Titan Engineering Co. Pvt. Ltd., , Durgapur V. DCIT, Circle - 1(2), Kolkata

ITA 2250/KOL/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 4814 (ITAT-KOLKATA)
• Duration Of Justice: 6 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-05-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 01-11-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SHRISHANKAR HALDER JCITSRDR
• Assessee Lawyers: H V BHARDWAJ
• Keywords: Unexplained cash credit; Share purchase agreement; Source of fund; Onus to prove; TDS
• Section: 143(3); 68

Judgement Text

, D , IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH D KOLKATA BEFORE SHRI S.S.GODARA, JUDICIAL MEMBER AND DR. A.L. SAINI, ACCOUNTANT MEMBER ITA NO. 2250 / KOL / 20 18 ASSESSMENT YEAR :2012-13 TITAN ENGINEERING CO. PVT. LTD., SANJIBI SARANI, DURGAPUR-713210 [ PAN NO.AABCT 4321 K ] V/S . DCIT, CIRCLE-1(2), AAYAKAR BHAWAN, P-7, 7 TH FLOOR, CHOWRINGHEE SQUARE, KOLKATA-69 /APPELLANT .. / RESPONDENT /BY APPELLANT SHRI H.V. BHARDWAJ, FCA /BY RESPONDENT SHRISHANKAR HALDER, JCIT-SR-DR /DATE OF HEARING 07-05-2019 /DATE OF PRONOUNCEMENT 17-05-2019 / O R D E R PER S.S.GODARA, JUDICIAL MEMBER:- THIS ASSESSEES APPEAL FOR ASSESSMENT YEAR 2012-13 ARISES AGAINST THE COMMISSIONER OF INCOME TAX (APPEALS)-1, KOLKATAS O RDER DATED 05.09.2018 PASSED IN CASE NO.18161/CIT(A)-1/KOL./CIR.-1(2)/201 5-16, INVOLVING PROCEEDINGS U/S 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT. HEARD BOTH THE PARTIES. CASE FILE PERUSED. 2. LEARNED COUNSEL REPRESENTING ASSESSEE DOES NOT P RESS FOR FIRST SUBSTANTIVE GROUND RAISED IN THE INSTANT APPEAL CHA LLENGING LIQUIDATED DAMAGE DISALLOWANCE OF 85,099/- MADE IN BOTH THE LOWER PROCEEDINGS KEEPING IN MIND SMALLNESS OF THE AMOUNT. 3. THIS FIRST SUBSTANTIVE GROUND IS REJECTED AS NOT PRESSED. 4. NEXT COMES THE ESTIMATED AD HOC DISALLOWANCE OF SITE EXPENSE AMOUNTING TO 4,74,241/- IN BOTH THE LOWER PROCEEDINGS. THE CIT(A )S DETAILED DISCUSSION TO THIS EFFECT READS AS FOLLOWS:- ITA NO.2250/KOL/2018 A .Y. 2012-13 TITAN ENGINEERING CO. PVT. LTD. VS. DCIT, CIR-1(2), KOL. PAGE 2 GROUND NO. 3: THAT THE A.O. HAS, LIKEWISE, FURTHER ERRED IN MAKING AT AD HOC ADDITION OF RS.5,00,000/- WITHOUT ANY BASIS OR MATE RIAL ON RECORD ONLY ON BASIS OF SURMISE AND CONJECTURE. THIS GROUND IS AGAINST THE AD HOC ADDITION OF RS.5, 00,000/- MADE BY THE A.O. ONLY ON THE BASIS OF SURMISES AND CONJECTURES. THIS ISSUE WAS DEALT WITH BY THE A.O. AS UNDER: 'THE ASSESSEE COMPANY