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Income Tax Officer, Ward-13(4), New Delhi vs. M/s. Optima Webtech Pvt. Ltd., 3775/3, Kanahiya Nagar, Tri Nagar, New Delhi
June, 10th 2019

Referred Sections:
Section 143(2) of the Income-tax Act,
Section 143(3) of the Act
Section 68 of the Act
Sub-section(1)
Section 251
section 271.

Referred Cases / Judgments
CIT vs. Navodaya Castle Pvt. Ltd. [2014] 367 ITR 306(Del.)
Navodaya Castle Pvt. Ltd. Vs. CIT [2015-TIOL-314-SC-IT]
Konark Structural Engineering (P.) Ltd. Vs. Deputy Commissioner of Income Tax [2018] 96 taxmann.com 255(SC)
DRB Exports (P.) Ltd. Vs. CIT [2018] 93 taxmann.com 490 (Calcutta)
CIT Vs. Nipun Builders & Developers (P.) Ltd. [30 taxmann.com 292, 214 Taxman 429, 350 ITR 407, 256 CTR 34]
CIT Vs. Nova Promotors & Finlease (P.) Ltd. [18 taxmann.com 217, 206 Taxman 207, 342 ITR 169, 252 CTR 187]
CIT Vs. Ultra Modern Exports (P.) Ltd. [40 taxmann.com 458, 220 Taxman 165]
CIT Vs. Frostair (P.) Ltd. [26 taxmann.com 11, 210 Taxman 221]
CIT Vs. NR Portfolio Pvt. Ltd. [2014] 42 taxmann.com 339 (Delhi) [2014] 222 Taxman 157 (Delhi) (MAG)/[2014] 264 CTR 258 (Delhi)
CIT Vs. Empire Buildtech (P.) Ltd. (366 ITR 110)
CIT Vs. Focus Exports (P.) Ltd [51 taxmann.com 46 (Delhi)/[2015] 228 Taxman 88]
PCIT Vs. Bikram Singh [2017] 85 taxmann.com 104 (Delhi)/[2017] 250 Taxman 273 (Delhi)/[2017] 399 ITR 407 (Delhi)
Rick Lunsford Trade & Investment Ltd. Vs. CIT [2016] 385 ITR 399 (Cal.)
CIT Vs Divine Leasing and Finance Ltd (SLP No. CC 375/2008
CIT Vs Navodya Castle Private Limited
CIT Vs. Ultra Modern Exports Private Limited

           IN THE INCOME TAX APPELLATE TRIBUNAL
                 DELHI BENCH: `E', NEW DELHI

         BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER
                             AND
            SHRI O.P. KANT, ACCOUNTANT MEMBER

                        ITA No.5457/Del/2012
                       Assessment Year: 2007-08

Income Tax Officer,                   Vs. M/s. Optima Webtech Pvt.
Ward-13(4), New Delhi                     Ltd.,
                                          3775/3, Kanahiya Nagar, Tri
                                          Nagar, New Delhi
PAN :AAACO7509F
       (Appellant)                                   (Respondent)

                   Appellant by         Shri P.C. Gupta, Sr.DR
                   Respondent by        None

                            Date of hearing                  27.05.2019
                            Date of pronouncement            10.06.2019
                                  ORDER

PER O.P. KANT, A.M.:

     This appeal by the Revenue is directed against order dated
22/06/2012 passed by the Ld. Commissioner of Income-tax
(Appeals)-XVI, New Delhi [in short `the Ld. CIT(A)'] for assessment
year 2007-08, raising following grounds:


    1.      Whether on the facts & in the circumstances of the case, the
          Ld.CIT(A) has erred in deleting the addition of Rs. 1,80,00,000/- u/s
          68 of the IT Act on account of unproved credits in the grab of share
          application money/share capital and share premium by allowing the
          alleged investors of share capital and premium without allowing the
          AO an opportunity to cross examine them.

    2.    Whether on the facts & in the circumstances of the case, the
          Ld.CIT(A) has erred deleting the addition of Rs. 6,14,000/- made by
                                       2
                                                      ITA No.5457/Del/2012

           the AO as income from other sources on account of amount credited
           in the P& L account as sales.

     3.    Whether on the facts & in the circumstances of the case, the Ld.
           CIT(A) has erred holding that the assessee had submitted all books
           of account before the Assessing Officer, when he had clearly failed
           to do so.

