ACE CABS LIMITED,DELHI V. ACIT, CIRCLE-1(2), DELHI, C R BUILDING

ITA 443/DEL/2024

AI Insights

The case involves ACE Cabs Limited, which issued Compulsory Convertible Preference Shares (CCPS) to M/s. Click Cab Technology LLP, and the subsequent scrutiny by the Income Tax Department which led to additions under Section 68 of the Income Tax Act, treating the investment as unexplained cash credit. The Tribunal examined the evidences presented, including the financial statements, bank transactions, and other documents, to determine the legitimacy of the share capital and premium received. The Tribunal concluded that the assessee had adequately demonstrated the creditworthiness and the genuineness of the transactions, leading to the allowance of the appeal.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 23576 (ITAT-DELHI)
• Duration Of Justice: 8 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-10-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 23-07-2024
• Assessment Year: 2017-2018
• Appeal Filed On: 03-02-2024
• Other Referred Cases: Sanjay Kumar Singh Versus The State of Jharkhand, Tek Ram Vs. Commissioner of Income-tax, CIT vs. Text Hundred India Pvt. Ltd., CIT Vs. Virgin Securities and Credits (P.) Ltd., Mankind Pharma Limited, Smt. Prabhavati S. Shah v. CIT, Binny Ltd. v. Asstt. CIT, Asst. CIT v. Citizen Urban Co-op. Bank Ltd., ONS Creations Private Limited Vs ITO
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KANV BALI
• Assessee Lawyers: GAURAV JAIN
• Keywords: Set aside; Opportunity of being heard; Additional evidence; Question of law; Corroborative evidences; Unexplained cash credit; Fair market value; Onus to prove; Principle of natural justice; Valuation report; Source of fund; Bogus Share capital; Share purchase agreement; Bogus
• Section: 143(3); 142(1); 143(2); 68; 133(6); 20

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘A’: NEW DELHI BEFORE SHRI SAKTIJIT DEY, HON’BLE VICE PRESIDENT and SHRI S.RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA No.443/DEL/2024 (Assessment Year: 2017-18) ACE Cabs Limited, vs. ACIT, Circle 1 (2), 562, Silver Oak Lane, Delhi. M.G. Road, Ghitorni, Delhi – 110 030. (PAN : AAICA4494R) (APPELLANT) (RESPONDENT) ASSESSEE BY : Shri Gaurav Jain, Advocate Ms. Bharti Sharma, Advocate REVENUE BY : Shri Kanv Bali, Sr. DR Date of Hearing : 23.07.2024 Date of Order : 04.10.2024 ORDER PER S.RIFAUR RAHMAN,AM: 1. This appeal has been filed by the assessee against the order of ld. Commissioner of Income Tax (Appeals), New Delhi [“ld. CIT(A)”, for short]/ National Faceless Appeal Centre (NFAC) dated 12.12.2023 for the Assessment Year 2017-18. 2. The assessee submitted an application under Rule 29 of the ITAT Rules for admitting the additional evidences and the contents thereof are reproduced below:- 2 ITA No.443/DEL/2024 1 In reference to the captioned, it is submitted that the assessee company, M/s Ace Cabs Limited has filed the following additional evidence(s) in the form of a paper-book on 15.07.2024: Additional evidences Supporting evidence/ROC documents relating to issuance/ allotment of CCPS (Compulsory Convertible Preference Shares) 29 Incorporation certificate and master data of Click Cab Technology LLP 236 238 30 Ledger of share capital of Click Cab Technology in the books of ACE Cab Private Limited for the FY 2015-16 & 2016-17. 239 240 31 Ledger of Security Premium Reserve in the books of ACE Cab Private Limited for the FY 2016-17. 241 241 32 Share Subscription Agreement dated 01.03.2016. 242 281 33 Share Holder's Agreement dated 02.03.2016 282 322 34 Form PAS-3, board resolution passed at meeting of board of directors along with list of allottees & minutes of meeting of the board of directors for allotment of 899 CCPS on 04.03.2016 323 345 35 Form PAS-3, board resolution passed at meeting of board of directors along with list of allottees & minutes of meeting of the board of directors for allotment of 454 CCPS on 28.06.2016 346 366 36 Board resolution passed at meeting of board of directors along with list of allottees for issuance/allotment of CCPS to Click Cab Technology LLP on 20.10.2016 367 374 37 Form PAS-3, board resolution passed at meeting of board of directors along with list of allottees & minutes of meeting of board of directors for allotment of 454 CCPS on 22.11.2016 375 392 Supporting evidence/ROC documents relating to conversion of CCPS in to equity shares & bonus shares issued thereafter 3 ITA No.443/DEL/2024 38 Ledger of Click Cab Technology in the books of ACE Cab Private Limited showing conversion CCPS into equity shares and issuance of bonus shares during the FY 2018- 19. 393 393 39 Form PAS-3 filed & board resolution passed at meeting of board of directors along with list of allottees for conversion of CCPS into equity shares & allotment of bonus shares on 15.09.2018 & 22.01.2019 394 410 40 SH-1 Share Certificates issued to Click Cab Technology LLP 411 413 41 Demat request form of the equity shares 414 415 Supporting evidences regarding purchase back of shares by promoters from Click Cab Technology LLP 42 Share purchase agreement dated 05.12.2019 416 424 43 Bank statement of Aman Julka & Arjun Julka during the FY 2019-20 425 427 44 E-mail correspondences between ACE Cab Private Limited and Click Cab Technology LLP 428 456 2 In complement to the said paper-book the present application is being filed under Rule 29 of the Rules requesting for admission of the aforesaid additional evidence(s) which could not be filed before the lower authorities during the course of assessment/first appeal proceedings. The reasons for furnishing the aforesaid additional evidence(s) are discussed in detail below: 3 Regarding assessment proceedings: (i) The assessee company has been engaged in the business of providing car rental services for more than 3 decades. During the year under consideration, the assessee company filed its return of income on 28.10.2017 declaring loss of Rs. 62,84,164/-. (ii) The case of the assessee was selected for scrutiny through CASS for the reason of large share premium received during the year and accordingly, a notice under section 143(2) of the Act was issued on 23.08.2018. Thereafter, various notices under section 142(1) were issued to the assessee which were duly responded to from time to time. (iii) The assessee company, during the year under consideration, had issued and allotted equity shares as well as Compulsory Convertible Preference Shares (“CCPS”), the details of which is given hereunder: 4 ITA No.443/DEL/2024  600 equity shares, having a face value of 10/- per share and share premium of Rs. 5490/- per share, issued and allotted to the directors and relatives of the directors at total consideration of Rs. 33,00,000/- and  1818 Compulsory Convertible Preference Shares (CCPS),having a face value of 100/- per share and share premium of Rs. 5400/- per share, issued and allotted to M/s Click cab Technology LLP at total consideration of Rs. 99,99,000/-. (iv) Since the case of the assessee was selected for limited scrutiny to examine the issue of large share premium, the AO, during the entire assessment proceedings, primarily focused on the justification of high valuation of shares done by the assessee, correctness of DCF method adopted for the valuation, and the applicability of the provisions of Section 56(2)(viib) of the Act. (v) It is also important to mention that although the AO asked the assessee to furnish the PAN details, current address, financial statements, ledger account, ITR, and bank statements of M/s Click Cab Technology LLP to examine the share premium received, these were duly submitted by the assessee during the assessment proceedings. However, no specific query was raised to examine the identity, genuineness, and creditworthiness of the transaction of allotment of preference share capital to M/s Click Cab Technology LLP under Section 68 of the Act. Additionally, no discrepancies were pointed out by the AO in the documents submitted during the assessment proceedings. (vi) It is further submitted that even a show cause notice dated 15.11.2019 was issued by the AO with regard to the valuation method of DCF adopted by the assessee, asking it to explain why, based on certain irregularities allegedly identified by the AO in the valuation report, the valuation of shares using the DCF method should not be rejected, and the NAV method should be utilized instead. (vii) The assessee filed its reply to the show cause notice on 22.11.2019, which was accepted by the AO and consequently, no adverse inference was drawn regarding the valuation of shares in the assessment order. A copy of the SCN and its reply are enclosed at page nos. 78 to 79 and 80-84 of the PB. (viii) All the aforementioned facts prove that the AO was primarily concerned with the issue of the large share premium received during the year, rather than verifying the Compulsory Convertible Preference share capital issued and allotted to M/s Click Cab Technology LLP based on the trinity tests of identity, genuineness, and creditworthiness prescribed under Section 68 of the Act. (ix) The assessee was under the bona fide belief that the AO was satisfied with the documents and explanations submitted during the assessment proceedings regarding the valuation of shares and share capital, as no further queries or show cause notices were issued. However, upon receiving the assessment order, the assessee was shocked to discover that the AO had treated the investment of Rs. 99,99,000 by M/s Click Cab Technology LLP in 1818 CCPS shares of the assessee company as unexplained share capital under Section 68 of the Act, based on the following allegations: 5 ITA No.443/DEL/2024 a) M/s Click Cab Technology LLP lacks the creditworthiness to make such a big investment on the ground that its statement of income & expenditure and ITR showed Nil Income and also due to non-compliance of notices issued u/s 133(6) of the Act. The AO failed to appreciate that he himself stated in the order that Bank statement and Balance Sheet of M/s Click Cab showed that funds had first come from its two partners, Muraleedharan Nair and Unnikrishnan Venugopal as unsecured loans which had been diverted to the assessee company for subscribing the CCPS. (x) All the above allegations were never confronted to the assessee during the assessment proceedings for rebuttal. This means that the assessee company was not given an opportunity to be heard regarding these allegations, which were raised for the first time in the assessment order. Regarding CIT(A) proceedings: (xi) Being aggrieved with the assessment order, the assessee filed an appeal before CIT(A). During the faceless appeal proceedings, the assessee filed a detailed written submission explaining and rebutting each of the allegations levelled by the AO in the assessment order. (xii) The assessee in order to justify the creditworthiness of M/s Click Cab Technology, LLP furnished the ITRs and respective bank statements of partners, Muraleedharan Nair and Unnikrishnan Venugopal to show that they had provided unsecured loans to M/s Click Cab Technology, LLP which were invested in the assessee company. The assessee also justified the business model of the assessee along with the purpose and utilization of funds raised through the share capital during the year. The assessee further justified the huge share premium by showing the increasing turnover of the last 5 years to elaborate the past performance of the assessee company. (xiii) However, the ld. CIT(A), without appreciating the submissions of the assessee, confirmed the impugned addition based on the same allegations made by the AO in the assessment order. The ld. CIT(A) reiterated the same findings as given in the assessment order without specifying what additional information or documents he required from the assessee to justify the share capital transaction with M/s Click Cab Technology LLP. (xiv) All the aforesaid facts prove that the assessee was not given reasonable and sufficient opportunity of being heard by the lower authorities to clear their doubts regarding the identity and creditworthiness of the investor/shareholder and genuineness of the transaction. (xv) It is pertinent to mention here that the assessee though had furnished the sufficient evidences to satisfactorily prove the identity of the shareholder, genuineness of the transaction and creditworthiness of the shareholder along with the additional requirement of explaining the source of source, as prescribed u/s 68 of the Act. However, in order to strengthen its arguments regarding the onus casted u/s 68 of the Act to prove identity, genuineness and creditworthiness, the assessee company seeks to furnish the additional evidence mentioned at para 1 of the application. 