CLAIMED SITE EXPENSES AMOUNTI NG TO RS.1069081/- BUT NO NATURE OF EXPENSES WAS FURNISHE D NOR APPLICABLE TDS HAS BEEN DEDUCTED. THE A/R OF THE ASSESSEE COMP ANY HAS BEEN ASKED TO FURNISH COPY OF BILLS FOR EXPENSES INCURRE D BUT THE SAME WAS NOT PRODUCED. AS THE ASSESSEE FAILS TO FURNISH THE DETAIL AND EVIDENCE CALLED FOR, A SUM OF RS.5,00,000/- HAS BEEN DISALLO WED FOR WANT OF DETAIL AND EVIDENCE, HENCE ADDED BACK. ' THE APPELLANT HAS MADE WRITTEN SUBMISSION AS UNDER: - 'WE HAD TO TAKE MATERIAL AT SITE OF THE CLIENT, DEL IVER THERE AND WHERE CONTRACT SO DEMAND INSTALLATION IS DONE. FULL DETAI LS OF SITE EXPENSES WERE FILED. OUT OF TOTAL CLAIM OF RS.10,69,081/- A. O. HAS DISALLOWED RS.5,00,000/- I.E. ALMOST 50%. NO BASIS HAS BEEN GI VEN AS TO HOW HE HAS ARRIVED AT THAT DISALLOWANCE @ 50% IS REASONABL E AND NOT 10% OR 60%. THIS IS AN AD HOC ADDITION AND ONLY BASIS IS S URMISE AND CONJECTURE.' I HAVE CONSIDERED THE MATERIAL BEFORE ME. THE AO F OUND THAT THE APPELLANT CLAIMED SITE EXPENSES OF RS.10,69,081/-. HOWEVER, T HE A.O. OBSERVED THAT THE APPELLANT WAS UNABLE TO SUBMIT DETAILS AND COPI ES OF VOUCHERS IN SUPPORT OF ITS CLAIM AND DISALLOWED RS.5,00,000/- FOR WANT OF EVIDENCE. ON CAREFUL CONSIDERATION OF THE SUBMISSIONS, IT IS OBSERVED THAT THE EXPENSES WERE INCURRED FOR INSTALLATION OF THE BOKARO SITE A ND ALTHOUGH DETAILS OF EXPENSES WERE FILED, NO BASIS FOR DISALLOWANCE WAS GIVEN BY A.O. I AM OF THE VIEW THAT IT IS WELL SETTLED THAT THE ONUS TO ESTAB LISH GENUINENESS OF EXPENSES LIES SQUARELY UPON THE ASSESSEE WHICH WAS NOT DISCH ARGED AS ONLY BREAK-UP OF 'BOKARO SITE EXPENSES VIDE COPY OF LEDGER A/C HA S BEEN FILED. HOWEVER, EXPENDITURE OF RS.1,55,182/- AND RS.7,93,336/- WER E CLAIMED AS BOKARO SITE EXPENSES AND LABOUR CHARGES. THE OTHER EXPENSE AS R S.62,890/- I.E. MACHINE RENT, SECURITY EXPENSES, TEA & TIFFIN EXPENSES. SIN CE THE APPELLANT OUGHT TO HAVE INCURRED SOME ESSENTIAL EXPENSES FOR MATERIAL AT THE SITE, IT WOULD BE REASONABLE TO RESTRICT FULL DISALLOWANCE OF 50% OUT OF RS.9,49,518/- FOR BOKARO SITE AND LABOUR CHARGES I.E. RS.4,74,759/- WHICH I CONFIRMED. THE APPELLANT GETS RELIEF TO THE EXTENT OF RS.25,241/- (RS.5,00,0 00 MINUS RS.4,74,241/-). THIS GROUND IS PARTLY ALLOWED. 