     4.    The appellant craves to be allowed to add any fresh grounds of
           appeal and /or delete or amend any of the ground of appeal.


2.     Briefly stated facts of the case are that the assessee
company filed its return of income electronically on 14/11/2007
declaring total income of Rs.2761/-. The case was selected for
scrutiny and notice under section 143(2) of the Income-tax Act,
1961 (in short `the Act') was issued on 22/09/2008, which was
duly      served   upon    the    assessee.    During     the    assessment
proceeding, compliance of various notices was made partly by the
Authorised Representative appeared on behalf of the assessee. In
the assessment completed under section 143(3) of the Act on
21/12/2009,         the    Assessing       Officer   made       addition     of
Rs.1,80,00,000/- under section 68 of the Act for the share
application money/share capital shown to be received by the
assessee during the year under consideration. The Assessing
Officer also made addition of Rs.6,14,000/- under the head
`Income from Other Sources' for the amount credited in the profit
and loss account as sales. Aggrieved, the assessee filed appeal
before the Ld. CIT(A) and produced books of account and
vouchers before him. The Ld. CIT(A) after considering submission
of the assessee and books of account produced, deleted the
additions made by the Assessing Officer. Aggrieved with the
finding of the Ld. CIT(A), the Revenue is in appeal before the
Tribunal raising the grounds as reproduced above.
                                3
                                             ITA No.5457/Del/2012

3.   At the outset, we may like to mention that this appeal was
fixed first time for hearing on 22/05/2013 by way of notice issued
through registered post at the address provided in form No. 36,
but none attended on behalf of the assessee. Subsequently, the
notices were issued through registered post and a copy was
provided to the Departmental Representative for service on the
assessee through affixure for hearing on various dates i.e.
20/01/2015;      27/05/2015;        12/11/2015;      02/06/2016;
21/07/2016;      26/12/2016;        28/03/2017;      08/06/2017;
27/09/2017;               29/10/2017;                08/02/2018;
18/07/2018;08/10/2018; 18/12/2018; 25/02/2019. The service
of notice dated 08/02/2018 through the Department is placed on
the file. As per the record, most of the notices sent through
registered post to the assessee have not returned back. Despite
providing a number of opportunities to the assessee, none
attended on its behalf before the Tribunal. The Departmental
Representative was directed to serve the notice on the assessee
for hearing dated 27/05/2019. A copy of the notice was also sent
through registered post. As per the record, notice has not
returned back by the postal authorities. In view of the attempts
made by the registry of the Tribunal for service of notice through
registered post as    well as service of    notice through the
Departmental Representative, it appears that the assessee is not
interested in responding to the appeal filed by the Revenue. In
such circumstances, we were of the opinion that no purpose
would be served in issuing a further notice to the assessee and
thus, we heard the appeal ex parte, qua the assessee.
                                   4
                                                 ITA No.5457/Del/2012

4.    The Ld. Departmental Representative relied on the order of
the Assessing Officer and supported the said order by following
decisions:
     1.    CIT vs. Navodaya Castle Pvt. Ltd. [2014] 367 ITR 306
           (Del.)
     2.    Navodaya Castle Pvt. Ltd. Vs. CIT [2015-TIOL-314-SC-IT]
     3.    Konark Structural Engineering (P.) Ltd. Vs. Deputy
           Commissioner of Income Tax [2018] 96 taxmann.com 255
           (SC)
     4.    Konark Structural Engineering (P.) Ltd. Vs. DCIT, [2018] 90
           taxmann.com 56 (Bombay)
     5.    DRB Exports (P.) Ltd. Vs. CIT [2018] 93 taxmann.com 490
           (Calcutta)
     6.    CIT Vs. Nipun Builders & Developers (P.) Ltd. [30
           taxmann.com 292, 214 Taxman 429, 350 ITR 407, 256
           CTR 34]
     7.    CIT Vs. Nova Promotors & Finlease (P.) Ltd. [18
           taxmann.com 217, 206 Taxman 207, 342 ITR 169, 252
           CTR 187]
     8.    CIT Vs. Ultra Modern Exports (P.) Ltd. [40 taxmann.com
           458, 220 Taxman 165]
     9.    CIT Vs. Frostair (P.) Ltd. [26 taxmann.com 11, 210 Taxman
           221]
     10.   CIT Vs. NR Portfolio Pvt. Ltd. [2014] 42 taxmann.com 339
           (Delhi) [2014] 222 Taxman 157 (Delhi) (MAG)/[2014] 264
           CTR 258 (Delhi)
     11.   CIT Vs. Empire Buildtech (P.) Ltd. (366 ITR 110)
     12.   CIT Vs. Focus Exports (P.) Ltd [51 taxmann.com 46
           (Delhi)/[2015] 228 Taxman 88]
     13.   PCIT Vs. Bikram Singh [2017] 85 taxmann.com 104
           (Delhi)/[2017] 250 Taxman 273 (Delhi)/[2017] 399 ITR 407
           (Delhi)
     14.   Rick Lunsford Trade & Investment Ltd. Vs. CIT [2016] 385
           ITR 399 (Cal.)
     15.   Rick Lunsford Trade & Investment Ltd. Vs. CIT [2016-TIOL-
           2017-SC-IT] (SC)
     16.   Hon'ble Delhi High Court Judgment dated 17.01.2019 in
           the case of NDR Promotors Pvt. Ltd., ITA No. 49/2018
                                             5
                                                              ITA No.5457/Del/2012

