (2008) 303 ITR 95 (Del) wherein it was held that reopening of assessment is not permissible on mere adverse statements from others. Such statement by itself does not constitute information, unless the Assessing Of has made enquiries thereon and inferred understatement or Income. lain therefore inclined to agree with the submissions made on behalf of the appellant to the effect that the information, if any, gathered behind the back of the assessee without being subjected to cross examination cannot be fully admitted as evidence against the assessee.
The ITAT confirmed the opinion of the CIT(A).
It is argued by the Revenue that the ITAT should have taken appropriate steps and remitted the matter, not merely confirming the CIT(A)’s opinion since the Investigation Wing’s report confirmed unequivocally that the assessee was beneficiary to bogus transactions wh e r e b y t h e g e n u i n e n e s s o f i d e n t i t y o f t h e s h a r e h o l d e r s , t h e genuineness and identity of the share applicants and the genuineness of transactions was suspect.
24. Hon’ble Rajasthan High Court in Supertech Diamond Tools (P) Ltd.
commission for getting accommodation entries.
of the accommodation entry providers and hence proceeded to make the addition.
29 ITA NO.2888/MUM/2017 (A.Y: 2012-13) M/s. Viswa Vyapar Trading Pvt. Ltd., affidavits. The ld. A/R’s contention is that the directors of the purchaser companies have fully replied against the ld. A.O’s letter u/s 133(6). There is no question to retract against anything which is not mentioned in the letter u/s 133(6). Therefore, the rejection of confirmations and affidavits filed by the directors of the purchasing companies was not justified and the various case laws relied by him is still applicable in this case and binding on the department. Moreover the ld. A/R also submits that the statement made by third party on the back of the assessee can not be utilized against him without giving him opportunity of confrontation or cross-examination of such persons making such statement. This opportunity was not provided by the ld. A.O. Under such circumstances the addition on account of receipt of money for regular and premium sales of shares can not be sustained. Considering the facts and circumstances of the case, particularly that the ld. A.O could not bring any material to disprove the genuineness of the confirmations and affidavits and following the case laws mentioned supra, particularly the recent decision of Supreme Court in the case of CIT V/s Lovely Exports Pvt. Ltd (2008) 6 DJR SC 308 and other decisions of jurisdictional High Court and Jurisdictional ITAT, I hold that addition of Rs.79,80,000/- on account of receipt for sales of regular shares and premium shares of the company as unexplained share capital is not justified and the same is deleted. The A.O. is directed to take necessary action against the purchaser companies for such investment in purchase of shares.
68. After considering the submissions and various case laws, it is seen that the submission of ld. CIT D/R is not helpful to the case of revenue. The Hon’ble Supreme Court in case of Lovely Exports Pvt. Ltd. had clearly held that even if the shareholders are bogus in that case no addition can be made in the hands of the company but AO can reopen the cases of shareholders. The contention of ld. CIT D/R that in case of Lovely Exports Pvt. Ltd. only bogus share application was found but the investors were genuine. However, in the present case even there are no genuine investors as all the companies are fabricated just to provide accommodation entries only as admitted by one of the Directors i.e. Shri Pradeep Jindal. Whether those companies were fictitious or bogus, the moot question here is that whether the assessee company had received share application money or not. It is seen that share capital was received through account payee cheques along with premium amount totalling to Rs.79,80,000/- from five private limited companies i.e. M/s. Sanraj Associates Pvt Ltd., M/s. Fortress Impex Pvt. Ltd., M/s. Sumit Overseas Pvt. Ltd., M/s. Pushpanjali Caps Pvt. Ltd. and M/s. B.P. Builtech Pvt. Ltd. all these companies are situated at Delhi. All these companies are assessed to tax and they are registered under the Companies Act. Return of allotment of shares in prescribed form No.2 to the Registrar of Companies was also filed before Assessing Officer as well as before ld.
made by those five companies through regular banking channel.
company for such investment in purchase of shares.
source of buying the shares in the company.