5. IT IS THEREFORE CLEAR THAT THE CIT(A) HAS RESTRI CTED FULL DISALLOWANCE TO 50% FOR BOKARO SITE AND LABOUR EXPENSE WITHOUT ANY DRAWING COMPARISON OR WITH SIMILAR HEAD(S) OF EXPENDITURE IN EARLIER OR S UCCEEDING ASSESSMENT YEAR AS WELL AS NOT PIN-POINTING ANY SPECIFIC DEFECT IN THE RELEVANT DETAILS. WE ITA NO.2250/KOL/2018 A .Y. 2012-13 TITAN ENGINEERING CO. PVT. LTD. VS. DCIT, CIR-1(2), KOL. PAGE 3 THEREFORE DEEM IT APPROPRIATE IN LARGER INTEREST OF JUSTICE KEEPING IN MIND THE FACT THAT ASSESSEE HAS ALSO NOT ABLE TO PROVE EACH AND EVERY DETAILS OF THE IMPUGNED CLAIM TO RESTRICT THIS DISALLOWANCE IN ISS UE OF A LUMP SUM AMOUNT OF 50,000/- WITH A RIDER THAT SHALL NOT BE TREATED AS A PRECEDENT IN ANY OTHER ASSESSMENT YEAR. THE SECOND SUBSTANTIVE GROUND IS T REATED AS PARTLY ALLOWED IN ABOVE TERMS. 6. NEXT COME TO CORRECTNESS OF SEC. 68 ADDITION OF SHARE CAPITAL ACCOUNT IN THE NATURE OF CONTRIBUTION MADE BY THE ASSESSEES M ANAGING DIRECTOR. THE CIT(A)S FINDING TO THIS EFFECT READS AS FOLLOWS:- GROUND NO. 4: THIS GROUND IS AGAINST THE A.O. HAS L IKEWISE FURTHER ERRED IN TREATING CONVERSION OF RS.32,50,000/- LOAN OF A DIR ECTOR INTO SHARE CAPITAL AN UNPROVED CREDIT AND ADDING SAID SUM U/S, 68 OF THE ACT. THE A.O FOUND THAT AN AMOUNT OF RS. 32,50,000/- WAS SHOWN AS OUTSTANDING ON ACCOUNT OF SHARE APPLICATION MONEY CREDITED DURI NG THE YEAR. THE A.D ASKED THE APPELLANT TO FURNISH FULL NAME & CURRENT ADDRESS, IDENTITY OF DIRECTORS ALSO WITH PRESENT RESIDENTIAL ADDRESS, CO PY OF PAN, IT RETURN ACKNOWLEDGEMENT OF THE SAID COMPANY & PRINCIPAL DIR ECTOR WHO APPLIED FOR SHARES, RELATIONSHIP WITH THOSE PARTIES, SHARE APPL ICATION FORM, SHARE CERTIFICATE ISSUED TO SUBSTANTIATE THE CLAIM FOR SU BSCRIPTION TO THE SHARE CAPITAL. HOWEVER, THE A.O OBSERVED THAT NO DETAIL WAS FURNIS HED BY THE APPELLANT COMPANY TO SUBSTANTIATE THE GENUINENESS OF ITS CLAI M APART FROM STATING THAT IT HAD TAKE SHARE APPLICATION MONEY FROM I. SENGUPATA, WITH COPY OF BANK STATEMENT AND SHARE CERTIFICATE FORM. HOWEVER, THE APPELLANT WAS UNABLE TO PRODUCE THE DIRECTOR OF THE APPELLANT COMPANY WITH RELEVANT DETAILS TO EXAMINE THE GENUINENESS OF HE SAID CLAIM AS DETAILS OF FEE PAID TO ROC FOR INCREASE OF SHARE CAPITAL OR RATE OF PREMIUM CHARGED WERE NOT F URNISHED NO THE DIRECTORS PRODUCED TO VERIFY THE GENUINENESS AND CREDITWORTHI NESS .ACCORDINGLY THE A.D. CONCLUDED THAT THE SHARE APPLICATION MONEY OF RS.32,50,000/- CREDITED TO THE BOOKS OF ACCOUNTS OF APPELLANT COMPANY WAS UNEX PLAINED INCOME OF THE APPELLANT COMPANY, WHICH WAS BROUGHT TO TAX AS UNEX PLAINED CASH CREDITS U/S. 68 OF LT. ACT, 1961.IT WAS THUS CONCLUDED BY THE A. O THAT AS THE IDENTITY OF THE CREDITOR WAS NOT