6 ITA No.443/DEL/2024 4 The relevancy of the additional evidences is explained hereunder in brief manner: A Regarding Identity of M/s Click Cab Technology, LLP: (i) Incorporation Certification and MCA data of M/s Click Cab Technology, LLP showing its active status as on 10.07.2024. B Regarding Genuineness of the transaction with M/s Click Cab Technology, LLP: (ii) Copies of Form PAS 3 filed with the ROC, along with board resolutions and the list of allottees, for the allotment of 899 preference shares to M/s Click Cab Technology in the preceding FY 2015-16 (AY 2016-17) and 1818 preference shares in the current FY 2016-17 (AY 2017-18). The assessee company had issued 899 CCPS to M/s Click Cab Technology at the same face value and share premium in the preceding FY 2015-16 (AY 2016-17), which were accepted by the department. (iii) Share Subscription and Shareholder Agreements dated 01/02.03.2016 among the assessee, M/s ACE CAB PRIVATE LIMITED, M/S CLICK CAB TECHNOLOGY, LLP and the promoters of M/s ACE CAB PRIVATE LIMITED. (iv) Conversion of CCPS shares into equity shares and issuance of bonus shares in the FY 2018-19: During FY 2018-19, all 2717 CCPS shares (899 CCPS issued in FY 2015-16 and 1818 CCPS in FY 2016-17) issued to Click Cab Technology LLP were converted into 27,170 equity shares, as the face value of each CCPS was Rs. 100 and the face value of each equity share was Rs. 10. Additionally, during FY 2018-19, the assessee company issued bonus shares to M/s Click Cab Technology LLP. As a result, as of 31-03-2019, Click Cab Technology LLP held 818,100 equity shares in the assessee company. The details are as follows: Additional Evidences (Statutory Documents) regarding conversion of CCPS into equity shares and issuance of bonus shares: 1) Ledger of Click Cab Technology in the books of ACE Cab Private Limited showing conversion of CCPS into equity shares and issuance of bonus shares during the FY 2018-19. 2) FORM PAS-3 filed with ROC along with Board Resolution and List of Allottees 3) Form SH-1 (Share Certificates) F.Y. Number of Shares Remarks 2015-16 10 Equity shares - 2018-19 27170 Equity shares Converted from 2717 CCPS 2018-19 90 Equity shares Bonus shares 2018-19 790830 Equity shares Bonus shares Total 818100 Equity Shares 7 ITA No.443/DEL/2024 (v) Equity shares held by M/s Click Cab Technology, LLP were purchased by promoters of the assessee company in the FY 2019-20: During F.Y. 2019-20, the promoters of assessee company Mr.Aman Julka and Mr. Arjun Julka purchased all the 818100 equity shares held by Click Cab Technology LLP at a purchase price of Rs.1,80,00,000/- for which following additional evidence are filed: - 1) Copy of Share purchase agreement dated 05.12.2019 2) Copies of bank statement of Mr. Aman Julka and Mr. Arjun Julka. (vi) Email correspondence exchanged between the concerned employees of M/s Ace Cab Limited and M/s Click Cab Technology LLP discussing updates and developments of the mobile app/test server during FY 2016-17 and FY 2017- 18. 4 All the aforementioned additional evidence demonstrates that the transaction of allotting preference share capital and share premium to M/s Click Cab Technology, LLP was entirely genuine. The purpose was to raise funds for the development of a mobile app/software for booking cabs, and the investor was subsequently provided an exit through the purchase of its shares by the promoters of the assessee company. 5 Thus, it is submitted that the aforementioned additional evidences, supporting the contentions and arguments raised by the assessee, are crucial for the judicious disposal of the present appeal. Therefore, it should be admitted in accordance with Rule 29 of the Rules and taken into consideration while adjudicating the assessee's grounds of appeal. 6 It is further submitted that the evidences sought to be filed as additional evidence will render substantive justice to the assessee and will assist Your Honours’ in passing a fair and a reasonable order. In this regard, we invite Your Honours’ attention to the decision of the Hon’ble Supreme Court in the case of Sanjay Kumar Singh Versus The State of Jharkhand vide CIVIL APPEAL NO. 1760 OF 2022; Judgement dated 10.03.2022 whereby it has been held that where the additional evidence sought to be adduced removes the cloud of doubt-over the case and the evidence has a direct and important bearing on the main issue in the suit and interest of justice clearly renders it imperative that it may be allowed to be permitted on record, such application may be allowed. Relevant extracts are as under: \"4. It is true that the general principle is that the appellate court should not travel outside the record of the lower court and cannot take any evidence in appeal. However, as an exception, Order 41 Rule 27 CPC enables the appellate court to take additional evidence in exceptional circumstances. It may also be true that the appellate court may permit additional evidence if the conditions laid down in this Rule are found to exist and the parties are not entitled, as of right, to the admission of such evidence. However, at the same time, where the additional evidence sought to be adduced removes the cloud of doubt over the case and the evidence has a direct 8 ITA No.443/DEL/2024 and important bearing on the main issue in the suit and interest of justice clearly renders it imperative that it may be allowed to be permitted on record, such application may be allowed. Even, one of the circumstances in which the production of additional evidence under Order 41 Rule 27 CPC by the appellate court is to be considered is, whether or not the appellate court requires the additional evidence so as to enable it to pronouncement judgment or for any other substantial cause of like nature. As observed and held by this Court in the case of A. AndisamyChettiar v. A. SubburajChettiar, reported in (2015) 17 SCC 713, the admissibility of additional evidence does not depend upon the relevancy to the issue on hand, or on the fact, whether the applicant had an opportunity for adducing such evidence at an earlier stage or not, but it depends upon whether or not the appellate court requires the evidence sought to be adduced to enable it to pronounce judgment or for any other substantial cause. It is further observed that the true test, therefore is, whether the appellate court is able to pronounce judgment on the materials before it without taking into consideration the additional evidence sought to be adduced. 5. Applying the law laid down by this Court in the aforesaid decision to the facts of the case on hand, we are of the opinion that while considering the application for additional evidence, the High Court has not at all adverted to the aforesaid relevant consideration, i.e., whether the additional evidence sought to be adduced would have a direct bearing on pronouncing the judgment or for any other substantial cause. As observed hereinabove, except sale deed 29.12.1987, which as such was rejected, there was no other material available on record to arrive at a fair market value of the acquired land. Therefore, in the facts and circumstances of the case, the High Court ought to have allowed the application for additional evidence. However, at the same time, even after permitting to adduce the additional evidence, the applicant has to prove the existence, authenticity and genuineness of the documents including contents thereof in accordance with law and for the aforesaid purpose, the matter is to be remanded to the Reference Court. 6. In view of the above discussion and for the reasons stated above, the present appeal is partly allowed. Order passed by the High Court rejecting IA No. 1384/2019 for adducing additional evidence to bring on record the documents mentioned in the said application is hereby quashed and set aside. IA No. 1384/2019 filed before the High Court for adducing additional evidence under Order 41 Rule 2 7 CPC is hereby allowed. The appellant herein is permitted to bring on record the documents mentioned in IA No. 1384/2019 as additional evidence.\" 7 Further reliance is placed on the decision of the Hon'ble Apex Court of India in the matter of Tek Ram Vs. Commissioner of Income-tax [2014] 44 taxmann.com 367 (SC) wherein it was held that documents which are relevant to the case should be considered before passing the order. The relevant extract of the case is hereunder: \"4. In our opinion, the documents, which the appellants have now filed before this court are of some relevance and those documents should be looked into by the High 9 ITA No.443/DEL/2024 Court before it comes to a conclusion whether the appeal requires to be allowed or to be rejected. 5. Taking that view of the matter, we set aside the order passed by the High Court and remand the matter back to the High Court for fresh disposal of I. T. A. No. 109 of 2005, after accepting the documents that were/may be filed by the appellants.” 8 The Hon'ble Delhi High Court in the case of CIT vs. Text Hundred India Pvt. Ltd.: 351 ITR 57(Del HC) observed the following: “13……It is well-settled that the procedure is handmade of justice and justice should not be allowed to be choked only because of some inadvertent error or omission on the part of one of the parties to lead evidence at the appropriate stage. Once it is found that the party intending to lead evidence before the Tribunal for the first time was prevented by sufficient cause to lead such evidence and that this evidence would have material bearing on the issue which needs to be decided by the Tribunal and ends of justice demand admission of such an evidence, the Tribunal can pass an order to that effect.” 9 Reliance is also placed on the decision of Hon'ble High Court of Delhi in case of CIT Vs. Virgin Securities and Credits (P.) Ltd. [2012] 20 taxmann.com 681 (Delhi) wherein it was held as under: “8. The aforesaid contention appears to be devoid of any merit. It is a matter of record that before admitting the additional evidence, the Commissioner of Income-tax (Appeals) had obtained a remand report from the Assessing Officer. While submitting his report, the Assessing Officer had not objected to the admission of the additional evidence, but had merely reiterated the contentions in the assessment orders. It is only after considering the remand report, the Commissioner of Income-tax (Appeals) had admitted the additional evidence. It cannot be disputed that this additional evidence was crucial to the disposal of the appeal and had a direct bearing on the quantum of claim made by the assessee. The plea of the assessee which was taken before the Assessing Officer remains the same. The Assessing Officer had taken adverse note because of non-production of certain documents to support the plea and it was in these circumstances, the additional evidence was submitted before the Commissioner of Income-tax (Appeals). It cannot be said nor is it the case of the Revenue that additional evidence is not permissible at all before the first appellate authority. On the contrary, rule 46A of the Rules permits the Commissioner of Income-tax (Appeals) to admit additional evidence if he finds that the same is crucial for disposal of the appeal. In the facts of this case, therefore, we are of the opinion that on this aspect, no substantial question of law arises.” 10 We also place reliance on the decision of the Hon’ble Delhi Tribunal in the case of Mankind Pharma Limited in I.T.A. No.2313/DEL/2022; order dated 01.05.2024 whereby the Hon’ble Tribunal held that where cause of substantial justice demands admission of additional evidences to arrive at just and fair conclusion, the additional evidences must be admitted. Relevant paras are reproduced as under: 10 ITA No.443/DEL/2024 “25. We shall first address ourselves on the admission of additional evidences strongly contested by both sides. 25.1 Rule 29 of the Income Tax (Appellate Tribunal) Rules, 1963, ostensibly places a bar on the parties to the appeal to produce additional evidences either oral or documentary before the Tribunal. However, the Tribunal is vested with a judicial discretion to allow the production of additional evidences in the following circumstances; (i) when the Tribunal requires any documents to be produced or any witness to be examined or any affidavit to be filed to enable it to pass orders or (ii) when the Tribunal requires any documents to be produced or any witness to be examined or any affidavit to be filed for any other substantial cause or (iii) when the Income Tax Authorities have decided the case without giving sufficient opportunity to the assessee to adduce evidences either on points specified by them or not specified by them. 25.2 In this backdrop, we take note of the plea raised on behalf of the assessee that additional evidences filed primarily demonstrate that the transactions between the eligible units and non eligible units / AEs are at arms length and at ordinary market price and therefore, no cause of action arises for invocation of 80IA(10) to allege the existence of any kind of ‘arrangement’ fetching more than ordinary profits to the assessee. …………………………………. 