ITA NO.2888/MUM/2017 (A.Y: 2012-13) M/s. Viswa Vyapar Trading Pvt. Ltd., 10.1 The contention of ld. CIT D/R that cash was deposited in the account of the respective five companies before issuing cheque to the assessee company for allotting the shares. Therefore, there is every likelihood that cash deposited in the account of those companies was belonging to assessee company for issuing cheque under the garb of issuing shares. In our view, this contention is without any evidence and if the cash deposited in the account of those companies then onus lies on those companies to prove that from which source the cash has been deposited in their account. Therefore, the AO should examine the case of those five companies instead of making addition in the hands of the assessee- company. The ld. CIT (A) has already directed, as stated above, to take action against the respective shareholders and, therefore, in our view, the ld. CIT(A) was justified in allowing the issue in favour of the assessee. Accordingly, without going into detail further, we are of the considered view that ld. CIT (A) was justified in allowing the claim of the assessee as the issue is squarely covered by the decision of Hon’ble Jurisdictional High Court as well as by the decisions of Hon’ble Supreme Court mentioned above. Accordingly, we confirm the findings of ld. CIT (A) on this issue.
law is involved in this appeal.
findings recorded by the AO.
12. The ratio of the decisions aforesaid directly applies to the present case too. Herein, as noticed, the appellate authorities have returned the findings of fact in favour of the assessee after due appreciation of the evidence on record, on relevant considerations, and on sound reasonings. These findings have neither been shown suffering from any perversity nor appear absurd nor are of such nature that cannot be reached at all.
13. Needless to reiterate the law laid down by the Courts consistently that the department is free to proceed in relation to the individual investor in accordance with law but the amount of increased share capital cannot be assessed at the hands of the assessee company itself.
“6.3 Whether on the facts and in the circumstances of the case and in law, orders of the Tribunal was perverse in deleting the addition of Rs.
33 ITA NO.2888/MUM/2017 (A.Y: 2012-13) M/s. Viswa Vyapar Trading Pvt. Ltd., evidence produced by the Respondent Company while ignoring the key factor that these entities were not traceable at their given addresses. 6.4 Whether on the facts and in the circumstances of the case and in law, the Tribunal erred in not appreciating the observations made by the Delhi High Court in Nova Promoters and Finlease Pvt. Ltd. 18 Taxman.com 217 wherein the Court has observed that cases of this type cannot be decided only on the basis of documentary evidences above and there is need to take into account the surrounding circumstances.
thereafter has added the amount under Section 68 of the Income Tax Act.
consider the circumstances and the facts which are relevant.
of CIT v. Lovely Exports (P.) Ltd.  216 CTR 195.
4. We have considered the submissions.
was deposited in their account.
34 ITA NO.2888/MUM/2017 (A.Y: 2012-13) M/s. Viswa Vyapar Trading Pvt. Ltd., Assessing Officer would not negate the case of the Assessee. The judgment in case of Gagandeep Infrastructure (P.) Ltd. (supra) would be applicable in the facts and circumstances of the present case.
“This Appeal under Section 260-A of the Income Tax Act, 1961 (the Act) challenges the order dated 23rd April, 2014 passed by the Income Tax Appellate Tribunal (the Tribunal). The impugned order is in respect of Assessment Year 2008-09.
“(i) Whether on the facts and in the circumstances of the case and in law, the Tribunal was justified in deleting the addition of Rs.7,53,50,000/- under Section 68 of the Act being share capital/share premium received during the year when the Assessing Officer held the same as unexplained cash credit?
(a) During the previous relevant to the subject Assessment Year the respondent-assessee had increased its share capital from Rs.2,50,000/- to Rs.83.75 lakhs. During the assessment proceedings, the Assessing Officer noticed that the respondent had collected share premium to the extent of Rs.6.69 crores. Consequently he called upon the respondent to justify the charging of share premium at Rs.190/- per share. The respondent furnished the list of its shareholders, copy of the share application form, copy of share certificate and Form no.2 filed with the Registrar of Companies. The justification for charging share premium was on the basis of the future prospects of the business of the respondent-assessee. The Assessing Officer did not accept the explanation/justification of the respondent and invoked Section 68 of the Act to treat the amount of Rs.7.53 crores i.e. the aggregate of the issue price and the premium on the shares issued as unexplained cash credit within the meaning of Section 68 of the Act.