ESTABLISHED, THE GENUINENESS AND C REDITWORTHINESS OF THE SAID SHARE SUBSCRIBER/ALLOTTEE WAS NOT SATISFACTORI LY EXPLAINED AND ADDED BACK THE AMOUNT OF RS. 32,50,000/- U/S. 68 OF THE IT. AC T. THE APPELLANT HAS MADE WRITTEN SUBMISSIONS AS UNDER : 'PERHAPS DUE TO ONGOING DECISION OF DEPARTMENT TO A DD SHARE CAPITAL ADDITION, MOSTLY ON PREMIUM, FROM BODIES CORPORATE, WHOSE CREDIT WORTHINESS AND IDENTITY IS DOUBTFUL. A.O HAS MADE T HIS ADDITION WITHOUT TOTAL LACK OF APPLICATION OF MIND. IN OUR CASE WE TOOK LOAN FROM TIME TO TIME FROM OUR MANAGING DIRECTOR, SINCE THE FORMATION OF THE COMPANY. DUE TO BANK'S R EQUIREMENT, FOR ITA NO.2250/KOL/2018 A .Y. 2012-13 TITAN ENGINEERING CO. PVT. LTD. VS. DCIT, CIR-1(2), KOL. PAGE 4 INCREASE IN CAPITAL WE I HAD TO INCREASE SHARE CAPI TAL. HENCE, ENTIRE AMOUNT RECEIVED DURING THE YEAR RS.32,50,000/- BY C HEQUE RS.30.00 LACS AND RS.2.50 LACS CONVERTED INTO SHARE CAPITAL. HIS IDENTITY, CREDIT WORTHINESS AND GENUINENESS OF TRANSACTION ARE PROVE D BEYOND DOUBT. A.O. ASKED TO PRODUCE A DIRECTOR, ONE DIRECTOR APPE ARED AS WELL. BUT A.O NEVER ASKED TO PRODUCE THE DIRECTOR WHO CONTRIB UTED RS.32,50,000/- WITH RELEVANT EVIDENCES. THE APPELLANT'S A/R HAD MAINLY CONTENDED THROUGH TH E WRITTEN SUBMISSIONS THAT IT HAD TAKEN LOAN FROM TIME TO TIME FROM OUR M ANAGING DIRECTOR, SINCE THE FORMATION OF THE COMPANY. DUE TO BANK'S REQUIREMENT , FOR INCREASE IN CAPITAL THE APPELLANT HAD TO INCREASE SHARE CAPITAL. HENCE, ENTIRE AMOUNT RECEIVED DURING THE YEAR RS.32,50,000/- BY CHEQUE RS.30.00 L ACS AND RS.2.50 LACS CONVERTED INTO SHARE CAPITAL. HIS IDENTITY, CREDIT WORTHINESS AND GENUINENESS OF TRANSACTION ARE PROVED BEYOND DOUBT. A.O ASKED T O PRODUCE A DIRECTOR, ONE DIRECTOR APPEARED AS WELL. BUT A.O NEVER ASKED TO P RODUCE THE DIRECTOR WHO CONTRIBUTED RS.32,50,000/- WITH RELEVANT EVIDENCES. HOWEVER, ON APPRAISAL OF THE MATERIAL ON RECORD, IT IS FOUND THAT ALTHOUGH THE APPELLANT HAD FILED COPIES OF DOCUMENTARY EVIDENCES TO ESTABLISH THE IDENTITY OF THE SHARE SUBSCRIBER, IT HAD FAILED TO PRODUCE T HE DIRECTORS/SHARE SUBSCRIBER FOR VERIFICATION BEFORE THE A.O DURING THE ASSESSME NT PROCEEDINGS. THIS COMBINED WITH THE FACT THE APPELLANT IS A CLOSELY-H ELD PRIVATE COMPANY AND THE SHARE SUBSCRIBERS WERE CLOSELY RELATED PERSON TO TH E DIRECTOR OF THE APPELLANT COMPANY, IT WAS THEREFORE INCUMBENT UPON THE APPELL ANT TO PRODUCE THE SHARE SUBSCRIBER FOR VERIFICATION OF THE GENUINENESS OF T HE TRANSACTIONS FOR