26. …………………………….. The additional evidences filed are in the form of comparative charts and Invoices showing value of purchases / sales made by the eligible units qua comparative transactions carried out by non AEs etc. The additional evidences attempts to uncover the myth propogated by the revenue and exposes the conceptual flaw in the approach adopted by it. The additional evidences would negate the artificial price distortion to claim higher deductions alleged by revenue without any basis. The assessee thus submits that the Tribunal is fully justified in admitting the additional evidences where it is of the opinion that substantial cause of justice cannot be carried out by ignoring the additional evidences. In the absence of such additional evidences, the Tribunal would be prevented from appreciating the relevant facts in perspective and the substantial cause of justice would be consequently defeated and denied to the assessee. The Assessee contends that the additional evidences merely seek to discharge onus which was never shifted to the Assessee by revenue. As pleaded, a fair comparison of controlled and uncontrolled transactions would be necessary for drawing fair conclusions on the issue. 27. ………………………………..It is further plea of the assessee that the additional evidence goes to prove conspicuous absence of any arrangement and the whole basis of reference to TPO and consequent addition by way of TP adjustment is vitiated and unsustainable in law. It is thus the plea of the assessee that to render substantial cause of justice, the Tribunal is not only entitled in law but also under a sacrosanct duty to admit the additional evidences, more so, where the lower authorities have omitted to examine the factual aspect on comparable market value of goods/services on the date of transfer expected of them in law. …………………………………… 11 ITA No.443/DEL/2024 30. ……………… The additional evidences appear to bring comparative purchase prices of various products transacted between AEs and non AE by an eligible unit to the fore. Similar is the case with sales carried out AEs vis a vis non AEs. Noticeably, the sales to AEs are insignificant in the context of total sales. The purchases from close connections are also moderate. In such matrix, to dispel the misconception of facts, if any, and to come to any definitive finding on existence of ‘arrangement’, the admission of additional evidence, in our view, would be paramount. 31. The TPO had no occasion to make any comparative data analysis of the transactions between eligible units and AEs and similar transaction executed by eligible units with non AEs. The TPO has also not taken into account the low percentage of such SDTs in the context of the case and hence no significant impact on resultant profits. The assessee, on the other hand, has adverted to tabulations to show that transactions between eligible units and its AE are at ALP indeed. We thus find ostensible merit in plea for admission of additional evidences filed under Rule 29 of the Income Tax (Appellate Tribunal) Rules, 1963. 32. While admitting the additional evidences, yet another angle occur in our mind. If the documentary evidences filed by way of additional evidences are ignored, it would be rather difficult for revenue to take a rational view towards existence of such arrangement. Hence, the documentary evidences filed for such purposes would be rather be necessary from the perspective of revenue also. The cause of substantial justice also demands admission to arrive at just and fair conclusion. 33. ………………………… The additional evidences filed would throw light on the bonafides of such transactions. 34. The Hon’ble Supreme Court in the matter of Tek Ram vs. CIT (2014) 44 taxmann.com 367 (SC) has held that documents which are relevant to the case should be looked into by the appellate body. The Hon’ble Delhi High Court in the case of CIT vs. Text Hundred India Pvt. Ltd., 351 ITR 57 (Del) and CIT vs. Virgin Securities and Credits (P.) Ltd. (2012) 20 taxmann.com 681 (Del) relied upon on behalf of the assessee have held that the additional evidences which are crucial to the disposal of the appeal and had a direct bearing on the subject matter requires to be taken into account. 35. To conclude, the additional evidences placed under Rule 29 of the Income Tax (Appellate Tribunal) Rules, 1963 stands admitted.” 11 To the same effect are the following judgements: a) Smt. Prabhavati S. Shah v. CIT [1998] 100 Taxman 404 (Bom.) b) Binny Ltd. v. Asstt. CIT [2010] 324 ITR 34 (Madras) c) Asst. CIT v. Citizen Urban Co-op. Bank Ltd. [2009] 120 ITD 513 (Amritsar) d) ONS Creations Private Limited Vs ITO ITA No. 6250/De1/2013 (ITATDelhi) 12 In view of the aforementioned reasons and the case laws cited in the present application, it is prayed that the additional evidences may kindly be admitted in the interest of justice. 12 ITA No.443/DEL/2024 He pleaded that the additional evidences may be admitted and taken on record in the interest of justice. 3. On the other hand, ld. DR for the Revenue objected to the submissions of the ld. counsel for the assessee. 4. Considered the rival submissions and material placed on record. We find that assessee has filed an application under Rule 29 of the ITAT Rules for admitting the additional evidences in the interest of justice to substantiate its case. After going through the application, we observed that these documents are relevant for adjudication of the issue raised in the appellate order which substantiate the allotment of shares, the relevant approval by the board and relevant documents submitted before the ROC towards compliance. These documents are relevant for reaching the decision, we deem it fit to admit the aforesaid additional evidences. 5. Aggrieved with the order of ld CIT(A), the assessee has taken the following grounds of appeal :- “1. That on the facts and circumstances of the case the learned Commissioner of Income Tax (Appeals) has erred both in law and on facts in confirming addition of Rs.99,99,000/- made u/s 68 of I.T. Act towards share subscription money received by the appellant for issuing Compulsory Convertible Preference Shares (CCPS) to M/s. Clickcab Technology LLP. In this regard all his observation are wrong and against the facts and law. 2. That on the facts and circumstances of the case the learned Commissioner of Income Tax (Appeals) has erred both in law and on facts in confirming addition of Rs.99,99,000/- which is based on surmises and conjecture which is arbitrary, unjustified, bad in law 13 ITA No.443/DEL/2024 and uncalled for and without examine the material/evidence placed on record and is against the principles of natural justice. 3. That on the facts and circumstances of the case the learned Commissioner of Income Tax (Appeals) has erred both in law and on facts in confirming the income of the appellant at Rs.99,99,000/- as against the loss of Rs.62,84,164/- declared by the appellant. 4. The above ground of appeal is without prejudice to one another.” 6. Brief facts are, the assessee company is engaged in the business of providing car rental services for more than 3 decades. During the year under consideration, the assessee company filed its return of income on 28.10.2017 declaring loss of Rs.62,84,164/-. It was submitted before us that the assessee company had a long-term objective of giving form and structure to the un-organized transportation industry in India. It wanted to create a similar business model as adopted by “Ola” and “Uber” to book cabs with the help of a mobile app. In order to raise funds to execute its business idea and to bring in the required expertise, the assessee, during the year under consideration had issued and allotted equity shares as well as Compulsory Convertible Preference Shares (“CCPS”), the details of which are given hereunder:  600 equity shares, having face value of 10/- per share and share premium of Rs. 5490/- per share, issued and allotted to the directors and relatives of the directors at total consideration of Rs. 33,00,000/- and 14 ITA No.443/DEL/2024  1818 SEED Compulsory Convertible Preference Shares (CCPS),having face value of 100/- per share and share premium of Rs. 5400/- per share, issued and allotted to M/s Click cab Technology LLP at total consideration of Rs. 99,99,000/-. 7. The case of the assessee was selected for scrutiny through CASS for the reason of large share premium received during the year. The AO, during the entire assessment proceedings, primarily verified the valuation of shares done by the assessee, correctness of DCF method adopted for the valuation, and the applicability of the provisions of Section 56(2)(viib) of the Act specifically for the allotment of SEED Compulsory Convertible Preference Shares (CCPS). 8. In order to verify the share allotment to the directors and investors, the assessee was asked to furnish the PAN details, current address, financial statements, ledger account, ITR, and bank statements of M/s Click Cab Technology LLP to examine the share premium received. The assessee submitted relevant information during the assessment proceedings. 9. A show cause notice dated 15.11.2019 was issued by the AO proposing to reject the valuation method of DCF adopted by the assessee. After considering the submissions of the assessee and found not acceptable to him, the AO had treated the investment of Rs. 99,99,000 by M/s Click Cab Technology LLP in 1818 SEED CCPS shares of the assessee valued 15 ITA No.443/DEL/2024 at Rs.4500 per share as unexplained share capital under Section 68 of the Act, based on the following reasons: (a) M/s Click Cab Technology LLP lacks the creditworthiness to make such a big investment on the ground that its statement of income & expenditure and ITR showed Nil Income. Further, the AO observed that the main funds have come from two managing partners, Muraleedharan Nair and Unnikrishnan Venugopal as unsecured loans which had been diverted to the assessee company for subscribing the CCPS. (b) Notice issued u/s 133(6) of the Act which was duly served on M/s Click Cab Technology, LLP remained unanswered. (c) The AO also observed that transactions made by M/s Click Cab Technology LLP are dubious in nature and the entire stratagem had been employed to introduce unexplained funds of the assessee through M/s Click Cab Technology LLP, based on the following factors: • The assessee has failed to give a business model embraced by it so as to attract share capital at such a high premium. The business of running cabs on hire is an ordinary idea which is captured even by persons of normal IQ and business acumen. Thus, what propelled M/S: Click Cab Technology LLP to make such a huge investment when it 16 ITA No.443/DEL/2024 did not have an economic profile to match the above investment. • M/S: Click Cab Technology LLP is based at Bengaluru, Karnataka and the partners too are based there at. Which circumstances attracted them to assessee company and what prospects they saw in assessee company to run the risk of investing this high investment is not clear. • If the business model of assessee company was so unique and dividend yielding how it could not catch the attention of investors/prudent businessmen in the NCR region where the assessee is running its business activities, is again not evident. 10. Aggrieved with the assessment order, the assessee filed an appeal before CIT(A). During the faceless appeal proceedings, the assessee filed a detailed written submission explaining and rebutting each of the allegations leveled by the AO in the assessment order. 11. The assessee justified the creditworthiness of M/s Click Cab Technology, LLP by submitting the ITRs and respective bank statements of partners, Muraleedharan Nair and Unnikrishnan Venugopal to demonstrate that they had provided unsecured loans to M/s Click Cab Technology, LLP and subsequently the same were utilized to invest in the assessee company. The assessee also submitted the business model of the assessee along with the purpose and utilization of funds raised through the share capital during the year. The assessee further justified the huge share 17 ITA No.443/DEL/2024 premium by tabulating the turnover of the last 5 years to demonstrate the past performance of the assessee company. 12. After considering the above submissions, the learned CIT(A) confirmed the impugned addition by primarily verifying the creditworthiness of M/s Click Cab Technology, LLP for the following reasons: (i) The trading & profit and loss account of M/s Click Cab Technology, LLP for the period from 01.04.2016 to 31.03.2017 showed a nil gross turnover, with partners' contributions of Rs. 9,000 and Rs. 10,000, and reserve and surplus of Rs. 24,429 and Rs. 10,70,400 for the financial years ending on 31.03.2016 and 31.03.2017, respectively (ii) Notices issued u/s 133(6) to M/s Click Cab Technology, LLP remained unanswered. 