5.       We have heard the submission of the Ld. DR and perused
the relevant material on record, including order of the lower
authorities. The assessee company in the instant case has filed
return of income declaring total income of Rs. 2761/-. During the
year under consideration, the assessee company raised share
capital of Rs.9,00,000/- and share premium of Rs.1,71,00,000/-
from eight parties. The list of the parties, the directors, return of
income and mode of receipt of the payment is appearing on page -
6 of the assessment order. For ready reference, the said list is
reproduced as under:
     S.No Name of the Indl/company Name               of Income as per Amount claimed to
                                        Director/lndl as copy of ITR   have been received
                                        per              Acknowledgeme
                                        confirmation     nt
     1.   Asthal Spares                 Krishan Kumar 1,233/-          46,00,000/- cash on
          P.Ltd.,            1958/53.                                  5.5.06
          Ganeshpura, Tri Nagar,
          Delhi-35
     2.   Govindam            Apparels Sandeep           3,638/-       34,00,000/- cash on
          P.Ltd.,1958/53,Ganeshpur Kumar                               5.5.06
          a, Tri Nagar, Delhi-35
     3.   Indo Holland Green Houses Naveen Garg          3,138/-       47,00,000/- cash on
          Ltd.3522/3,NaraNG                                            5.5.06
          Colony, Tri Nagar, Delhi-35
     4.   Maharaja Soft Solutions Naveen Garg            0             1,00,000/- cash on
          P.Ltd.,3522/3,Narang                                         24.3.07
          Colony, Tri Nagar, Delhi-35
     5.   New Way Steels P.Ltd., L- Sandeep              2,178/-       32,50,000/- cash on
          119, Shastri Nagar, Delhi- Kumar                             5.5.06
          CO
     6.   Paradise Soft Solutions Rakesh           Kumar 0             3,00,000/- cash on
          P.Ltd.,1-3/76,    Sector-16, Garg                            20.3.07
          Rohini, Delhi-85
     7.   Sai Soft Solutions P.Ltd., I- Sandeep          0             7,50,000/- cash on
          3/76, Sector-16, Rohini, Kumar                               24.3.07
          Delhi-85
     8.   Gulbarga Associates P.Ltd., Sandeep            0             9,00,000/- cash on
          L-132, Shastri Nagar,Delhi- Kumar                            5.5.06
          35



5.1 During assessment proceeding, the Assessing Officer asked
information from the assessee about the source of share
capital/share premium amount for the first time in July 2009
                                         6
                                                         ITA No.5457/Del/2012