SHARE ALLOTMENT IN VIEW OF THE SPECIFIC REQUISITION BY TH E ASSESSING OFFICER. AS REGARDS THE ISSUE OF ESTABLISHING THE GENUINENES S OF AN AMOUNT CREDITED TO THE BOOKS OF ACCOUNTS OF THE APPELLANT COMPANY, IT IS WELL ESTABLISHED THAT THE ONUS TO PROVE HIS EXPLANATION SATISFACTORILY TO THE ASSESSING OFFICER WAS ON THE ASSESSEE. THE APPELLANT HAS MISERABLY FAILED TO DISCHARGE SUCH ONUS. FROM THE ABOVE DECISION, IT IS APPARENT THAT THE GE NUINENESS OF THE IMPUGNED TRANSACTIONS OF RECEIPT OF THE IMPUGNED SHARE SUBSC RIBER/ALLOTTEE AS UNSECURED LOANS TOTALING RS.32,50,000/- AS DETAILED IN THE ABOVE PARAGRAPHS CANNOT BE DETERMINED WITHOUT LOOKING INTO THE HUMAN PROBABILITY ASPECTS, SURROUNDING CIRCUMSTANCES SUCH AS RELATIONSHIP OF T HE ENTITIES I.E. COMPANIES SHOWN AS CASH CREDITORS AND THE RECIPIENT I.E. APPE LLANT COMPANY. IT IS ALSO PERTINENT TO MENTION THAT IF THE ASSESSEE FAILS TO ESTABLISH ANY OF THE ESSENTIAL INGREDIENTS OF A CASH CREDIT I.E IDENTITY, MODE OF RECEIPT AND CREDIT-WORTHINESS / SOURCES OF THE CASH CREDITORS, THE IMPUGNED TRANSAC TIONS I.E. UNSECURED ICANS CANNOT BE TREATED AS GENUINE. ON THE ISSUE IN DISPUTE, THE HON'BLE THE SUPREME CO URT IN VIJAY KUMAR TALWAR V. CIT [2011] 330 ITR 1/ 196 TAXMAN 136 [2010] 8 TAXMANN.COM 264 (SC) THE SAME PRINCIPLE WAS APPLIED IN THE FOLLOWIN G OBSERVATIONS : '24 .... AII THE AUTHORITIES BELOW, IN PARTICULAR T HE TRIBUNAL, HAVE OBSERVED IN UNISON THAT THE ASSESSEE DID NOT PRODUC E ANY EVIDENCE TO REBUT THE PRESUMPTION DRAWN AGAINST HIM UNDER SECTI ON 68 OF THE ACT, BY PRODUCING THE PARTIES IN WHOSE NAME THE AMOUNTS IN QUESTION HAD ITA NO.2250/KOL/2018 A .Y. 2012-13 TITAN ENGINEERING CO. PVT. LTD. VS. DCIT, CIR-1(2), KOL. PAGE 5 BEEN CREDITED BY THE ASSESSEE IN HIS BOOKS OF ACCOU NT. IN THE ABSENCE OF ANY COGENT EVIDENCE, A BALD EXPLANATION FURNISHE D BY THE ASSESSEE ABOUT THE SOURCE OF THE CREDITS IN QUESTION VIZ., R EALISATION FROM THE DEBTORS OF THE ERSTWHILE FIRM, IN THE OPINION OF TH E ASSESSING OFFICER, WAS NOT SATISFACTORY. IT IS WELL SETTLED THAT IN VI EW OF SECTION 68 OF THE ACT, WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS O F THE ASSESSEE FOR ANY PREVIOUS YEAR, THE SAME MAY EXPLANATION OFFERED BY THE ASSESSEE ABOUT THE NATURE AND SOURCE THEREOF IS, IN THE OPIN ION OF THE ASSESSING OFFICER, NOT SATISFACTORY.' IN RESPECT OF THE RELIA NCE BY THE AIR ON THE DECISION OF THE APEX COURT IN THE CASE OF LOVELY EX PORTS (P) LTD (SUPRA), THE DIVISION BENCH OF THE DELHI HIGH COURT HAS OBSERVED IN THE CASE OF CIT V. OASIS HOSPITALITIES (P.) LTD.