13. Aggrieved with the above order, the assessee filed the appeal before us raising grounds of appeal and also submitted additional evidences in support of the investments made by the Clickcab Technology LLP. At the time of hearing, Ld. AR for the assessee submitted oral submissions as well as filed written submissions which are reproduced below :- 1. Submissions:The submissions are being prepared after considering the evidence filed during the assessment and appellate proceedings, as well as the additional evidence in terms of Rule 29 of the Income-Tax (Appellate Tribunal) Rules, 1963. 11. During the year under consideration, for the development and growth of its business, the assessee had issued and allotted 1818 SEED Compulsory Convertible Preference Shares (CCPS) with Face Value of Rs. 100/- each to M/S. Click CabTechnology, LLP ( “Invest per share, the details of which are 12. The ld. AO and the ld. CIT(A) treated the aforementioned preference share capital and premium as unexplained cash credit u/s 68 of the Act primarily for the reason that M/s Click Cab Technology, LLP lacked creditworthiness for making such huge investment a notices issued u/s 133(6) of the Act. 13. It is pertinent to mention here that the assessee had also issued and allotted 899 SEED Compulsory Convertible Preference Shares (CCPS) with a face value of Rs. 100 each and a premium of Rs. 5400 per share to M/S Click Cab Technology, LLP, for a total consideration of Rs. 49,44,500 in the preceding financial year 2015-16 (AY 2016 The fact of CCPS issued and allotted in th the Audited Balance Sheet of the assessee company for the year ended on 31.03.2017 which is enclosed at page no. 7 & 8 of the PB. 14. Submissions regarding the impugned addition of Rs. 99,99,000/ 1818 CCPS allotted to M/s Click Cab Technology, LLP during the year, u/s 68 of the Act are being discussed in the forthcoming paragraphs. 15. Onus u/s 68 of the Act has been sufficiently discharged by proving identity and creditworthiness of the investor,M/s Click Cab LLP and genuineness of the transaction along with additional requirement of proving “source of source” 15.1 Section 68 of the Act deals with cash credits. It casts a the assessee to explain the nature or source of any sum found the books of the assessee to the satisfaction of the Assessing Officer. To discharge this onus, the assessee is required to satisfactorily prove the identity of the investor, genuineness of the transaction and creditworthiness of the inv absence of no explanation or satisfactory explanation, the AO may treat the cash credit as income of the assessee for the year in which such credit is received. 18 ITA No. Click CabTechnology, LLP ( “Investor/Shareholder”) at a premium of Rs. 5400/ per share, the details of which are as follows: The ld. AO and the ld. CIT(A) treated the aforementioned preference share capital and premium as unexplained cash credit u/s 68 of the Act primarily M/s Click Cab Technology, LLP lacked creditworthiness for making such huge investment and also for the reason of non-compliance of the notices issued u/s 133(6) of the Act. It is pertinent to mention here that the assessee had also issued and allotted 899 SEED Compulsory Convertible Preference Shares (CCPS) with a face each and a premium of Rs. 5400 per share to M/S Click Cab Technology, LLP, for a total consideration of Rs. 49,44,500 in the preceding 16 (AY 2016-17), which was not disputed by the fact of CCPS issued and allotted in the preceding FY is clearly evident from the Audited Balance Sheet of the assessee company for the year ended on enclosed at page no. 7 & 8 of the PB. Submissions regarding the impugned addition of Rs. 99,99,000/ tted to M/s Click Cab Technology, LLP during the year, u/s 68 of the Act are being discussed in the forthcoming paragraphs. Onus u/s 68 of the Act has been sufficiently discharged by proving identity and creditworthiness of the investor,M/s Click Cab LLP and genuineness of the transaction along with additional requirement of proving “source of source” Section 68 of the Act deals with cash credits. It casts a primary the assessee to explain the nature or source of any sum found to be credited in the books of the assessee to the satisfaction of the Assessing Officer. To discharge this onus, the assessee is required to satisfactorily prove the identity of the investor, genuineness of the transaction and creditworthiness of the inv absence of no explanation or satisfactory explanation, the AO may treat the cash credit as income of the assessee for the year in which such credit is received. ITA No.443/DEL/2024 or/Shareholder”) at a premium of Rs. 5400/- The ld. AO and the ld. CIT(A) treated the aforementioned preference share capital and premium as unexplained cash credit u/s 68 of the Act primarily M/s Click Cab Technology, LLP lacked creditworthiness for compliance of the It is pertinent to mention here that the assessee had also issued and allotted 899 SEED Compulsory Convertible Preference Shares (CCPS) with a face each and a premium of Rs. 5400 per share to M/S Click Cab Technology, LLP, for a total consideration of Rs. 49,44,500 in the preceding 17), which was not disputed by the department. e preceding FY is clearly evident from the Audited Balance Sheet of the assessee company for the year ended on Submissions regarding the impugned addition of Rs. 99,99,000/-being tted to M/s Click Cab Technology, LLP during the year, u/s 68 of Onus u/s 68 of the Act has been sufficiently discharged by proving identity and creditworthiness of the investor,M/s Click Cab Technology, LLP and genuineness of the transaction along with additional requirement primary onus on to be credited in the books of the assessee to the satisfaction of the Assessing Officer. To discharge this onus, the assessee is required to satisfactorily prove the identity of the investor, genuineness of the transaction and creditworthiness of the investor. In absence of no explanation or satisfactory explanation, the AO may treat the cash credit as income of the assessee for the year in which such credit is received. 19 ITA No.443/DEL/2024 Further, the first proviso to Section 68 which was introduced by the Finance Act 2013, casts an additional onus in case of a private limited company which has received the share capital and share premium during the year, to further explain the nature and source of the share capital and premium so invested by such shareholder in the assessee company i.e., explaining the “source of the source” from where the funds in the form of share capital and share premium are invested by a shareholder in the assessee company. Section 68 of the Act reads as under: “68.Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the [Assessing] Officer, satisfactory, the sum so credited may be charged to income- tax as the income of the assessee of that previous year : [Provided that where the assessee is a company (not being a company in which the public are substantially interested), and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee-company shall be deemed to be not satisfactory, unless— (a) the person, being a resident in whose name such credit is recorded in the books of such company also offers an explanation about the nature and source of such sum so credited; and (b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory:” 15.2 The assessee company, in this case, has satisfied the trinity tests of identity, genuineness and creditworthiness in the following manner: A) IDENTITY OF THE INVESTOR/SHAREHOLDER:At the very outset, it is submitted that the identity of the investor, M/s Click Cab Technology, LLP (“investor/shareholder”) is not in dispute. However, the assessee has furnished the following evidences to satisfy the test of the “identity” of the investor: Evidence filed during the assessment and first appeal proceedings: (i) PAN Details and current Address as per MCA records; (ii) ITR of the investor for the AY 2017-18 and AY 2019-20 enclosed at page no. 142 and 154-211 of the PB respectively Additional Evidence: (iii) Incorporation certificate dated 05.10.2015 of Click Cab Technology, LLP(Pg no. 236 of the PB) (iv) MCA profile of the investor as on 10.07.2024 showing its active status in the ROC records. (Pg no. 237-238 of the PB) 20 ITA No.443/DEL/2024 B) GENUINENESS OF THE TRANSACTION: The AO had though questioned the genuineness of the transaction by doubting the assessee's business model and the purpose of raising funds/making investments based on general and frivolous reasons, as stated in para 7(b) of the facts, which were rebutted by the assessee during the CIT(A) proceedings. However, the ld. CIT(A) did not dispute the genuineness of the transaction. The following supporting evidence are enclosed in the PB to satisfy the test of genuineness of the transaction: Evidence filed during the assessment and first appeal proceedings: (i) Company business profile at page no. 97-124 of the PB. (ii) Ledger of Click Cab Technology, LLP in the books of ACE Cab Private Limited for the FY 2016-17at page no.127 of the PB. (iii) Ledger of ACE Cabs Private Limited in books of Click Cab Technology, LLP for the FY 2016-17at page no.128 of the PB. (iv) Bank statement of ACE Cab Private Limited for the FY 2015-16 & 2016-17 highlighting the entries of funds received aggregating to Rs. 50,00,000/- and Rs. 1,00,00,000/- received in the FY 2015-16 and FY 2016-17 respectively from Click Cab Technology, LLP towards share capital and premium at page no. 129-135 of the PB. (v) Bank statement of Click Cab Technology, LLP for the FY 2016-17 showing the payments entries of share capital and premium aggregating to Rs. 1,00,00,000/- made to ACE Cab Private Limited during the FY 2016-17. This bank statement also shows the entries of funds received in the form of unsecured loans aggregating to Rs. 52,50,000/- and Rs. 57,50,000/- from its partners, Muraleedharan Nair and Unni Krishnan respectively at page nos. 136-141 of the PB. (vi) Balance Sheet and Statement of Income & Expenditure for the year ended on 31.03.2017 of Click Cab Technology, LLP reproduced at page no. 16 of CIT(A) order. (vii) Share Valuation Report of ACE Cabs Private Limited as on 01 April, 2016at page no. 212 to 232 of the PB. Additional Evidence: (viii) Ledger of share capital of Click Cab Technology in the books of ACE Cab Private Limited for the FY 2015-16 & 2016-17. It showed that 899 CCPS were issued and allotted by the assessee in preceding FY 2015-16 which were accepted by the department. Refer page no. 239 and 240 of the PB. (ix) Share Subscription Agreement dated 01.03.2016(Refer page no. 242 to 281 of the PB): The Share Subscription Agreement is a legal document governing the purchase of shares in the assessee company. It outlines the terms and conditions of the share purchase, such as the number of shares being issued, their price, and any other relevant details. In the case of the assessee company, the aforesaid Share Subscription Agreement was entered into on 01.03.2016, wherein the assessee 21 ITA No.443/DEL/2024 company requested the investor, M/S Click Cab Technology LLP, to invest up to an aggregate amount of Rs. 14,998,500/- in three tranches in consideration for the subscription to Compulsory Convertible Preference Shares (“Investor Subscription Securities”), which were received in FY 2015-16 and FY 2016-17.(Relevant pages 242-251 & 280) (x) Share Holder's Agreement dated 01.03.2016(Refer page no. 242 to 281 of the PB): The Shareholder Agreement is a document that governs the relationship between the shareholders of a company. It sets out the rights, obligations, and responsibilities of the shareholders, and outlines the rules by which the company will operate. The agreement typically covers a wide range of topics, including: - Governance, Management, Shareholders Meetings, Transfer of shares, Terms and procedure of conversion of CCPS, Procedure of Exit of Equity Shares, Dispute Resolution etc. So, along with the Share subscription agreement, the assessee company on 01-03-2016 also entered into a Shareholders’ Agreement with the investor M/S. Click Cab Technology LLP.(Relevant pages 282-289&318-319) (xi) Copies of Form PAS 3 filed with the ROC, along with board resolutions, list of allottees and Minutes of the Meeting, for the allotment of 899 preference shares to M/s Click Cab Technology in the preceding FY 2015-16 (AY 2016-17) and 1818preference shares in the current FY 2016-17 (AY 2017-18).