onwards.     The   case       was     getting   barred     by   limitation      on
31/12/2009, but the assessee filed list of share subscriber
alongwith the address only on 24/11/2009, however, but the
other information as required under section 68 of the Act
including identity, genuineness and creditworthiness of the share
subscriber were not filed. Books of accounts were also not
produced by the assessee company, though the assessee filed
confirmation along with copies of ITR acknowledgement from the
share subscribers. The Assessing Officer also issued a final show
cause on 02/12/2009, which has been reproduced in the
assessment order. The said show cause notice also remained un-
complied. According to the Assessing Officer, on 17/12/2009, the
authorised representative of the assessee attended however no
further information was filed by him. The Assessing Officer made
following observations in respect of the share capital/share
premium received from the parties:
     (i)     During     the    year     assessee   has      shown    sales      of
             Rs.6,14,400/- and against which deduted expenditure
             of Rs.6,11,639/- claiming net profit of Rs.2,761/-
             whereas in the immediately preceding year, there was
             no sale.
     (ii)    The amount of income reflected in acknowledgement of
             return of income filed by the four share subscribers
             was nil and in respect of the remaining four parties, it
             was in the range of two to three thousand only.
     (iii)   There are common directors in the share subscriber
             companies.
     (iv)    The share capital/share premium has been subscribed
             in cash and even the assessee company has not shown
                                       7
                                                            ITA No.5457/Del/2012

              any bank account in its balance sheet. The assessee
              company has further deployed the funds received from
              share capital/share premium into share purchase of
              other companies that too in cash.
       (v)    In response to summons issued by the Assessing
              Officer to the share subscriber companies , none
              attended      before    him,      but         identically     worded
              confirmations were filed by them in the dak receipt
              counter of the Assessing Officer. The Source of
              investment     was     not     explained        by    those    share
              subscriber companies. In the confirmations date of
              investment had not been mentioned.
       (vi)   Local enquiries conducted by the Inspector of the
              Officer of Assessing Officer revealed that no business
              was carried out at the addresses of the share
              subscriber     companies       and      the     share    subscriber
              companies as well as assessee company was found to
              be controlled by one Sh. K.K. Bansal, who admitted to
              have   been    engaged       in   providing          accommodation
              entries.






5.2 In view of the above observation, the Assessing Officer
concluded that the assessee failed to explain creditworthiness of
the    share    subscriber     companies        and     genuineness         of   the
transactions. The relevant paragraph of the assessment order is
reproduced as under:
      "The overwhelming circumstantial evidence and the facts discussed
      above clearly prove that the alleged share holders have no
      creditworthiness of their own. As discussed above, the identity and
      creditworthiness have to be seen in their proper perspective in that
      the persons have either an established source of income or some
                                           8
                                                            ITA No.5457/Del/2012

       standing in a particular line of activity. These signs could be the
       infrastructure or business, their intellectual capital, place of work,
       staff members, books of accounts, substantive evidence of the
       business carried by the persons in the form of tools and apparatus
       of business, inputs of the business, processes involved etc. or
       anything which can prove that either some actual activity is going on
       or the person has got something in the works. Clearly, the existence
       of the entities at the given addresses, if at all, is limited to the use of
       the addresses merely as a post-box. Neither the assessee nor the
       "snare holders" have furnished even an iota of evidence
       substantiating their capacity and source of cash in hand."


5.3 In view of the conclusions, the Ld. Assessing Officer held
that      the     share      capital/share         premium        amounting          to
Rs.1,80,00,000/-received was unexplained cash credit in terms of
section 68 of the Act.
5.4 Before the Ld. CIT(A), the assessee accepted that due to non-
cooperation of the subscribers to share capital, the directors of
the assessee company were so perturbed and disturbed that they
could not produce the books of accounts and other details as
asked by the Assessing Officer. The assessee produced copy of the
cashbook        of   the    assessee      company        for   the    period     from
01/04/2006 to 31/03/2007 before the learned CIT(A) in order to
explain the cash received on account of share application money
from various subscribers of share capital and further investment
in share of various companies. The assessee also accepted that no
dividend could be paid by the assessee company on the
investment made by the subscribers of the share capital. Before
the Ld. CIT(A), the assessee claimed that report of Inspector dated
09/12/2009 regarding no business activity at the addresses of
the subscribers of the share capital, was not provided to the
assessee. It was also contended that no cross-examination of Sh.
K.K. Bansal was provided to the assessee. According to the
                                  9
                                                  ITA No.5457/Del/2012