[2011] 331 ITR 119/ 198 TAXMAN 247/ 9- TAXMANN.COM 179 (DELHI), THAT THE IN ITIAL BURDEN MUST BE UPON THE ASSESSEE TO EXPLAIN THE NATURE AND SOUR CE OF THE SHARE APPLICATION MONEY RECEIVED. IN ORDER TO DISCHARGE T HIS BURDEN, THE ASSESSEE IS REQUIRED TO PROVE: (A) IDENTITY OF SHAR EHOLDER; (B) GENUINENESS OF TRANSACTION; AND (C) CREDIT WORTHINE SS OF SHAREHOLDERS. AS FAR AS THE CREDITWORTHINESS OF THE SUBSCRIBER IS CONCERNED, THAT CAN BE PROVED BY PRODUCING A BANK STATEMENT OF THE SUBS CRIBER SHOWING THAT IT HAS SUFFICIENT BALANCE IN ITS ACCOUNT TO EN ABLE IT TO SUBSCRIBE TO THE SHARE CAPITAL. THE DELHI HIGH COURT HELD THAT O NCE THE INITIAL BURDEN HAS BEEN DISCHARGED, THE OBSERVATIONS OF THE SUPREM E COURT IN THE CASE OF LOVELY EXPORTS (P.) LTD. (SUPRA) WOULD SUGG EST THAT THE DEPARTMENT IS FREE TO PROCEED TO REOPEN THE INDIVID UAL ASSESSMENTS IN THE CASE OF ALLEGED BOGUS SHAREHOLDERS IN ACCORDANC E WITH LAW AND IS NOT REMEDILESS. THIS WOULD BE MORE SO WHEN THE ASSE SSEE IS A PUBLIC LIMITED COMPANY AND HAS ISSUED SHARE CAPITAL TO THE PUBLIC AT LARGE AS IN SUCH CASES THE COMPANY CANNOT BE EXPECTED TO KNO W EVERY DETAIL PERTAINING TO THE IDENTITY AND FINANCIAL WORTH .OF THE SUBSCRIBER. HOWEVER, THE INITIAL BURDEN ON THE ASSESSEE WOULD B E SOMEWHAT HEAVY IN CASE THE ASSESSEE IS A PRIVATE LIMITED COMPANY W HERE THE SHAREHOLDERS ARE CLOSELY RELATED AS IN THE INSTANT CASE, BECAUSE IN SUCH A CASE THE ASSESSEE CANNOT FEIGN IGNORANCE ABO UT THE STATUS OF THE PARTIES. THE DIVISION BENCH OF THE BOMBAY HIGH COURT IN CIT V. CREATIVE WORLD TELEFILMS LTD. [2011] 203 TAXMAN 36 (MAG.)/ 333 ITR 100 / 15 TAXMANN.COM 183 (BOM.) IS ALONG THE SAME LINES. THEREFORE, IN THE CASE OF THE APPELLANT COMPANY WHICH IS AN UN LISTED CLOSELY- HELD PRIVATE COMPANY, WITH THE SHARE SUBSCRIBER COMPANIE S ARE ALSO CLOSELY CONNECTED ENTITIES, THE RATIO OF THE DECISION IN LO VELY EXPORTS (P) LTD(SUPRA) IS NOT FOUND TO BE APPLICABLE TO THE FAC TS AND CIRCUMSTANCES OF THE INSTANT CASE. IN THIS REGARD, IT IS PERTINENT TO REFER TO THE DEC ISION IN SAJAN DASS AND SONS V. CIT [2003] 264 ITR 435 (DELHI) WHEREIN THE HON'BLE DELHI HIGH COURT HELD THAT MERE IDENTIFICATION AND SHOWING MOVEMENT THROUGH BA NKING CHANNELS IS NOT SUFFICIENT. SIMILAR VIEW WAS TAKEN IN SANDEEP KUMAR V. CIT (293 ITR 294) (DEL), JASPAL SINGH 290 ITR 306 (P & H), YASH PAL G OEL , 310 ITR 75/76(P&H) AND