(Refer page no. 323 to 392 of the PB) (xii) Conversion of CCPS shares into equity shares and issuance of bonus shares in the FY 2018-19: During FY 2018-19, all 2717 CCPS shares (899 CCPS issued in FY 2015-16 and 1818 CCPS in FY 2016-17) issued to Click Cab Technology LLP were converted into 27,170 equity shares, as the face value of each CCPS was Rs. 100 and the face value of each equity share was Rs. 10. Additionally, during FY 2018-19, the assessee company issued bonus shares to M/s Click Cab Technology LLP. As a result, as of 31-03-2019, Click Cab Technology LLP held 818,100 equity shares in the assessee company. The details are as follows: Supporting Evidences regarding conversion of CCPS into equity shares and issuance of bonus shares: F.Y. Number of Shares Remarks 2015-16 10 Equity shares - 2018-19 27170 Equity shares Converted from 2717 CCPS 2018-19 90 Equity shares Bonus shares 2018-19 790830 Equity shares Bonus shares Total 818100 Equity Shares 22 ITA No.443/DEL/2024  Ledger of Click Cab Technology in the books of ACE Cab Private Limited showing conversion of CCPS into equity shares and issuance of bonus shares during the FY 2018-19.Refer page no. 393 of the PB.  FORM PAS-3 filed with ROC along with Board Resolution and List of Allottees Refer page no. 394-410 of the PB.  Form SH-1 (Share Certificates)and DMAT request Form showing the holding of M/s Click Cab Technology, LLP after conversion and Bonus issue. Refer page no. 411-415 of the PB. (xiii) After conversion, 8,18,100 nos. of equity shares held by M/s Click Cab Technology, LLP were purchased by promoters of the assessee company at the total consideration of Rs. 1,80,00,000/- in the FY 2019-20: During F.Y. 2019-20, the promoters of assessee company Mr. Aman Julka and Mr. Arjun Julka purchased all the 818100 equity shares held by Click Cab Technology LLP at a purchase price of Rs. 1,80,00,000/- for which following additional evidence are enclosed in the PB: -  Copy of Share purchase agreement dated 05.12.2019 (Refer page no. 416-424 of the PB)  Copies of bank statement of Mr. Aman Julka and Mr. Arjun Julka(Refer page no. 425-427 of the PB) The above indicates that M/s Click Cab Technology, LLP was given an exit by the promoters of the assessee company in the FY 2019-20 by purchasing its equity shareholding. Thus, it cannot be stated that the preference share capital and premium allotted to M/s Click Cab Technology, LLP represented undisclosed or unexplained funds of the assessee. If these had been the assessee's own funds, there would have been no reason to pay them back at a higher return to M/s Click Cab Technology, LLP. It is further submitted that factum of repayment of loan/share application money is entitled to great weight while evaluating bonafides of the said loan/share application transactions.[Refer ACIT v. Evenmore Stock Brokers (P.) Ltd. [2024] 158 taxmann.com 211 (Delhi ITAT) (xiv) Email correspondence exchanged between the concerned employees of M/s Ace Cab Limited and M/s Click Cab Technology LLP discussing updates and developments of the mobile app/test 23 ITA No.443/DEL/2024 server during FY 2016-17 and FY 2017-18. (Refer page no. 428 to 456 of the PB.) These email correspondences show that the partners of M/s Click Cab Technology, LLP, Mr. Muraleedharan Nair and Mr. Venugopal Unnikrishnan, who possessed IT expertise, were continuously in touch with the office of the assessee company. They were receiving updates regarding the development of the software/app for booking cabs and providing their inputs and suggestions. (xv) It is also submitted that the directors and promoters also infused funds for expansion of the business of the assessee company at the same FMV/price of the shares which stands accepted. The infusion of funds at a higher share premium by the promoters which stands accepted by the department substantiates the proposed business model of the assessee company and consequently the genuineness of the present transaction by garnering part funds from the investor, M/s Click Cab Technology LLP through CCPS. All the aforementioned facts and documents clearly establish that the transactions for the allotment of CCPS to M/s Click Cab Technology, LLP were completely genuine, conducted through banking channels, and reported to the MCA by filing the necessary ROC records. These transactions were undertaken by the assessee company to raise funds for the development of a mobile app/software for booking cabs. C) CREDITWORTHINESSOF THE INVESTOR ALONG WITH SOURCE OF SOURCE OF REQUIREMENT: The ld. AO and the ld. CIT(A) mainly doubted the creditworthiness of M/s Click Cab Technology, LLP, alleging that the turnover of the LLP for F.Y. 2015-16 and 2016-17 was nil and the partners’ capital contribution in the LLP stood at Rs. 9000/- and Rs. 1000/- and ITRs showed NIL/meagre income. Assessment Proceedings: At the very outset since the AO did not give any opportunity to the assessee to discharge to prove the identity, creditworthiness of the investor along with the genuineness of the transaction, the assessee could not file any evidence in respect thereof. However, the ld. AO himself at para 4.1in the assessment order stated that “In the bank account of M/S: Click Cab Technology LLP furnished, the funds have first come from the two partners which have been diverted to the assessee company for subscribing the Seed CCPS.”This means that the AO was aware of the fact that Click Cab Technology, LLP had invested the funds received from the partners as unsecured loans in CCPS shares of the assessee company. However, the AO still questioned the creditworthiness of the investor ignoring the clear bank statement and balance sheet of the LLP investor. 24 ITA No.443/DEL/2024 CIT(A) proceedings: During the CIT(A) proceedings, the assessee submitted that the partners of M/S. Clickcab Technology, LLP namely Mr. Muraleedharan Nair and Mr.Venugopal Unnikrishnan had provided the unsecured loan to the LLP to subscribe the Preference shares in the assessee company. For justifying the creditworthiness, the assessee furnished the following evidences: (i) Bank statement of Muraleedharan Nair, partner of Click Cab Technology LLP for the FY 2016-17 showing that it had given unsecured loan aggregating to Rs. 52,50,000/- to the LLP during the year for subscribing CCPS in the assessee company. Refer page no. 143-145 of the PB. (ii) Bank statement of VenugopalanUnni Krishnan, partner of Click Cab Technology LLP for the FY 2016-17 showing that it had given unsecured loan aggregating to Rs. 57,50,000/- to the LLP during the year for subscribing CCPS in the assessee company. Refer page no. 146-151 of the PB. (iii) Furthermore, the bank statement of M/s Click Cab Technology, LLP shows that funds amounting to Rs. 1,00,00,000 were transferred by the LLP to the assessee company for subscribing to its CCPS shares during the year, immediately after receiving unsecured loans totalling Rs. 1,10,00,000 from the partners of the LLP. Refer page no. 136-141 of the PB. (iv) ITR for the AY 2017-18 of Muraleedharan Nair, showing Gross Total Income of Rs. 94,30,703/- . (v) ITR for the AY 2017-18 of Venugopalan Unni Krishnan, showing Gross Total Income of Rs. 18,29,355/- . Thus, by furnishing the aforementioned documents, the assessee demonstrated that M/s Click Cab Technology, LLP invested in the preference share capital of the assessee company using the unsecured loans received from its partners, who had the creditworthiness to provide these loans. These funds were then further invested by the LLP into the assessee company. Further, the high income declared by the partners in their respective ITR justifies their creditworthiness to provide unsecured loans to the LLP. Therefore, the assessee by furnishing the aforesaid documents proved the creditworthiness as well as the source of the source requirement as prescribed under the first proviso to Section 68 of the Act. 15.3 In view of the aforementioned facts and supporting evidence, it is submitted that the assessee company has established the identity of the shareholder i.e., M/s Click Cab Technology, LLP, genuineness of the transaction and creditworthiness of the shareholder beyond any doubt by filing concrete and 25 ITA No.443/DEL/2024 conclusive supporting evidences. The assessee company has also proved the source of the source by proving the bank statements and ITRs of the partners of the LLP. Hence, the assessee company has sufficiently discharged the onus u/s 68 of the Act and therefore, the addition of Rs. 99,99,000/- on account of unexplained cash credit deserves to be deleted. 15.4 Regarding the allegation of the ld. AO and ld. CIT(A) that M/s Click Cab Technology, LLP had Nil turnover, meagre income declared in the ITR and Low Partner’s capital contribution , we invite your Honours’ kind attention to the decision to the Hon’ble High Court of Delhi in the case of M/s Vrindavan Farms Pvt. Ltd. v CIT, ITA 71, 2015whereby it has been held that mere low operational income of the shareholders cannot be criteria for disputing creditworthiness of the investor and making addition u/s 68 of the Act. 15.5 We also invite your Honours’ attention to the decision of the Hon’ble Bombay High Court in the case of Ami Industries (India) (P.) Ltd. [2020] 424 ITR 219 (Bombay)[29-01-2020] whereby it has been held that to justify the creditworthiness, it is not necessary that the share application money should be invested out of taxable income only. It may be brought out of borrowed funds. Relevant paras of the decision are reproduced hereinunder: “17. In so far order passed by the Assessing Officer is concerned, he came to the conclusion that the three companies who provided share application money to the assessee were mere entities on paper without proper addresses. The three companies had no funds of their own and that the companies had not responded to the letters written to them which could have established their credit worthiness. In that view of the matter, Assessing Officer took the view that funds aggregating Rs. 34 Crores introduced in the return of income in the garb of share application money was money from unexplained source and added the same to the income of the assessee as unexplained cash credit under section 68 of the Act. 18. In the first appellate proceedings, it was held that assessee had produced sufficient evidence in support of proof of identity of the creditors and confirmation of transactions by many documents, such as, share application form etc. First appellate authority also noted that there was no requirement under section 68 of the Act to explain source of source. It was not necessary that share application money should be invested out of taxable income only. It may be brought out of borrowed funds. It was further held that non-responding to notice would not ipso facto mean that the creditors had no credit worthiness. In such circumstances, the first appellate authority held that where all material evidence in support of explanation of credits in terms of identity, genuineness of the transaction and credit-worthiness of the creditors were available, without any infirmity in such evidence and the explanation required under section 68 of the Act having been discharged, Assessing Officer was not justified in making the additions. Therefore, the additions were deleted.” 26 ITA No.443/DEL/2024 15.6 Reliance is also placed on the decision of the Hon’ble Delhi ITAT in the case of Prime Comfort Products (P.) Ltd. v. ACIT Trib.)[2019] 179 ITD 647 (Delhi - Trib.)[04-10-2019]has also held that no addition could be made under section 68, where assessee-company issued its shares at premium to subscribing company and subscribing company had explained that shares were taken on premium out of loan taken from NBFCs and had given immediate source; and had also given documents and confirmations from NBFC companies confirming loan out of borrowings. Relevant paras of the decision are reproduced as follows: “18. Under the deeming provision of Section 68, the primary onus lies upon the assessee to prove the nature and source of credit. Here, in this case, the nature has been stated to be share application money which has been duly allotted by the assessee company to the subscribing company for which all the documentary evidences, including from ROC has been filed. The source of credit has been explained from the bank statement of the subscribing company, audited balance sheet, ITRs, etc. Further, the subscribing company, M/s. Aviskar Marketing Pvt. Ltd has also explained the source of fund received by it from three other companies who have also furnished the entire details of the loan given to the said company. No adverse material has been brought on record by the Assessing Officer after assessee had filed these evidences against these companies nor any inquiry have been made that the entire transactions by these companies are colourable or sham. Here, it is not a case of any accommodation entry provider nor there is any investigation or report or inquiry that either M/s. Aviskar Marketing Pvt. Ltd. or two other companies who had given loan to M/s. Aviskar Marketing Pvt. Ltd. were involved in any bogus accommodation entry or were in collusion. One of the reason given by the Assessing Officer is that revenue from operations of M/s. Aviskar Marketing Pvt. Ltd. was Nil/meager. However, in the balance sheet itself incorporated by him in the assessment order it is clearly borne out that there is huge availability of fund in the form of long term borrowings of more than Rs. 4.15 crores and reserves and surpluses of Rs. 3.76 crores. If the said company has stated that it has subscribed to the share application money out of borrowing and has also proved the genuineness and creditworthiness of the loan taken from the 3 parties directly before the Assessing Officer, then primary onus cast upon the assessee stands fully discharged. It is not the case here that any adverse material has been unearthed or has been found that all these transactions are 'make believe arrangements' or all the evidences are mere paper trail. 