assessee, there is nothing illegal to receive the share application
money in cash and make further investment in cash. The
assessee relied on the decision of the Hon'ble Supreme High
Court in the case of CIT Vs Divine Leasing and Finance Ltd (SLP
No. CC 375/2008 arising out of ITA No. 53/2005 of the Hon'ble
High Court of Delhi) and CIT versus lovely export private limited(
SLP No. CC 11993/07 arising out of ITA No. 953/06 of the
Hon'ble High Court of Delhi) and other decisions.
5.5 In view of the decisions relied upon by the assessee, the Ld.
CIT(A) held that the assessee has discharged its onus provided
under section 68 of the Act. The Ld. CIT(A) observed that when
the money is received by cheque and is transacted through
banking     or   other   undisputed   channels,     to   establish   the
genuineness of the transaction, submission of shareholder
register, share application form, share transfer ratio etc. would be
sufficient. As far as creditworthiness of the parties is concerned,
same can be proved by producing bank statement of the
creditor/subscriber showing that it had sufficient balance in its
account to enable it to subscribe to the share capital. Once these
documents are produced, the assessee would have satisfactorily
discharged the onus placed upon it. In view of the detailed finding
in para 3.2 of the impugned order, the Ld. CIT(A) deleted the
addition.
5.6 Before us, the Ld. DR has relied on the decision of the
Hon'ble Delhi High Court in the case of CIT Vs Navodya Castle
Private Limited (supra) wherein the matter of addition under
section 68 of the Act was restored back to the Tribunal as the
assessee was unable to produce the directors and principal
officers of the shareholder companies. In the case of CIT Vs.
                                       10
                                                        ITA No.5457/Del/2012

Ultra Modern Exports Private Limited (supra) where the notices
sent to the share applicants returned answered, still the assessee
managed to secure documents such as income tax returns as well
as bank accounts from the share applicant companies, the
Hon'ble High Court held that the Assessing Officer was justified in
drawing adverse inference and adding the amount in question to
taxable income under section 68 of the Act. The relevant finding of
the Hon'ble High Court is reproduced as under:


    "9. As noticed previously, the CIT (A) was of the opinion that the
    assessee had discharged the basic onus which was cast upon it
    after considering the ruling in Lovely Exports (P.) Ltd.'s case (supra).
    The material and the records in this case show that notice issued to
    the 5 of the share applicants were returned unserved. The
    particulars of returns made available by the assessee and taken into
    consideration in paragraph 3.4 by the AO in this case would show
    that the said parties/applicants had disclosed very meager income.
    The AO also noticed that before issuing cheques to the assessee,
    huge amounts were transferred in the accounts of said share
    applicants. This discussion itself would reveal that even though the
    share applicants could not be accessed through notices, the
    assessee was in a position to obtain documents from them. While
    there can be no doubt that in Lovely Exports (P.) Ltd. (supra), the
    Court indicated the rule of "shifting onus" i.e. the responsibility of the
    Revenue to prove that Section 68 could be invoked once the basic
    burden stood discharged by furnishing relevant and material
    particulars, at the same time, that judgment cannot be said to limit
    the inferences that can be logically and legitimately drawn by the
    Revenue in the natural course of assessment proceedings. The
    information that assessee furnishes would have to be credible and
    at the same time verifiable. In this case, 5 share applicants could not
    be served as the notices were returned unserved. In the backdrop of
    this circumstance, the assessee's ability to secure documents such
    as income tax returns of the share applicants as well as bank
    account particulars would itself give rise to a circumstance which the
    AO in this case proceeded to draw inferences from. Having regard to
    the totality of the facts, i.e., that the assessee commenced its
    business and immediately sought to infuse share capital at a
    premium ranging between Rs. 90-190 per share and was able to
    garner a colossal amount of Rs. 4.34 Crores, this Court is of the
    opinion that the CIT (Appeals) and the ITAT fell into error in holding
    that AO could not have added back the said amount under Section
                                     11
                                                     ITA No.5457/Del/2012

    68. The question of law consequently is answered in favour of the
    Revenue and against the assessee."


5.7 Further, in the case of CIT versus N.R. Portfolio Private
Limited (supra), the Hon'ble High Court held that if the Assessing
Officer doubts the document produced by the assessee, the onus
shift on the assessee to further substantiate the facts or producer
share applicant in proceeding. The relevant finding of the Hon'ble
High Court is reproduced as under:
    "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. "