RAJEEV TANDON VS. ASSISTANT COMMISSI ONER OF INCOME TAX IN ITA NO. 77 OF 2007 DATED 13.7.2007 AS ALSO IN SUBHA SH CHANDER SEKHRI V. DEPUTY CIT [2007] 290 ITR 300 (P&H).IN THE PRESENT CASE ALSO, IT IS NOT ITA NO.2250/KOL/2018 A .Y. 2012-13 TITAN ENGINEERING CO. PVT. LTD. VS. DCIT, CIR-1(2), KOL. PAGE 6 ESTABLISHED THAT TWO SUBSCRIBERS TO THE SHARE CAPIT AL OF THE APPELLANT COMPANY BY THE TWO COMPANIES WHICH WERE FOUND TO HAVE MEAGR E CASH BALANCES/CAPITAL IN THEIR BOOKS OF ACCOUNTS HAD CAP ACITY TO MAKE THE LOANS. THEREFORE, THE A.O WAS JUSTIFIED IN UPHOLDING THE A DDITION OF THE AMOUNT CLAIMED AS IMPUGNED UNSECURE LOANS. IN RAM LAL AGRA WAL V. CIT [2006] 280 ITR 547 (ALL), THE HON'BLE ALLAHABAD HIGH COURT HEL D THAT WHERE THERE IS A FINDING GIVEN BY THE INCOME-TAX AUTHORITIES THAT CR EDITWORTHINESS OF DEPOSITORS WAS NOT PROVED, THE AMOUNT COULD BE ASSESSED AS INC OME OF THE ASSESSEE. IN SUNIL SIDDHARTHBHAI V. CIT [1985] 156 ITR 509 (SC), THE HON'BLE SUPREME COURT HELD THAT IT IS THE RIGHT OF THE INCOME-TAX A UTHORITIES TO CONSIDER GENUINENESS OF THE TRANSACTIONS AND TO PENETRATE TH E VEIL AND ASCERTAIN THE TRUTH. IT IS WITHIN THEIR POWER TO CONSIDER WHETHER A PARTICULAR TRANSACTION WAS TO EVADE TAX. IN K. RAMASAMY V. CIT [2003] 261 ITR 358 (MAD), IT WAS HELD THAT VEIL CAN BE PIERCED IN EXCEPTIONAL CIRCUMSTANC ES. THE INCOME-TAX AUTHORITIES ARE ENTITLED TO LOOK AT THE REALITY OF THE TRANSACTION. MOREOVER, THE DECISIONS IN ITO V. DIZA HOLDINGS P. LTD. [2002] 25 5 ITR 573 (KER); RAUNAQ RAM NAND LAL V. CIT [2002] 254 ITR 617 (P&H); SMT. IVA GOGOI V. CIT [2002] 254 ITR 576 (GAUHATI); CIT V. PRECISION FINANCE P VT. LTD. [1994] 208 ITR 465 (CAL); RAJSHREE SYNTHETICS PVT. LTD. V. CIT [20 02] 256 ITR 331 (RAJ); R. B. MITTAL V. CIT [2000] 246 ITR 283 (AP) ; CIT V. UNIT ED COMMERCIAL AND INDUSTRIAL CO. P. LTD. [1991] 187 ITR 596 (CAL); M. A. UNNEERIKUTTY V. CIT [1992] 198 ITR 147 (KER); NEMI CHAND KOTHARI V. CIT [2003] 264 ITR 254 (GAUHATI); AND HINDUSTHAN TEA TRADING CO. LTD. V. C IT [2003] 263 ITR 289 (CAL) SUPPORT THE VIEW THAT REVENUE AUTHORITIES ARE ENTITLED TO CONSIDER GENUINENESS OF THE TRANSACTIONS AND TO PENETRATE TH E VEIL IN ORDER TO ASCERTAIN THE TRUTH. THEY ARE ENTITLED TO LOOK INTO THE SURRO UNDING CIRCUMSTANCES TO FIND OUT THE REALITIES OF THE TRANSACTIONS SHOWN TO HAVE BEEN ENTERED INTO BY THE PARTIES IN VIEW OF THE ABOVE DISCUSSION, I AM OF THE VIEW T HAT CONSIDERING THE INFERENCES DRAWN FROM MATERIALS