Ridhi Sidhi Shares (P) Ltd., Aryaman vs DCIT

B.R.R. Kumar, (A.M)

Following grounds have been raised in this appeal :

"1) For that the Order passed by the Commissioner of Income Tax (Appeals) is, disputed, arbitrary and bad in law.

2) For that the Ld. CIT(A) erred in confirming the addition of Rs. 1,75,00,000/- as unexplained cash credit u/s 68 of the Act on account of Share Application Money in the name of Sky Lux Cityscapes (P) Ltd.

3) For that the Assessing Officer failed to appreciate the fact that the assessee submitted all the relevant details in the form of Confirmations, Bank Statements & Financial Statements of M/s Sky Lux Cityscapes Private Limited for verification of the assessing officer.

4) Further the Assessing Officer failed to appreciate the fact that Share Application Money were all received from corporate entity by account payee cheques which proves the identity, credit worthiness and genuineness of the amount so received.

5) For that the Appellant craves, leave to amend, add or delete any of the ground(s) mentioned above at any time before the final hearing of the Appeal."

During the hearing before us, no one appeared nor any letter of adjournment was filed on behalf of the assessee. From the records, it is seen that the case has been filed 09.03.2016 and regular adjournments have been given on various occasions. A notice has been issued to the assessee by the Tribunal on 29.04.2019 by RPAD intimating the date of hearing on 12.06.2019. On the designated date nobody appeared on behalf of the assessee. Hence, the matter is being adjudicated based on the materials available on record.

The ld. DR relied on the order of the ld. CIT(A) and filed his arguments in the form of written submissions before us which are as under :

The assessee received Rs. 4,50,00,000 as share application money. No details were filed before the AO, hence entire amount was added back u/s 68 of IT Act.

The Ld CIT(A) allowed relief of Rs. 2.75 cr since it was received in earlier years.

Addition of Rs 1.75 cr was confirmed since the assessee has filed to file copy of ITR as well as affidavit of the person from whom this amount was received. Since the assessee has not discharged its onus, the amount has rightly been added in the hands of the assessee.

In the above case, it is humbly submitted that the following decisions may kindly be considered with regard to addition made u/s 68 of I.T. Act:

PCIT Vs NDR PROMOTERS PVT LTD I2019-TIQL-172-HC-DEL-IT) where Hon'ble Delhi High Court held that a case involving make-believe paperwork to camouflage the bogus nature of the transactions is to be treated as unexplained credit u/s 68

2 PCIT Vs Bikram Singh 120171 85 taxmann.com 104 (Delhi)/r2017l 250 Taxman 273 (Delhi)/r2017l 399 ITR 407 (Delhi) (Copy Enclosed) where Hon'ble Delhi High Court held that even if a transaction of loan is made through cheque, it cannot be presumed to be genuine in the absence of any agreement, security and interest payment. Mere submission of PAN Card of creditor does not establish the authenticity of a huge loan transaction particularly when the ITR does not inspire such confidence. Mere submission of ID proof and the fact that the loan transactions were through the banking channel, does not establish the genuineness of transactions. Loan entries are generally masked to pump in black money into banking channels and such practices continue to plague Indian economy

3- CIT Vs MAF Academy (P.) Ltd (361 ITR 258) (Copy Enclosed) where Hon'ble Delhi High Court held that where assessee, a private limited company, sold its shares to unrelated parties at a huge premium and thereupon within short span of time those shares were purchased back even at a loss, share transactions in question were to be regarded as bogus and, thus, amount received from said transactions was to be added to assesee's taxable income under section 68 It was held as follows:

"53. In contrast to the above judgments, in the present case, the Assessee is a private limited company and in the factual matrix, we have held that the Assessee has not been able to discharge the initial onus and has not been able to establish the identity, creditworthiness of the share applicants and the genuineness of the transaction. Though, in our considered opinion, none of the above judgments, referred to by the Assessee respondent, are applicable in the facts of the present case and in view of the findings recorded by us hereinabove.

In view of the above, we are of the view that the Assessee has not discharged the onus satisfactorily and the additions made by the Assessing Officer were justified and sustainable. "

CIT Vs Navodava Castle Pvt Ltd T20141 367 ITR 306 (Del) (Copy Enclosed)

where Hon'ble Delhi High Court accepted that since the assessee was unable to produce the directors and the principal officers of the six shareholder companies and also that as per the information and details collected by the Assessing Officer from the concerned bank, the Assessing Officer had observed that there were genuine concerns about identity, creditworthiness of shareholders as well as genuineness of the transactions.

"20. Now, when we go to the order of the Tribunal in the present case, we notice that the Tribunal has merely reproduced the order of the Commissioner of Income-tax (Appeals) and upheld the deletion of the addition. In fact, they substantially relied upon and quoted the decision of its co-ordinate Bench in the case of MAF Academy P. Ltd., a decision which has been overturned by the Delhi High Court, vide its judgment in CIT v. MAF Academy P. Ltd. [2014] 206 DLT 277 ; [2014] 361 ITR 258 (Delhi)). In the impugned order it is accepted that the assessee was unable to produce directors and principal officers of the six shareholder companies and also the fact that as per the information and details collected by the Assessing Officer from the concerned bank, the Assessing Officer has observed that there were genuine concerns about identity, creditworthiness of shareholders as well as genuineness of the transactions.