5.8 Further the Hon'ble Supreme Court in the case of recent
decision of NRA Iron & Steel Pvt. Ltd. in Civil Appeal of 2019
arising out of SLP (Civil) No. 29855 of 2018 has analysed all the
decisions available on the issue of addition or share capital/share
premium under section 68 of the Act and held that wherever the
creditworthiness or genuineness of the subscriber of the share
capital is not found to be satisfied, the addition made under
section 68 of the Act, has been held to be justified. The relevant
finding of the Hon'ble Supreme Court is reproduced as under:


    "11. The principles which emerge where sums of money are credited
    as Share Capital/Premium are:
                                   12
                                                    ITA No.5457/Del/2012


i.    The assessee is under a legal obligation to prove the
      genuineness of the transaction, the identity of the creditors, and
      credit-worthiness of the investors who should have the financial
      capacity to make the investment in question, to the satisfaction
      of the AO, so as to discharge the primary onus.

ii.   The Assessing Officer is duty bound to investigate the credit-
      worthiness of the creditor/ subscriber, verify the identity of the
      subscribers, and ascertain whether the transaction is genuine,
      or these are bogus entries of name-lenders.

 iii. If the enquiries and investigations reveal that the identity of the
      creditors to be dubious or doubtful, or lack credit-worthiness,
      then the genuineness of the transaction would not be
      established. In such a case, the assessee would not have
      discharged the primary onus contemplated by Section 68 of the
      Act.






12. In the present case, the A.O. had conducted detailed enquiry
which revealed that :

 i.   There was no material on record to prove, or even remotely
      suggest, that the share application money was received from
      independent legal entities. The survey revealed that some of the
      investor companies were non-existent, and had no office at the
      address mentioned by the assessee.

      For example:

      a.   The companies Hema Trading Co. Pvt. Ltd. and Eternity
           Multi Trade Pvt. Ltd. at Mumbai, were found to be non-
           existent at the address given, and the premises was
           owned by some other person.

      b.   The companies at Kolkatta did not appear before the A.O.,
           nor did they produce their bank statements to substantiate
           the source of the funds from which the alleged investments
           were made.

      c.   The two companies at Guwahati viz. Ispat Sheet Ltd. and
           Novelty Traders Ltd., were found to be nonexistent at the
           address provided. The genuineness of the transaction was
           found to be completely doubtful.

ii.   The enquiries revealed that the investor companies had filed
      returns for a negligible taxable income, which would show that
      the investors did not have the financial capacity to invest funds
      ranging between Rs. 90,00,000 to Rs. 95,00,000 in the
                                   13
                                                   ITA No.5457/Del/2012

       Assessment Year 2009-10, for purchase of shares at such a
       high premium.

       For example:

          Neha Cassetes Pvt. Ltd. - Kolkatta had disclosed a taxable
       income of Rs. 9,744/- for A.Y. 2009-10, but had purchased
       Shares worth Rs, 90,00,000 in the Assessee Company.

          Similarly Warner Multimedia Ltd. ­ Kolkatta filed a NIL
       return, but had purchased Shares worth Rs. 95,00,000 in the
       Assessee Company ­ Respondent. Another example is of Ganga
       Builders Ltd. ­ Kolkatta which had filed a return for Rs. 5,850
       but invested in shares to the tune of Rs. 90,00,000 in the
       Assessee Company ­ Respondent, etc.

iii.   There was no explanation whatsoever offered as to why the
       investor companies had applied for shares of the Assessee
       Company at a high premium of Rs. 190 per share, even though
       the face value of the share was Rs. 10/- per share.

iv.    Furthermore, none of the so-called investor companies
       established the source of funds from which the high share
       premium was invested. `

v.     The mere mention of the income tax file number of an investor
       was not sufficient to discharge the onus under Section 68 of the
       Act.

13. The lower appellate authorities appear to have ignored the
detailed findings of the AO from the field enquiry and investigations
carried out by his office. The authorities below have erroneously held
that merely because the Respondent Company ­ Assessee had filed
all the primary evidence, the onus on the Assessee stood
discharged.

  The lower appellate authorities failed to appreciate that the
investor companies which had filed income tax returns with a
meagre or nil income had to explain how they had invested such
huge sums of money in the Assessee Company - Respondent.
Clearly the onus to establish the credit worthiness of the investor
companies was not discharged. The entire transaction seemed
bogus, and lacked credibility.