ON RECORD BY THE A. O., IT IS HELD THAT THE APPELLANT WAS UNABLE TO ESTABLISH THE GENUINENESS O F THE IMPUGNED SUBSCRIBERS TO THE SHARE CAPITAL AS THEIR GENUINENE SS OF THE TRANSACTIONS AND CREDIT-WORTHINESS/SOURCES OF INCOME COULD NOT BE ES TABLISHED SATISFACTORILY. THEREFORE, I HOLD THAT THERE IS NO INFIRMITY IN THE FINDING OF THE A.O IN TREATING THE IMPUGNED SHARE ALLOTMENT MONEY FROM THE TWO COM PANIES AMOUNT OF SHARE APPLICATION MONEY INCLUDING THE PREMIUM AMOUN TING TO RS.32,50,000/- AS UNEXPLAINED CASH CREDITS U/S 68 OF THE IT. ACT, 1961. AS A RESULT, THE IMPUGNED ADDITION ON ACCOUNT OF TREATING THE CASH C REDITS AMOUNTING TO RS. 32,50,000/- IS CONFIRMED. THIS GROUND IS NOT ALLOWED . 7. WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATION TO RI VAL CONTENTIONS. THE REVENUE STRONGLY SUPPORTS BOTH THE LOWER AUTHORITIE S FINDINGS MAKING THE IMPUGNED SEC. 68 ADDITION. IT FAILS TO DISPUTE THE MOST CRUCIAL FACT THAT THE ASSESSEE HAD INCURRED RECEIVED THE AMOUNT IN ISSUE FROM ITS DIRECTOR BY WAY OF TWO CHEQUES INVOLVING SUMS OF 30 LAC AND 2.05 LAC WHICH STOOD CONTROVERTED INTO SHARE CAPITAL. IT ALSO PRODUCED T HE SAID DIRECTOR ALONGWITH ITA NO.2250/KOL/2018 A .Y. 2012-13 TITAN ENGINEERING CO. PVT. LTD. VS. DCIT, CIR-1(2), KOL. PAGE 7 THIS COPY OF ACCOUNT, BALANCE-SHEET INCOME-TAX RETU RN. THERE IS FURTHER NO QUARREL THAT THEY ARE ASSESSED IN THE SAME JURISDIC TION. THE ASSESSMENT ORDER DATED 23.03.2015 IN THIS REGARD INDICATES THAT ASSE SSING OFFICER NOWHERE DEALT WITH ALL THESE DETAILS BEFORE TERMING THE AMOUNT IN ISSUE TO BE NON-GENUINE LEVYING TO SEC. 68 ADDITION. WE THEREFORE TAKE INTO CONSIDERATION ALL THESE PECULIAR FACTS TO HOLD THAT THE ASSESSEE HAS DULY P ROVED IDENTITY, GENUINENESS AND CREDITWORTHINESS OF THE IMPUGNED SHARE CAPITAL TO HAVE COME FROM ITS DIRECTOR / MANAGING DIRECTOR. THE SAME IS ORDERED T O BE DELETED. 8. THIS ASSESSEES APPEAL IS PARTLY ALLOWED IN ABOV E TERMS. ORDER PRONOUNCED IN THE OPEN COURT 17 /05/2019 SD/- SD/- ( %) (' %) (DR.A.L. SAINI) (S.S.GODARA) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) KOLKATA, *DKP, SR.P.S (- 17 / 05 /201 9 / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-TITAN ENGINEERING CO. PVT. LTD., SANJIB SARANI, DURGAPUR-713210 2. /RESPONDENT-DCIT, CIR-1(2), AYAKAR BHAWAN, 7 TH FL, P-7, CHOWRINGHEE SQ. KOL-69 3. 3 4 / CONCERNED CIT KOLKATA 4. 4- / CIT (A) KOLKATA 5. 7 ''3, 3, / DR, ITAT, KOLKATA 6. < / GUARD FILE. BY ORDER/ , /TRUE COPY/ 3,