35 ITA NO.2888/MUM/2017 (A.Y: 2012-13) M/s. Viswa Vyapar Trading Pvt. Ltd., by the Revenue. Finally he relied upon the decision of the Apex Court in CIT v. Lovely Exports (P.) Ltd.  216 CTR 195 to hold that if the amounts have been subscribed by bogus shareholders it is for the Revenue to proceed against such shareholders. Therefore it held the Assessing Officer was not justified in adding the amount of share capital subscription including the share premium as unexplained credit under Section 68 of the Act.
(c) Being aggrieved, the Revenue carried the issue in the appeal to the Tribunal. The impugned order of the Tribunal holds that the respondent- assessee had established the identity, genuineness and capacity of the shareholders who had subscribed to its shares. The identity was established by the very fact that the detailed names, addresses of the shareholders, PAN numbers, bank details and confirmatory letters were filed. The genuineness of the transaction was established by filing a copy of share application form, the form filed with the Registrar of Companies and as also bank details of the shareholders and their confirmations which would indicate both the genuineness as also the capacity of the shareholders to subscribe to the shares. Further the Tribunal while upholding the finding of CIT(A) also that the amount received on issue of share capital alongwith the premium received thereon, would be on capital receipt and not in the revenue field. Further reliance was also placed upon the decision of Apex Court in Lovely Exports (P.) Ltd. (supra) to uphold the finding of the CIT(A) and dismissing the Revenue’s appeal.
(d) Mr. Suresh Kumar, the learned counsel appearing for the Revenue contends that proviso to Section 68 of the Act which was introduced with effect from 1st April, 2013 would apply in the facts of the present case even for A.Y. 2008-09. The basis of the above submission is that the de hors the proviso also the requirements as set out therein would have to be satisfied.
ITA NO.2888/MUM/2017 (A.Y: 2012-13) M/s. Viswa Vyapar Trading Pvt. Ltd., amended Section 68 of the Act has held that where the Revenue urges that the amount of share application money has been received from bogus shareholders then it is for the Income Tax Officer to proceed by reopening the assessment of such shareholders and assessing them to tax in accordance with law. It does not entitle the Revenue to add the same to the assessee’s income as unexplained cash credit.
4. (a) Admit the substantial question of law at (ii) above.
(b) The issue arising in question no. (ii) is essentially whether application of Rule 8D(2)(iii) of the Income Tax Act Rules would permit the Revenue to disallow expenditure not claimed i.e. much larger than the expenditure / debited in earning its total income. The Counsel inform us that there is no decision on this issue of any Court available and it would affect a large number of cases where similar issues arise. Therefore, this issue would require an early determination. In the above view, at the request of the Counsel, the appeal is kept for hearing on 17th April, 2017 at 3.00 p.m., subject to overnight part-heard.
5. Registry is directed to communicate a copy of this order to the Tribunal. This would enable the Tribunal to keep the papers and proceedings relating to the present appeal available, to be produced when sought for by the Court.
27. In so far as the decision of the Hon’ble Delhi High Court in the case of PCIT v. NDR Promotors Pvt. Ltd., (supra), we are of the view that this decision is distinguishable on facts. We find that in the case of ITO v. M/s.
28. Since facts are different in the case of PCIT v. NDR Promotors Pvt.
Ltd. (supra), we are of the view that this decision has no application to the present assessee’s case.
29. In view of what is discussed above and in view of the evidences furnished by the assessee, we are of the view that the assessee has discharged its onus of proving the identity, genuineness and creditworthiness of the creditors/shareholders and fulfilled the requirement of ingredients of section 68 of the Act. Thus, the addition made u/s. 68 of the Act which is purely based on the investigation reports and statements recorded from PKJ and whose statements were not provided to the assessee for rebuttal and no cross examination was provided to assessee and therefore is in violation of principles of natural justice. Further we observe that no sort of enquiries were made by the Assessing Officer to disprove the evidences furnished by the assessee.
38 ITA NO.2888/MUM/2017 (A.Y: 2012-13) M/s. Viswa Vyapar Trading Pvt. Ltd., premium as non-genuine and bring to tax as unexplained cash credit u/s.
68 of the Act. In the circumstances, the addition cannot be sustained.
Thus, we direct the Assessing Officer to delete the addition made u/s. 68 of the Act.
30. In the result, appeal of the Revenue is dismissed.

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