19. ………………….Here the genuineness of the transaction is proven from the fact that M/s. Aviskar Marketing Pvt. Ltd. has subscribed the shares on premium out of loan taken from NBFCs and has given the immediate source; and not only that, it has also given the documents and confirmations from the NBFC companies confirming the loan given to the subscribing company who in turn has subscribed the share of the assessee company. Under these circumstances and facts of the case and without there any material that any unaccounted money has been routed through 27 ITA No.443/DEL/2024 various channels, then simply based on presumption and hypothesis deeming fiction cannot be invoked. If the assessee has proved the source as well as the source of the source of the fund then onus shifts upon the Assessing Officer to carry some prima facie inquiry to rebut the explanation given by the assessee. In absence of any such exercise, addition cannot be sustained simply based on certain hypothesis.” 15.7 Further, the Hon’ble Delhi ITAT in the case of M/s Angel Cement Pvt. Ltd. ITA no. 4691/Del/2016; order dated 18.03.2021 has held that “63. Again, in so far as the creditworthiness is concerned, these companies have made investments through banking channels duly reflected in the bank statement and have also filed balance sheets and detailed explanation thereafter showing their availability of funds for making the investments. The case of the Department before us has been that these companies had very meager income however the Revenue from the operations did not justify such an investment. First of all, what is required to be seen is whether the lender/investor companies had sufficient funds available with them in the books/ balance sheets and it is not necessary that loan or advances or shares are subscribed, should be out of taxable income only. Either it could be from borrowed funds or from the investments standing in their balance sheet. If the Assessing Officer doubted the source of the fund of the investor companies, then Assessing Officer was required to at least conduct prima facie inquiry from these investors to rebut the assessee’s explanation about the source of the funds in the hands of the investor companies.” 15.8 Furthermore, the Hon’ble ITAT in the case of ITO Ward -20(3) v. RMP Holding (P) Ltd. ITA no. 6017/Del/2018held as follows: “27. ………………… One of the reasons cited by the DR after referring to these judgments was that these companies were showing very meagre income or loss. In our opinion what is required to be seen is, whether these companies has sufficient source of funds duly disclosed in their balance sheet filed along with the income tax return which has been assessed and not disturbed and if the source of funds are disclosed in the books are sufficient to cover up the investments made by them, then whether they have shown lesser income will not lead to inference that they do not have creditworthiness or capacity to make investment. Here in the balance sheets of all the companies there are huge funds available from where they have made investments. It is only by way of inquiry if it is found that these companies are only providing any accommodation entry then a doubt can be created about the creditworthiness of these companies. But without any such prima facie inquiry or material on record to prove that availability of huge investments in their balance sheet are duly supported by source of funds, then it cannot be held that there is a lack of creditworthiness. In view of our detailed finding given above, we hold that the reasoning given by the AO for sustaining the addition cannot be sustained and accordingly on merits the appeal of the assessee is partly allowed.” 28 ITA No.443/DEL/2024 15.9 The Hon’ble Mumbai ITAT in the case of Chemicon Engineering Consultant (P.) Ltd. V ACIT [2022] 142 taxmann.com 297has also held as follows: “16. Another reasoning given by the AO to justify the impugned addition was that, some of the shareholders had reported NIL or meagre income which did not commensurate with the investments made by them and it therefore raised doubts on their creditworthiness. As already noted by us above, each of the shareholders had sufficient own funds and reserves to justify the investments made by them in the assessee company. The fact that some of the shareholders did not derive sufficient profits during the year cannot be the sole determinative factor to doubt their creditworthiness. It is noted that, such shareholders have demonstrated that the investments made by them with the assessee, were either out of the proceeds received on sale of investments which were made in earlier years and/or refund of loans granted earlier. The source of source of funds has also been provided, which has already been discussed above. On these facts, in our considered view therefore, nothing much turns on the fact that some of the shareholders had reported meagre income in the relevant year.” 15.10 Further, reliance is also placed on the following decisions in respect of the aforesaid proposition:  Honourable Raipur ITAT in DCIT v. Shree Rupanandham Steel (P.) Ltd. [2024] 161 taxmann.com 745  DCIT v. Acro Exports Trade (P.) Ltd. [2019] 111 taxmann.com 51 (Mumbai Tribunal] 15.11 Regarding source of the source explanation: (i) The Hon’ble Delhi ITAT in the case of Renu Proptech (P.) Ltd. v. ACIT[2021] 190 ITD 378 (Delhi - Trib.)[26-04-2021] has held that once the assessee has established the 'source' and 'source of the source', and if the 'source' is not able to explain or give plausible explanation of its 'source', then, the addition should be made in the hands of that person and not in the hands of the assessee company, as prima facie, the assessee company has discharged its burden of proof. Relevant paras of the decision are reproduced hereunder: “15. On careful perusal of the aforementioned documents, we are of the considered view that the assessee has not only proved the source of share capital and share premium received by it, but has also proved the nature and source of funds in the hands of shareholders. We find that the AO has not pointed out any discrepancy in the documentary evidences filed by the assessee in support of its claim but has made general observations in respect of entry provider of some SK Jain group. In our considered opinion, once the assessee has established the 'source' and 'source of the source', and if the 'source' is not able to explain or give plausible explanation of its 'source', then, the addition should be made in the 29 ITA No.443/DEL/2024 hands of that person and not in the hands of the assessee company, as prima facie, the assessee company has discharged its burden of proof. 16. Further, we find that Shri Anand Gupta, HUF and Shri Sanchit Gupta, whose additions have been confirmed by the CIT[A], these two share applicants have shown their respective source of source, sale consideration resulting into capital gain on sale of shares of Shital Leasing and Finance Ltd which, according to the Assessing Officer, was a company engaged in accommodation entry business. Assuming that the shareholder Anand Gupta HUF has introduced his own unaccounted cash in the disguise of long-term capital gain from sale of shares of some penny stock company, then the addition should have been made in his hands and not in the hands of assessee company. 17. Long-term capital gain from sale of shares of Shital Leasing and Finance Ltd, if according to the AO, is a sham transaction, then, addition should have been made in the respective hands of the share applicants and not the assessee company. The appellant is only required to prove the identity, genuineness of the transaction and capacity of the lender and by virtue of the first proviso to section 68 of the Act where the appellant has received share premium, then it has also to establish the source of source. 18. Considering the plethora of documentary evidences, we find that not only the assessee has established the source of the creditor, but it has also furnished documentary evidences to show the' source of source'. We find that the AO, while making addition, has made general observations relating to the circulation from one source to the other.” (ii) Further, we also rely on the decision of the Hon'ble Delhi Tribunal in the case of ACIT v. Enrich Agro Food Products (P.) Ltd. [2021] 128 taxmann.com 242 (Delhi)whereby it has been held as under: “ 29.3 A perusal of the details filed by the assessee in the paper book in respect of the above 08 parties who had extended unsecured loan of Rs. 4,78,00,000/- shows that they have sufficient capacity to extend the loan to Mr. Taranpal Singh Kandhari who in turn had invested in the shares of the assessee company. There is no evidence on record to show that the funds of the assessee company has gone to these persons which in turn had come back to the assessee company. …………………………………………………………………………………………………………… 29.5 Thirdly, one of the observations of the A.O. at para 4.10 of the assessment order is that the profit declared by the investor companies over the years is negligible and even the turnover declared by the investor companies is not very significant in most of the cases. However, the assessee company has received share capital and share premium only from one individual namely Shri Taranpal therefore, we find merit in the argument of the Learned Counsel for the Assessee that this observation of the A.O. is infructuous. Even otherwise also the assessee company has filed sufficient details to not only prove the source but th that addition could not have been made on this issue also.” 16. When the assessee has discharged its primary onus of proving identity and capacity of creditor/investor as well as genuineness of transaction, merely because creditor/investor has not responded to notice issued under section 133(6), such loan/share capital could not be treated as unexplained credit under section 68. 16.1 Another allegation on the basis of which the impugned addition was made by the ld. AO and sustained by the ld. CIT(A) is that M/s Click Cab Technology, LLP did not comply with the notices issued u/s 133(6) of the Act and chose to remain silent thereon. 16.2 In this respect, it is submitted that the ld. AO at first had issued th notice u/s 133(6) of the Act on the address available of M/s Click Cab Technology, LLP in its ITR, however, the same was returned with postal remark “Insufficient address”. Then the ld. AO had issued the notice u/s 142(1) dated 26.11.2019 whereby it aske of the LLP as per ROC record. The assessee in response to the same provided the following details of the registered address of the M/s Click Cab Technology, LLP: Refer page no. 86 and 87 of the PB. 16.3 After receiving the aforesaid details, the ld. AO at the fag end of the assessment proceedings, had issued another notice u/s 133(6) of the Act on 02/12/2019. The said notice had been sent by speed on M/s Click Cab Technology assessment order. However, the LLP did not file any response to the same. 16.4 Thus, it is not the case that the investor LLP did not exist at the available address or that it was a bogus concern. Rather, Technology, LLP was a genuine entity functioning from the registered office. 