In view of the aforesaid discussion, we feel that the matter requires an order of remit to the Tribunal for fresh adjudication keeping in view the aforesaid case law."

Navodava Castle Pvt Ltd Vs CIT (2015-TIQL-314-SC-IT) (Copy Enclosed)

SLP of assessee dismissed by Hon'bie Supreme Court

Pratham Telecom India Pvt Ltd Vs DCIT (2018-TIQL-1983-HC-MUM-IT) (Copy Enclosed)

where Hon'bie Bombay High Court held that mere production of PAN numbers & bank statements is sufficient enough to discharge the burden on taxpayer to escape the realms of Section 68

6 CIT Vs Nipun Builders & Developers (P.) Ltd (30 taxmann.com 292, 214 Taxman 429. 350 ITR 407, 256 CTR 34) (Copy Enclosed)

where Hon'bie Delhi High Court held that where assessee failed to prove identity and capacity of subscriber companies to pay share application money, amount so received was liable to be taxed under section 68. It was held as follows:

"12. A perusal of the order of the Tribunal shows that it has gone on the basis of the documents submitted by the assessee before the AO and has held that in the light of those documents, it can be said that the assessee has established the identity of the parties. It has further been observed that the report of the investigation wing cannot conclusively prove that the assessee's own monies were brought back in the form of share application money. As noted in the earlier paragraph, it is not the burden of the AO to prove that connection. There has been no examination by the Tribunal of the assessment proceedings in any detail in order to demonstrate that the assessee has discharged its onus to prove not only the identity of the share applicants, but also their creditworthiness and the genuineness of the transactions. No attempt was made by the Tribunal to scratch the surface and probe the documentary evidence in some depth, in the light of the conduct of the assessee and other surrounding circumstances in order to see whether the assessee has discharged its onus under Section 68. With respect, it appears to us that there has only been a mechanical reference to the case-law on the subject without any serious appraisal of the facts and circumstances of the case.

We. therefore, answer the substantial question of law framed by us in the negative, in favour of the revenue and against the assessee. The appeal of the revenue is allowed with no order as to costs."

CIT Vs Nova Promoters & Finlease (P) Ltd (18 taxmann.com 217, 206 Taxman 207. 342 ITR 169. 252 CTR 187) (Copy Enclosed)

where Hon'bie Delhi High Court held that amount received by assessee from accommodation entry providers in garb of share application money, was to be added to its taxable income under section 68. It Was held as follows:

"41. In the case before us, not only did the material before the Assessing Officer show the link between the entry providers and the assessee-company, but the Assessing Officer had also provided the statements of Mukesh Gupta and Rajan Jassal to the assessee in compliance with the rules of natural justice. Out of the 22 companies whose names figured in the information given by them to the investigation wing, 15 companies had provided the so-called "share subscription monies" to the assessee. There was thus specific involvement of the assessee-company in the modus operandi followed by Mukesh Gupta and Rajan Jassal. Thus, on crucial factual aspects the present case stands on a completely different footing from the case of Oasis Hospitalities (P.) Ltd. (supra).

In the light of the above discussion, we are unable to uphold the order of the Tribunal confirming the deletion of the addition of Rs. 1,18,50,000 made under section 68 of the Act as well as the consequential addition of Rs. 2,96,250. I/Ve accordingly answer the substantial questions of law in the negative and in favour of the department. The assessee shall pay costs which we assess at Rs. 30,000/-."

8 CIT Vs N R Portfolio Pvt Ltd r2014l 42 taxmann.com 339 (Delhi)/r2014l 222 Taxman 157 (DelhiHMAG)/r20141 264 CTR 258 (Delhi) (Copy Enclosed)

where Hon'ble Delhi High Court held that if AO doubts the documents produced by assessee, the onus shifts on assessee to further substantiate the facts or produce the share applicant in proceeding. It was held as follows:

"30. What we perceive and regard as correct position of law is that the court or tribunal should be convinced about the identity, creditworthiness and genuineness of the transaction. The onus to prove the three factum is on the assessee as the facts are within the assessee's knowledge. Mere production of incorporation details, PAN Nos. or the fact that third persons or company had filed income tax details in case of a private limited company may not be sufficient when surrounding and attending facts predicate a cover up. These facts indicate and reflect proper paper work or documentation but genuineness, creditworthiness, identity are deeper and obtrusive. Companies no doubt are artificial or juristic persons but they are soulless and are dependent upon the individuals behind them who run and manage the said companies. It is the persons behind the company who take the decisions, controls and manage them. ''

He also relied on the judgment of jurisdictional High Court in the case of NDR Promoters Pvt. Ltd. and also the judgment of Hon'ble Supreme Court in the case of NRA Iron and Steel Pvt. Ltd.

Having gone through the facts of the case, we find that even before the Assessing Officer, the assessee has not furnished the requisite details nor discharged the primary onus of proving the source. Even before the ld. CIT(A), the basic documentary evidence to prove identity, genuineness and creditworthiness of the amount received have not been filed. It is also observed that the assessee has grossly failed to prove the source of amount received. Keeping in view the judgment of the Hon'ble supreme court in the case of NRS iron and steel pvt.ltd, in Civil appeal no.29855 /2019 , we here by decline to interfere in the order of the ld. CIT(A).

As a result, the appeal is dismissed.

Order pronounced in the open court.