  The Court/Authorities below did not even advert to the field
enquiry conducted by the AO which revealed that in several cases
the investor companies were found to be non-existent, and the onus
to establish the identity of the investor companies, was not
discharged by the assessee. 14. The practice of conversion of un-
accounted money through the cloak of Share Capital/Premium must
                                      14
                                                      ITA No.5457/Del/2012

    be subjected to careful scrutiny. This would be particularly so in the
    case of private placement of shares, where a higher onus is required
    to be 27 placed on the Assessee since the information is within the
    personal knowledge of the Assessee. The Assessee is under a legal
    obligation to prove the receipt of share capital/premium to the
    satisfaction of the AO, failure of which, would justify addition of the
    said amount to the income of the Assessee.

    14. The practice of conversion of un-accounted money through the
    cloak of Share Capital/Premium must be subjected to careful
    scrutiny. This would be particularly so in the case of private
    placement of shares, where a higher onus is required to be 27
    placed on the Assessee since the information is within the personal
    knowledge of the Assessee. The Assessee is under a legal obligation
    to prove the receipt of share capital/premium to the satisfaction of
    the AO, failure of which, would justify addition of the said amount to
    the income of the Assessee."

5.9 In view of the above judicial decisions, when we examine the
facts of the instant case, we find that entire share capital/share
premium money of Rs. 1.80 crore has been shown to be received
by the assessee in cash from the share subscriber companies.
This amount of share capital/share premium money shown to
have been received by the assessee company has been further
shown to have been invested in purchase of the shares of the
other companies that too in cash. In our opinion the investment
by cash is not a normal phenomena because both the assessee
company and the share subscriber companies in normal course
are expected to transact through banking channel. Making
investment through cash in itself raises doubt and therefore it
was the onus of the assessee to explain the source of cash
invested by way of share capital/share premium into its
cashbook. The assessee has merely furnished confirmation from
said subscriber of the share capital without any detail of source of
the cash in the hands of the subscriber companies. The assessee
even failed to produce books of accounts and vouchers etc. of the
                                 15
                                              ITA No.5457/Del/2012

assessee   company     before   the   Assessing   Officer.   In   the
independent enquiry made by the Assessing Officer through
Inspector, those companies were not found at the addresses given
and in response to summons issued, none appeared on behalf of
those companies before the Assessing Officer to explain the
source of cash in their hands. In such circumstances, it cannot
be said that the assessee has discharged its onus of explaining
nature and source of the credit as required under section 68 of
the Act. In the instant case, the Assessing Officer has not relied
only on the report of the Inspector or on the statement of Sri. K.K.
Bansal, who was engaged in providing accommodation entries
and the Assessing Officer has taken into consideration the failure
of the assessee in explaining the creditworthiness of the share
subscriber companies as well as genuineness of the transaction.
In view of the recent decision of the Hon'ble Supreme Court in the
case of NRA Iron & Steel Pvt. Ltd.(supra), wherein the decision of
in the case of CIT versus lovely export P Ltd (supra) has also been
considered, we find that the assessee failed to establish the
creditworthiness of the share subscriber parties and genuineness
of the transaction and accordingly, we set aside the finding of the
Ld. CIT(A) on the issue in dispute and restore the finding of the
Assessing Officer of making addition under section 68 of the Act.
The addition in dispute of Rs. 1.8 crore under section 68 of the
Act is accordingly sustained. The ground No. 1 of the appeal of
the Revenue is accordingly allowed.
6.   In ground No. 2, the Revenue challenged deletion of addition
of Rs.6,14,000/-made by the Assessing Officer. According to the
Assessing Officer, no books of accounts or vouchers in support of
purchase and sales were produced before him, accordingly he
                                       16
                                                      ITA No.5457/Del/2012

added the entire sales turnover of Rs.6,14,000/- as "Income from
Other Sources". Before the Ld. CIT(A), the assessee produced
books of account and vouchers etc. The Ld. CIT(A) deleted that
the addition observing as under:
    "4.2 I have gone through the discussion in the assessment order and
    the submissions made by the AR of the appellant and am of the view
    that the appellant had reasonable cause for not producing before the
    AO the books of accounts, bills and vouchers. In the interest of
    natural justice and in exercise of the powers of the CIT (Appeals) u/s
    254 (4), these books of accounts, bills and vouchers were required
    by me to be produced by the appellant. This requirement was duly
    complied with and after examination of the details, I am satisfied
    that the appellant was engaged in the activity of sales and
    purchases during the year and had also incurred expenses as
    claimed in its duly audited accounts. In view of the foregoing
    discussion, the benefit of purchases and other expenses is directed
    to be allowed to the appellant. These grounds of appeal stand
    allowed."


6.1 Before us, the Ld. DR submitted that the Ld. CIT(A) has
admitted the additional evidence in the form of books of account
or bills and vouchers etc., however, no opportunity was provided
to the Assessing Officer as required under Rule 46A of the Income
Tax Rules, 1962 and thus, matter may be restored back to the Ld.
CIT(A)   for   adjudicating      the    issue   afresh     after   providing
opportunity of being heard to the Assessing Officer.
6.2 We have heard the submission of the learned DR and
perused the relevant material on record. There is no doubt that
the Assessing Officer made addition in absence of bills of
purchase and sales produced by the assessee. The Ld. CIT(A)
himself has admitted this fact while adjudicating the issue,
however, he failed to follow the procedure provided in Rule 46A of
the Income Tax Rules. The relevant rule provides as under:
                                      17
                                                      ITA No.5457/Del/2012

"[Production of additional evidence before the [Deputy Commissioner
(Appeals)] [and Commissioner (Appeals) ].
46A. (1) The appellant shall not be entitled to produce before the [Deputy
Commissioner (Appeals)] [or, as the case may be, the Commissioner
(Appeals)], any evidence, whether oral or documentary, other than the
evidence produced by him during the course of proceedings before the
[Assessing Officer], except in the following circumstances, namely :--
  (a) where the [Assessing Officer] has refused to admit evidence which ought
       to have been admitted ; or
  (b) where the appellant was prevented by sufficient cause from producing
       the evidence which he was called upon to produce by the [Assessing
       Officer] ; or
   (c) where the appellant was prevented by sufficient cause from producing
       before the [Assessing Officer] any evidence which is relevant to any
       ground of appeal ; or
  (d) where the [Assessing Officer] has made the order appealed against
       without giving sufficient opportunity to the appellant to adduce evidence
       relevant to any ground of appeal.
(2) No evidence shall be admitted under sub-rule (1) unless the [Deputy
Commissioner (Appeals)] [or, as the case may be, the Commissioner (Appeals)]
records in writing the reasons for its admission.
(3) The [Deputy Commissioner (Appeals)] [or, as the case may be, the
Commissioner (Appeals)] shall not take into account any evidence produced
under sub-rule (1) unless the [Assessing Officer] has been allowed a
reasonable opportunity--
  (a) to examine the evidence or document or to cross-examine the witness
      produced by the appellant, or
  (b) to produce any evidence or document or any witness in rebuttal of the
      additional evidence produced by the appellant.
(4) Nothing contained in this rule shall affect the power of the [Deputy
Commissioner (Appeals)] [or, as the case may be, the Commissioner (Appeals)]
to direct the production of any document, or the examination of any witness,
to enable him to dispose of the appeal, or for any other substantial cause
including the enhancement of the assessment or penalty (whether on his own
motion or on the request of the [Assessing Officer]) under clause (a) of sub-
section (1) of section 251 or the imposition of penalty under section 271.]"


6.3 In view of the clear violation of the Rule 46A(3) of the Income
Tax Rules, we feel it appropriate to restore this issue to the file of
the Ld. CIT(A) for deciding afresh after following the due process
of law. This ground of the appeal is accordingly allowed for
statistical purposes.
                                  18
                                                ITA No.5457/Del/2012

7.    In the result, the appeal of the Revenue is allowed partly for
statistical purposes.

         Order is pronounced in the open court on 10th June, 2019.




            Sd/-                                  Sd/-
       [AMIT SHUKLA]                          [O.P. KANT]
     JUDICIAL MEMBER                      ACCOUNTANT MEMBER

Dated: 10th June, 2019.
RK/-[d.t.d.s]
Copy forwarded to:
1.    Appellant
2.    Respondent
3.    CIT
4.    CIT(A)
5.    DR
                                           Asst. Registrar, ITAT, New Delhi

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