16.5 Further, most of the details sought by the learned AO through the notice u/s 133(6) have been furnished to the lower authorities. The onus of pr identity and creditworthiness of the investor, as well as the genuineness of the 30 ITA No. assessee company has received share capital and share premium only from one individual namely Shri Taranpal Singh Kandhari and, therefore, we find merit in the argument of the Learned Counsel for the Assessee that this observation of the A.O. is infructuous. Even otherwise also the assessee company has filed sufficient details to not only prove the source but the source of the source. We, therefore, hold that addition could not have been made on this issue also.” the assessee has discharged its primary onus of proving identity and capacity of creditor/investor as well as genuineness of merely because creditor/investor has not responded to notice issued under section 133(6), such loan/share capital could not be treated as unexplained credit under section 68. Another allegation on the basis of which the impugned addition was the ld. AO and sustained by the ld. CIT(A) is that M/s Click Cab Technology, LLP did not comply with the notices issued u/s 133(6) of the Act and chose to remain silent thereon. In this respect, it is submitted that the ld. AO at first had issued th notice u/s 133(6) of the Act on the address available of M/s Click Cab Technology, LLP in its ITR, however, the same was returned with postal remark “Insufficient address”. Then the ld. AO had issued the notice u/s 142(1) dated 26.11.2019 whereby it asked the assessee company to provide authentic address of the LLP as per ROC record. The assessee in response to the same provided the following details of the registered address of the M/s Click Cab Technology, LLP: Refer page no. 86 and 87 of the PB. After receiving the aforesaid details, the ld. AO at the fag end of the assessment proceedings, had issued another notice u/s 133(6) of the Act on 02/12/2019. The said notice had been sent by speed post which was duly served on M/s Click Cab Technology, LLP as per the AO’s findings at para 4.5 in the assessment order. However, the LLP did not file any response to the same. Thus, it is not the case that the investor LLP did not exist at the available address or that it was a bogus concern. Rather, it proves that M/s Click Cab Technology, LLP was a genuine entity functioning from the registered office. Further, most of the details sought by the learned AO through the notice u/s 133(6) have been furnished to the lower authorities. The onus of pr identity and creditworthiness of the investor, as well as the genuineness of the ITA No.443/DEL/2024 assessee company has received share capital and share premium Singh Kandhari and, therefore, we find merit in the argument of the Learned Counsel for the Assessee that this observation of the A.O. is infructuous. Even otherwise also the assessee company has filed sufficient details to not e source of the source. We, therefore, hold that addition could not have been made on this issue also.” the assessee has discharged its primary onus of proving identity and capacity of creditor/investor as well as genuineness of merely because creditor/investor has not responded to notice issued under section 133(6), such loan/share capital could not be treated Another allegation on the basis of which the impugned addition was the ld. AO and sustained by the ld. CIT(A) is that M/s Click Cab Technology, LLP did not comply with the notices issued u/s 133(6) of the Act and In this respect, it is submitted that the ld. AO at first had issued the notice u/s 133(6) of the Act on the address available of M/s Click Cab Technology, LLP in its ITR, however, the same was returned with postal remark “Insufficient address”. Then the ld. AO had issued the notice u/s 142(1) dated d the assessee company to provide authentic address of the LLP as per ROC record. The assessee in response to the same provided the following details of the registered address of the M/s Click Cab Technology, LLP: After receiving the aforesaid details, the ld. AO at the fag end of the assessment proceedings, had issued another notice u/s 133(6) of the Act on was duly served , LLP as per the AO’s findings at para 4.5 in the assessment order. However, the LLP did not file any response to the same. Thus, it is not the case that the investor LLP did not exist at the available it proves that M/s Click Cab Technology, LLP was a genuine entity functioning from the registered office. Further, most of the details sought by the learned AO through the notice u/s 133(6) have been furnished to the lower authorities. The onus of proving the identity and creditworthiness of the investor, as well as the genuineness of the 31 ITA No.443/DEL/2024 transaction u/s 68 of the Act, has been satisfactorily discharged by providing cogent and concrete evidence. Therefore, merely because M/s Click Cab Technology, LLP did not file a response to the notice u/s 133(6) of the Act, no adverse inference can be drawn against the assessee based on this. 16.6 In this regard, we place reliance on the following decisions whereby it has been held that when assessee discharged its primary onus of proving identity and capacity of creditor as well as genuineness of transaction, merely because creditor/investor had not responded to notice issued under section 133(6), such loan/share capital could not be treated as unexplained credit under section 68. (a) Hon'ble High Court of Delhi in case of PCIT Vs. Wel Intertrade (P.) Ltd. [2023] 152 taxmann.com 663 (Delhi) was held as under: “12. As regards the first issue which is proposed, the AO raised the very same concern, which is that there was no response received from the entity i.e., M/s Searock Developers Pvt. Ltd., which had advanced Rs. 2 crores to the respondent/assessee. The respondent/assessee had demonstrated, that out of Rs. 2 crores, Rs. 17 lakhs had been returned. The respondent/assessee also conveyed to the AO, that because of the disruption in relationship, there was, perhaps, non-cooperation by the said entity, with regard to the notice issued under section 133(6) of the Act………. 14. The Tribunal examined this issue as well, which is evident from the following parts of the impugned order: \"10.2 Before us, the assessee submitted that the mere fact that the assessee could not repay the said sum cannot be the basis of the addition. In fact inability of the assessee to refund the amount back to the creditor is the cause of dispute between the assessee and the creditor. Drawing our attention to the ledger account of the creditor for the subsequent year (page 462 of the Paper Book), it is submitted that the assessee had further refunded Rs. 1 lac. It is pointed out that the Ld. AO has not disputed either the creditworthiness or the source of the credit. The assessee has placed on record Financial Account of the creditor for the year ending on 31-3-2011 (page 438-451). Profit and Loss Account shows the income of Rs. 39,55,609/- in AY 2011-12 as against income of Rs. 25,33,745/- of the preceding year. 10.3 Having heard the submission of the parties and on careful consideration thereof, we have reached to the conclusion that the assessee has discharged the primary onus which lay upon it. The identity of the creditor, the creditworthiness of the creditor and genuineness of the transaction have been proved by the assessee. In CIT v. Bedi & Co. Pvt. Ltd. (1998) 230 ITR 580 (SC), the Hon 'ble Supreme Court held that where the explanation offered by the assessee as to the nature and source of credit is prima facie credible, it cannot be rejected on mere surmises. We, therefore, 32 ITA No.443/DEL/2024 delete the impugned addition of Rs. 1,83,00,000/-, Ground No, 6 and its sub- grounds are decided in favour of the assessee.\" 15. In our view, the Tribunal adopted the correct approach. Merely because the respondent/assessee had not repaid the balance amount i.e., Rs. 1.83 crore, and the creditor had not responded to the notice issued under section 133(6) of the Act could not have been used as a reason by the AO to make an addition.” (b) In the decision of Hon'ble High Court of Gujarat in case of CIT v. Nilchem Capital Ltd. [2012] 18 taxmann.com 350 (Gujarat)was held as under: “8. ……… CIT (Appeals) noticed that the Assessing Officer, instead of adding the investment made in the share capital of the company only to the extent where there was no disclosure of identity, added the entire share capital of Rs. 8,20,16,000/-, which included contributions by promoters, NRI, large investors and small investors without gathering sufficient evidence and, therefore, did not uphold such an addition. It found such a situation improbable where the entire capital of the company could be bogus and unexplained. It also noticed that when 68 notices were issued under Section 133(6) of the Act, 12 persons confirmed their investments which was to the tune of Rs. 71,16,330/-. CIT (Appeals) also found no plausible explanation from the Revenue to include this amount of Rs. 71,16,330/- as an addition under Section 68 of the Act. Moreover, three banks also had confirmed collections made by them to the tune of Rs. 20,33,000/-, Rs. 1,71,68,000/- and Rs. 4,00,77,500/- respectively. Only Madura Bank could not send confirmation report as its branch in Ahmedabad was closed. CIT (Appeals) also found that the entire money had come through the Banking channel and the share holders had contributed to share applications from various places. Only on the ground that out of 68 parties, 56 parties did not respond to the notices sent under Section 133(6), CIT (Appeals) did not find any justification in making addition of the entire share capital. Accordingly to CIT (Appeals), since, there was no response from these 56 parties, the contribution reflected of those shareholders, who did not respond, could still be justifiably added under Section 68 but surely not of all the shareholders, who were nearly 3000 in numbers. 14. ………. Again, when it is at the stage of adducing evidence and to avail the opportunities to the parties, it cannot be said that any question of law arises for this Court's determination, much less the substantial question as neither side is likely to be prejudiced by the order of the Tribunal and as both the sides once again shall have ample opportunity to pursue their respective stands………” (c) Reliance, in this regard is also placed on the decision of Hon. High Court of Bombay in the case of Commissioner of Income Tax – 1, Mumbai Vs. 33 ITA No.443/DEL/2024 Nikunj Eximp Enterprises (P.) Ltd. [2013] 35 taxmann.com 384 (Bombay) wherein it was held that the purchases cannot be held as bogus merely because the suppliers did not appear before the Assessing Officer: (d) In the decision of Hon'ble Delhi Tribunal in case of Vidya Education Investments (P.) Ltd. v. DCIT [2021] 129 taxmann.com 5 (Delhi) it has been held as under: “6. The ld. AR argued that the assessee cannot be held responsible, if M/s Kakade Stone Crusher does not comply to the notice u/s 133(6) issued by the department. If, M/s Kakade Stone Crusher is responsible for any misdemeanor or non-compliance, then M/s Kakade Stone Crusher should be treated as in default but not the assessee. 7. It was argued that the amount was received by account payee cheque and also returned back on 23-7-2011 by cross account payee cheque. The assessee has disclosed all the particulars and PAN so identity was proved. 10. We find that the advance of Rs. 50,00,000/- has been received by the assessee on 27-1-2011 and repaid on 23-7-2011. The return for the relevant assessment year was filed on 28-9-2011 and the notice u/s 143(3) was issued on 10-9-2012 which primarily shows that the transactions have been completed before filing of the return. The assessee from their side reproduced the relevant details and documents to prove the identity, genuineness and creditworthiness of the loan party and the transactions. Since, the amount has already been paid, the assessee could no more exert any influence on the loan party. At the same time, the assessee can be said to have discharged his primary onus with regard to the advance. There was no information with the AO before or during the assessment proceedings to point out any suspicion with regard to the deposit and its sources either in the form of cash deposits or any other enquiries conducted. The addition has been made merely on the grounds that there was no compliance from M/s Kakade Stone Crusher to the notice issued u/s 133(6). We have also gone through the judgment relied upon by the ld. CIT (A) while confirming the addition. We find that the judgment has been delivered while dealing with the question of genuineness of the huge premium paid on the shares. The addition was confirmed owing to presence of abundant corroborative evidences which is not show in the instant case. 11. Having gone through the entire factum of the case, we hereby hold that the addition made by the AO cannot be sustained as the 34 ITA No.443/DEL/2024 assessee has discharged the primary onus casted upon them and the revenue has not brought on record to treat the amounts u/s 68.” (e) In the decision of the Hon'ble Mumbai Tribunal in case of Chemico Engineering Consultant (P.) Ltd. v. ACIT [2022] 142 taxmann.com 297 (Mumbai), it has been held as under: “19. The other main plank on which the AO justified the addition made u/s 68 of the Act was the commission report obtained u/s 131(1)(d) of the Act dated 22-03-2016 wherein the DDIT had stated that none of these companies were traceable at their given addresses and that all the sixteen (16) shareholders belonged to entry operators. At the time of hearing, the Ld. AR of the assessee painstakingly took us through the contents of the report and argued that the averments made therein were patently erroneous which raised serious doubt on the veracity of the report. He first invited our attention to Para 2 of the report wherein the DDIT had mentioned that he had deputed Inspectors attached with his office to verify the whereabouts of the companies and that none were found at their registered offices and even the local residents failed to acknowledge their existence. To this, he pointed out that, prior to the commission, the AO had on his own volition issued notices u/s 133(6) of the Act to these shareholders through Indian Postal authorities, which were admittedly served upon them. It was not a case that the notices were served either by hand or on e-mail. Referring to the Section 27 of the General Clauses Act, the Ld. AR stated that the fact that the notice was served through registered post upon the shareholders proved their existence……..” 17. The assessee had sufficiently explained the purpose of raising funds, business model of the assessee company etc. before the ld. CIT(A) who after accepting the explanation of the assessee did not draw any adverse inference in respect of illogical factors considered by the AO. 17.1 In this regard, it is submitted that the AO also alleged in the assessment order that transactions made by M/s Click Cab Technology LLP are dubious in nature and the entire stratagem had been employed to introduce unexplained funds of the assessee through M/s Click Cab Technology LLP, based on the following illogical factors: • The assessee has failed to give a business model embraced by it so as to attract share capital at such a high premium. The business of running cabs on hire is an ordinary idea which is captured even by persons of 35 ITA No.443/DEL/2024 normal IQ and business acumen. Thus, what propelled M/S: Click Cab Technology LLP to make such a huge investment when it did not have an economic profile to match the above investment. • M/S: Click Cab Technology LLP is based at Bengaluru, Karnataka and the partners too are based there at. Which circumstances attracted them to assessee company and what prospects they saw in assessee company to run the risk of investing this high investment is not clear. • If the business model of assessee company was so unique and dividend yielding how it could not catch the attention of investors/prudent businessmen in the NCR region where the assessee is running its business activities, is again not evident. 17.2 The assessee vide its submissions dated 01.09.2021 filed before the ld. CIT(A) rebutted each of the aforesaid allegations made in the assessment order. Relevant pages of the submissions are enclosed at page nos. 92 and 93 of the PB. The ld. CIT(A) accepted the explanation of the assessee and did not make any adverse inference on the basis of the aforesaid allegations in his order. 18. It is a settled law that once the assessee discharges its onus u/s 68 of the Act, the burden shifts on the Revenue to prove otherwise. Reliance is placed on following judicial pronouncements for this proposition: a. The decision of the Hon'ble Delhi High Court in the case of CIT v. Value Capital Services (P.) Ltd. [2008] 307 ITR 334, wherein it was held that the amounts received towards share application money cannot be assessed in the hands of the company unless the Department is able to show that the amount received towards the share capital actually emanated from the coffers of the company. b. Pr. CIT vs. Paradise Inland Shipping Pvt. Ltd [2017] 84 taxmann.com 58 (Bombay): It has been held in this case that companies which invest share capital cannot be treated as bogus if they are registered and have been assessed. Once the assessee has produced documentary evidence to establish the existence of such companies, the burden shifts to the Revenue to establish their case. c. The Hon’ble ITAT Delhi in the case of ITO v. Neelkanth Finbuild Ltd. [2015] 70 SOT 368 (Delhi Trib.) has held as under in para 6: 36 ITA No.443/DEL/2024 “the learned Commissioner of Income tax (Appeals) observed that the Assessing Officer was not able to bring anything on record that it was the assessee's own money which was routed in the form of share application money and has rightly deleted the same.” d. CIT v. Lanco Industries Ltd.[2000] 242 ITR 357/110 Taxman 172 (AP). While rejecting the Revenue's appeal, the High Court observed that merely by reason of unsatisfactory explanation relating to the source of investment by the shareholders, the money invested in shares cannot be treated as income of the assessee. If the ostensible shareholders failed to explain the means of investment, that should have been treated as unexplained income in their hands. In order to add it to the income of the assessee there must be a further finding that in fact the shareholders were name lenders and the money allegedly invested by them really belongs to the directors of the assessee-company. In the present case, the Department having accepted the returns of income filed by the ostensible shareholders, it cannot go back while making the assessment of the assessee to hold that those shareholders are money lenders and investments were unexplained. Had the Department disregarded the returns filed by the alleged shareholders, alleging that the money moved out of the assessee's hands to the hands of the alleged shareholders only then it can be treated as the money belonging to the assessee. Without bringing on record a finding to show that the money has moved from the assessee hands to the alleged shareholders’ hands and having accepted the alleged shareholders, it is not possible to us to sustain the addition in the hands of the assessee. Further, on the basis of evidence available on record, it is not possible to hold that the transactions are stage managed and the share application money was received from bogus shareholders without bringing on record the money has moved from the assessee's hands to the shareholders. e. The Hon’ble High Court of Delhi has observed as under in the case of Antarctica Investment (P.) ltd. 262 ITR 493: “7. In the present case, as noticed above, the Tribunal’s finding, which is essentially factual, is based on cogent material highlighted by the CIT(A). The CIT(A) had even gone to the extent of examining the bank account of the two companies from where the cheques in question were issued and had found that there were numerous transactions of deposits and withdrawals and whenever the cheques in favour of the assessee were issued, there was sufficient balance available. It is pertinent to note that 37 ITA No.443/DEL/2024 it was not the case of the Assessing Officer that any amount found credited in the account of the two companies, has direct or indirect nexus with the assessee-company.\" 19. Under the facts and circumstances and in the light of the aforesaid case laws, the assessee hereby prays that the impugned addition is bad at law and on facts and therefore deserve to be deleted.” 14. On the other hand, ld. DR for the Revenue submitted that ld. AR for the assessee has already read the findings of Assessing Officer/CIT (A). Further, submitted that the assessee has to bring on record the person who has made the investment before the Assessing Officer, in this regard, he brought to our notice pages 144 & 145 of the paper book and submitted that assessee has submitted bank statement as per which Muraleedharan Nair has made the investment only Rs.25,00,000/- in two occasions. He brought to our notice the above bank statement and submitted that the details are not complete and assessee has chose to submit the above bank statement selectively. Further, he brought to our notice pages 146 & 147 of the paper book and submitted that the bank account statement shows the different name as account holder and it is not clear from whom the funds have come. In this regard, ld. DR for the Revenue submitted that as per the Second Proviso to section 68 of the Act, in the case of sums credited in the books of the assessee which consists of share application money, share capital, share premium or any such amount by whatsoever name called, the primary object is that Assessing Officer has to be 38 ITA No.443/DEL/2024 satisfied with the satisfactory explanations. In this case, Assessing Officer is not satisfied with explanation offered and the relevant documents submitted before him. Further, he brought to our notice page 17 of the ld. CIT(A) order and he supported the confirmation of the additions. 15. In rejoinder, ld. AR for the assessee submitted that the Second Proviso to section 68 of the Act referred by the ld. DR for the Revenue discusses about first source and not relevant for source of source. He relied on the submissions made earlier. 16. Considered the rival submissions and material placed on record. We observe that Assessee is engaged in the business of providing car rental services and during this year, assessee had issued and allotted equity shares as well as compulsory convertible preference shares as under :- (a) 600 equity shares with the face value of Rs.10 per share and share premium of Rs.5,490/- per share; (b) 1818 SEED Compulsory Convertible Preference Shares face value of Rs.100/- per share and share premium of Rs.5,400/- per share issued and allotted to M/s. Click Cab Technology LLP. (CCT) 17. The AO/CIT(A) has primarily raised doubts on the credit worthiness of the investor i.e., CCT-LLP during the year with the observation that the above company have no credit worthiness due to the fact that it did not 39 ITA No.443/DEL/2024 have enough turnover which stood at Nil and partners capital at Rs. 9000 and Rs.1000 during AY 2016-17 and AY 2017-18 respectively. They further observed that the partners namely Mr. Muralidharan Nair and Venugopalan Unni Krishnan had transferred to the CCT-LLP as unsecured loans and the same was invested in the assessee company. They just came to this conclusion because of issue of high value SEED capital introduced in the business of the assessee on the basis of share premium. The shares were valued based on certain criteria and at the same time not just the SEED capital was issued to the CCT-LLP but also shares were issued to the existing Director/Share holders at the same share prices. They merely focused on the SEED Capital issued to the new investor. The new investor are unrelated and hailing from the other city. They basically questioned the decision making acumen of the new investors and also raised the question on the basis that why such investors are not in existence in the area where the company exists. Let us not deal with the unrelated and debatable issues raised by the authorities below which has no relevance. Let us focus only on the issue of credit worthiness of the new shareholders. 18. We noticed that the new investors are CCT-LLP i.e., it is limited liability partnership company, the affairs are controlled and managed by the managing partners, technically the financials of the company are belongs 40 ITA No.443/DEL/2024 to the partners. In this case, the two partners brought capital to the LLP- company initially introduced as unsecured loan in the LLP and the same was utilized to make the investment in the assessee company. In the present case, the assessee has already brought on record various documents to prove the source of source. By this way, it has proved the existence of source and genuineness of the investment. What tax authorities raised doubt in the present case is that the LLP has no capital on its own, since they do not have enough profit and capital on its own. They totally ignored the fact that it is LLP and it is mainly formed on the basis and strength of the managing partners. They have already introduced the capital inside the LLP company. With the loan and capital together forms the capital, it is otherwise called quasi capital. 19. Another important issue is that the lower authorities expect that the new investment can be made only on the basis of profit generation ability of the investors instead of capital generation capability of the entity. In this case, the capital generation of the LLP has to be seen not on the basis of profit generation of the LLP. The existence of the LLP is totally on the basis of its partners. Therefore, we do not see any reason to doubt the credit worthiness of the CCP-LLP. However, we observed that the assessee has filed several documents in support of its contention as additional evidences, in our view, it substantiate the availability of source 41 ITA No.443/DEL/2024 of introduction of capital and source of funds in the hands of the managing partners. Therefore, we are inclined to allow the grounds raised by the assessee. 20. In the result, appeal filed by the assessee is allowed. Order pronounced in the open court on this 4th day of October, 2024. Sd/- sd/- (SAKTIJIT DEY) (S.RIFAUR RAHMAN) VICE PRESIDENT ACCOUNTANT MEMBER Dated: 04.10.2024 TS Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals)-24, New Delhi. 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI "