INCOME TAX OFICER WARD 4(5), NAGPUR V. M/S GREEEDGE CONSTRUCTION PRIVATE LIMITED , NAGPUR

ITA 263/NAG/2018

• Counselvise Citation: [2024] 101 COUNSELVISE.COM (IT) 5765 (ITAT-NAGPUR)
• Duration Of Justice: 5 year(s) 7 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-07-2024
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 08-07-2024
• Assessment Year: 2011-2012
• Appeal Filed On: 03-12-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJEEV BENJWAL
• Keywords: Unexplained cash credit; Principle of natural justice; Opportunity of cross examination; Question of law; Difference of opinion; Third party statement; Accommodation entries; Reason to believe; Change of opinion; Reassessment proceedings; Bogus
• Section: 147; 68; 69; 145; 148; 143(3); 133(6); 195; 13; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL NAGPUR BENCH, NAGPUR BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER AND SHRI K.M. ROY, ACCOUNTANT, MEMBER ITA no.263/Nag./2018 (Assessment Year : 2011–12) Income Tax Officer Ward–4(5), Nagpur ................ Appellant v/s 3 rd Floor, Saraf Chambers, Sadar Nagpur 440 001 PAN – AADCG5946R ................ Respondent Assessee by : Shri Hitesh P. Shah Revenue by : Shri Rajeev Benjwal Date of Hearing – 08/07/2024 Date of Order – 18/07/2024 O R D E R PER K.M. ROY, A.M. The present appeal has been filed by the Revenue challenging the impugned order dated 11/09/2018, passed by the learned Commissioner of Income Tax (Appeals)–1, Nagpur, [“learned CIT(A)”], for the assessment year 2011–12. 2. In its appeal, the Revenue has raised following grounds:– “Whether on the facts and circumstances of the case, the CIT(A) was right to hold that the notice issued under section 148 was ab initio void ignoring the fact that the said case was re-opened on the basis of credible information received from the Investigation Wing and to ignore the ratio of the decision of the Hon'ble Supreme Court in case of Yogendrakumar Gupta [2014]51 taxmann.com 383(SC) wherein it has held that information received on basis of investigation was fresh information to initiate reassessment proceedings? M/s. Greenedge Construction Pvt. Ltd. ITA no.263/Nag./2018 Page | 2 2. Whether on the facts and circumstances of the case, the CIT(A) erred in holding that the AO re-opened the case on the basis of incorrect information to the extent of escapement of Rs.1.47 crores and assessed the escapement at Rs.5.60 crores ignoring the settled law that the reasons for re-opening could be a starting point for completing assessment but the assessment need not be restricted to the said amount when fresh facts were brought to light before the AO in the course of reassessment proceedings? 3. Whether on the facts and circumstances of the case, the CIT(A) was right to hold that the assessee successfully established the identity, creditworthiness and genuineness of the investors ignoring the fact the assessee did not discharge its onus of producing the said investors despite the AO giving ample time to do so? 4. Whether on the facts and circumstances of the case, the CIT(A) was right to hold that the assessee's contention of not being given the opportunity of cross examination of witness was correct despite the fact that the assessee itself submitted alleged affidavit of the same witness dated 27.12.2017 and submitted before the AO on 27.12.2017, wherein he had retracted the statement made before the income tax authorities u/s 131? 5. Any other grounds at the time of hearing.” 3. Facts in Brief:– The assessee is a company filed its return of income on 28/09/2011, declaring total loss of ` (–) 31,756. Pursuant to information received from the Dy. Director (Inv.), Unit–2(3), Kolkata, the case was re– opened under section 147 Income Tax Act, 1961 ("the Act") and notice under section 148 of the Act was issued and served on the assessee. Reasons for the re–opening of the assessment were also provided to the assessee, which is reproduced below:– Credits in assessee’s account from the following companies Sr. No. Name of Company Beneficiary Amount (`) 1. Aadita Construction Pvt. Ltd. M/s. Greenedge Construction 22,00,000 2. Aarjav Commodities Pvt. Ltd. M/s. Greenedge Construction 79,00,000 3. Priyank Multitrade Pvt. Ltd. M/s. Greenedge Construction 35,00,000 4. Adshaj Multitrade Pvt. Ltd. M/s. Greenedge Construction 11,00,000 TOTAL 1,47,00,000 M/s. Greenedge Construction Pvt. Ltd. ITA no.263/Nag./2018 Page | 3 4. The assessment under section 143(3) of the Act r/w section 147 of the Act was completed on 29/12/2017, by making addition of ` 5,60,00,000, under section 68 of the Act as unexplained cash credit. The assessee was asked to produce the details of shareholders and amount of investment, details of which are as follows:– Sr. No. Name of Company Amount (`) 1. Aarajav Commodities Pvt. Ltd. 79,00,000 2. Akshaj Multitrade Pvt. Ltd. 41,00,000 3. Akul Multitrade Pvt. Ltd. 65,00,000 4. Anantika Infrastructure Pvt. Ltd. 15,00,000 5. Czaee Infrastructure Pvt. Ltd. 10,00,000 6. Hitee Infrastructure Pvt. Ltd. 15,00,000 7. Jasum Real Estate Pvt. Ltd. 15,00,000 8. Powered Multitrade Pvt. Ltd. 20,00,000 9. Priyank Multitrade Pvt. Ltd. 35,00,000 10. Sonabar Infrastructure Pvt. Ltd. 15,00,000 11. Spectarcular Infrastructure Pvt. Ltd. 25,00,000 12. Tauras Viniyog Pvt. Ltd. 1,25,00,000 13 Vidya Buildcon Pvt. Ltd. 10,00,000 14. Aadita Construction Pvt. Ltd. 37,00,000 15. Adhik Multrade Pvt. Ltd. 53,00,000 5,60,00,000 5. The Assessing Officer also referred to the report of Investigation Wing, Kolkata and the same is reproduced below:– “4. Reports of investigation wing Kolkata, Ground of suspicion: Mr. Arun Behera Director of i) Aadita Construction P. Ltd, ii) Priyank Myultitrade P. Ltd, iii) Akshaj Multitrade PLtd, iv) Adhik Multitrade P. Ltd and u) KCA Allied services P. Ltd. Mr. Vimlesh Kumar Singh, Director of the following companies M/s. Greenedge Construction Pvt. Ltd. ITA no.263/Nag./2018 Page | 4 i) Priyank MultitradePvt. Ltd. ii) Adhik Multitrade P. Ltd, Mr. Ranjit kumar Das Director of i) M/s Aadita Construction P. Ltd and ii) Aarjav Commodities P. Ltd Mr. Jay PrakashKandoi, Director of Aarjav Commodities Pvt. Ltd. and ii) Akshaj Multitrade Pvt. Lt. And Mr. Shyam Singh director of i) KCA Allied Services Pvt. Ltd. All the entities maintained current account with the Union Bank of India as under:– Sr. No. Name of Company Account no. 1. Aarajav Commodities Pvt. Ltd. 607701010050043 2. Akshaj Multitrade Pvt. Ltd. 607701010050044 3. Akul Multitrade Pvt. Ltd. 607701010050045 4. Anantika Infrastructure Pvt. Ltd. 607701010050046 5. Czaee Infrastructure Pvt. Ltd. 607701010050047 6. Hitee Infrastructure Pvt. Ltd. 607701010050051 There have been round amount enter account transfers amongst the above entities Summons dated 10.02.2011 were issued by speed post to all the entities including the directors Le. Shri Arun Behera and Shri Ranjit Kumar Das at their given. adderss and also to the concerned bank for KYC information and bank statement. As no response received from the companies and its directors further summons dated 23.01.2017 issued by speed post to Shri Arun Behera, at his given address. On going through the company details and the departmental data base it is observed that the STR linked with other STR baring numbers 1000020459 and 20461 in respect of Mr. Anil Kumar Verma, Mr. Rajesh Bhutoria in his statement dated 14.11.2014 (ΑNNEXURE-A) accepted that the he is one of the director of the above mentioned companies along with some other companies that were managed and controlled by him. Through these companies he facilitated accommodation entry to the beneficiaries in lieu of commission. In his statement he also admitted that his wife Smt. Sangita Bhutoria is also one of the directors in the following companies: Sr. No. Name of Account Holder 1. M/s. Dugar Buklder Pvt. Ltd. 2. M/s. Povitra Sales Pvt. Ltd. 3. M/s. KCA Allied Services Pvt. Ltd. 4. M/s. Advent Solutions Pvt. Ltd. 5. M/s. King Buildwell Pvt. Ltd. On going through the bank statement of the above companies it was seen that M/s. Greenedge Construction Pvt. Ltd. was on the ultimate beneficiary. M/s. Greenedge Construction Pvt. Ltd. ITA no.263/Nag./2018 Page | 5 6. In the assessment order, the Assessing Officer has noted that the assessee in its reply dated 26/12/2017, has submitted income tax return, Balance Sheet, P&L A/c, etc. of all the 15 companies along with relevant bank statement. The Assessing Officer also noted that all the companies are having very meagre income and gross receipts. He also perused bank statement as on the date these companies advanced funds to the assessee. It received exactly the same amount from other Group Companies. Thus, the entire transaction is a colourable devise to route the assessee’s own funds back to its books. He had thereafter extracted the statement of Shri Rajesh Kumar Bhutoria, dated 14/11/2014, before the Investigation Unit, Kolkata. Shri Rajesh Kumar Bhutoria, explained that his main business is providing accommodation entries to various beneficiaries in lieu of commission. He also mentioned the name of other operators with whom he was working and has submitted that he has provided accommodation entries in the form of share capital to Baazar Group of Companies in lieu of commission to the tune of ` 0.20 per hundred rupees. The Assessing Officer denied the cross–examination of Shri Rajesh Kumar Bhutoria, and has added ` 5.60 lakh to the return of income. However, he did not mention any charging provisions for making the addition. The assessee being not satisfied, preferred appeal before the first appellate authority. 7. Before the learned CIT(A), the assessee submitted as under:– “5.0 During the appellate proceedings, the following submissions were made: With reference to the above appeal and under instructions from our above named client, we submit herewith their following submissions with a request that the same may please be accepted on record and sympathetically considered for allowing the relief as prayed for in the grounds of appeal: M/s. Greenedge Construction Pvt. Ltd. ITA no.263/Nag./2018 Page | 6 The brief facts of their case, are as under. They had filed their original return for the abovementioned Asst. Year on 28/09/2011, declaring Total Income of Rs. Nil. The said assessment has been re-opened by issuing notice U/S.148 on 31/03/2017, on the basis of the information received from the Dy. Director, Unit -2(3), Investigation Wing, Kolkata, who had obtained the statement of one Mr. Rajesh Bhutoria on 14/11/2014. Mr. Bhutoria, in his said statement, had stated that he used to provide accommodation entries through his several companies in which he and his family members or friends, were directors. It is to be noted tG Mr. Bhutoria, in his statement, has specifically mentioned the name of bazar group only to which he had provided accommodation entries and has not specifically mentioned name of our client. Further, even though the Ld. A.O. has stated in his reasons for re-opening that Mr. Rajendra Bhutoria is director in the said companies, Mr. Bhutoria in his statement has not specifically mentioned name of the assessne company and has clearly mentioned the names of SRA Merchandise P. Ltd. and Bhavya Merchandise P. Ltd., only which belong to bazar group companies. Hence to stretch the said statement to include the assessee company is nothing but frivolous attempt to implicate Assessee Company. Therefore, the Ld. A.O. was not justified in re-opening the Assessment merely on such vague statement of Mr. Bhutoria, which was not supported by any cogent or clinching evidence. It is to be noted that Mr. Bhutoria has not appeared before the Officer, even after the summons was served on him, nor the Ld. A.O. has made any attempt to enforce his attendance at any point of time. The above facts also prove that even though the department had full information in the form of said statement since November 2014, they had chose not to reopen the said assessment earlier, as they themselves were not sure about the authenticity of the said statement as Mr. Bhutoria had not appeared before the Department at any point of time thereafter, even after issue and service of summons on him. The above facts show that the reopening done on 31/03/2017 is nothing but change of opinion to harass the assessee and that the Ld. A.O. has not at all applied his mind to the facts of the case, before issuing notice U/S.148. In view of the above facts and circumstances of our client's case, we humbly request Your Honour to kindly quash the re-opening proceedings as the same are void ab-initio. In this regard, we also rely on the following judgements: The Hon. Andhra Pradesh High Court has held "Income Tax Department cannot be permitted to bring fresh litigations because of new views they entertain on facts or new M/s. Greenedge Construction Pvt. Ltd. ITA no.263/Nag./2018 Page | 7 versions which they present as to what should be the inference or proper inference either of the facts disclosed or the weight of the Circumstances - Sirpur paper mills Ltd. v. ITO[1978] 114 ITR 404 (AP). Further, the Hon. Kolkata High Court has held "A mere confessional statement by a third party (who is a lender of the assessee) that he was a mere name-lender and that all his transactions of Loans were bogus, without naming the assessee as one who had obtained bogus loans, would not be sufficient to hold that the assessee's income had escaped assessment" S.P. Agarwalla alias Sukhdeo Prasad Agarwalla. ΤΟ [1983] 140ITR 1010(Cal.). Also in a recent decision of Hon. Bombay High Court in case of Paradise Inland Shipping Pvt. Ltd., 400 ITR 439, on appeal by the Revenue, the Bombay High Court upheld the decision of the Tribunal and held as under- The notice of reassessment had been issued on the ground that the shareholders of the assessee company were fictitious persons. The shareholders were other companies. The documents which had been produced were basically from public offices, which maintain records of companies. The documents also included the assessment orders of such companies for the three preceding years. Besides the documents also included the registration of the companies which disclosed their registered addresses. ii) The commissioner (Appeals) as well as the Tribunal on the basis of the appreciation of the evidence on record, concurrently came to the conclusion that the existence of the companies was based on documents produced from public records. iii) The revenue was seeking to rely upon the statements recorded of two persons who had admittedly not been subjected to cross examination. Hence the question of remanding the matter for re-examination of such persons would rot at all be justified. The notice was not valid and had to be quashed. The appeal stands rejected. The above judgements are squarely applicable to our client's case as the Ld. A.O. has not reopened the assessment at any time earlier, even though the said information in the form of the said statement of Mr. Bhutoria, was always available with them and that no cross-examination was allowed to the assessee as held by the Hon. Bombay High Court, which is the jurisdictional High Court. In View of the above, we once again humbly request Your Honour to quash the proceedings-initiated U/S. 148 as Void ab Initio, in the Interest of justice and equity. Without Prejudice to the above, we would like to draw Your Honour's attention to the fact that the addition made by the Ld. A.O., U/S.68, was only on the basis of assumptions and presumptions that the assessee company had received share application money from paper companies, whose identity, capacity, creditworthiness, were in doubts as the said companies were having meagre profits only and were not having their own sufficient funds. M/s. Greenedge Construction Pvt. Ltd. ITA no.263/Nag./2018 Page | 8 In this regard, we would like to draw Your Honour's attention to the fact that the following companies had invested their funds into the shares of assessee company: Name of Company Total (`) Aadita Construction Pvt. Ltd. 37,00,000 Aarjav Commodities Pvt. Ltd. 79,00,000 Priyank MultitradePvt. Ltd. 35,00,000 Akshaj MultitradePvt. Ltd. 41,00,000 AkulMultitradePvt. Ltd. 65,00,000 Anantika Infrastructure Pvt. Ltd. 15,00,000 Czaee Infrastructure Pvt. Ltd. 10,00,000 Hitee Infrastructure Pvt. Ltd. 15,00,000 Jasum Real Estate Pvt. Ltd. 15,00,000 Powered MultitradePvt. Ltd. 20,00,000 Sanobar Infrastructure Pvt. Ltd. 15,00,000 Spectarcular Infrastructure Pvt. Ltd. 25,00,000 Taurus ViniyogPvt. Ltd. 1,25,00,000 Vidya BuildconPvt. Ltd. 10,00,000 Adhik MultitradePvt. Ltd. 53,00,000 Total: 5,60,00,000 Further, during the assessment proceedings the assessee company had filed the following details of all the above-mentioned companies before the Ld. A.O. as can be appreciated from the paper book submitted and which is on Your Honour's record: – The copy of their PAN card issued to them by the Income Tax Department. – Income Tax Return alongwith their computation of total income for the relevant year. – Copy of memorandum of association and articles of association alongwith the copy of certificate of incorporation. – Complete set of audited financial statements of all the companies for the relevant year. – The bank statements, establishing that the above transactions were by cheque payment only. The above details established the following facts: 1. The identity of all the companies, were proved beyond doubt by the evidence of their pan card copies, copies of their income tax returns and copies of form18 filed by them with ROC. 2. The genuineness of the transaction was established from the bank statements of all the companies that were filed. This established the fact that M/s. Greenedge Construction Pvt. Ltd. ITA no.263/Nag./2018 Page | 9 the share application money was received by Cheque/RTGS from the bank account of those companies, who were having their own sufficient funds in their own bank account out of which they had issued cheques/RTGS. 3. The full set of audited financial statements of all the said companies, were submitted and were on the record of the Ld. A.O. Tax Companies in Assessee Company along-with their investment in other Their balancesheets clearly established the Investment made by those companies. This evidence proved the availability of bonafide funds with those companies and their creditworthiness. 4. Our client also proved the source of investment of said companies, by bringing on record their bank statements and balance sheets in which these investments were clearly accounted for along with their investment in other companies as per their audited statements. 5. We would also like to point out here that the amendment to section 68 of further additional proof of sources of investor companies was brought on the statute book only with effect from 01/04/2013 and hence the said provision does not apply to our client's case. Even then, the assessee company had also submitted all the documents proving the Identity, capacity and creditworthiness of the Source of Source to enable the Ld. A.O. to appreciate the genuineness of all the said transactions. The Ld. A.O. had verified all the said facts and was apparently satisfied about it, which can be appreciated from the fact that he has not raised any single doubt or pointed out any single anomaly in any of the documents submitted before him. To enable Your Honour to appreciate the said details, to which the Ld. A.O. has not applied his mind as required in the Performance of his Judicial Duty, we give hereunder the Investment information of those Companies, which could have been easily appreciated from the Financial Statements of those Companies submitted to the Ld. A.O.: Name of Company Total Share Holders Funds Available With the Company as per their Balance Sheet Total Investment made by those Companies Aadita Construction Pvt. Ltd. 5,97,00,789 5,60,00,789 53,00,000 Aarjav Commodities Pvt. Ltd. 6,22,00,205 5,43,00,205 79,00,000 Priyank Multitrade Pvt. Ltd. 5,60,00,640 5,25,00,640 35,00,000 Akshaj Multitrade Pvt. Ltd. 4,50,50,691 4,09,50,691 41,00,000 Akul Multitrade Pvt. Ltd. 8,47,00,525 7,82,00,525 65,00,000 Anantika Infrastructure Pvt. Ltd. 6,44,25,464 6,29,25,464 15,00,000 Czaee Infrastructure Pvt. Ltd. 2,77,00,307 2,67,00,307 10,00,000 M/s. Greenedge Construction Pvt. Ltd. ITA no.263/Nag./2018 Page | 10 Hitee Infrastructure Pvt. Ltd. 4,43,00,447 4,28,00,447 15,00,000 Jasum Real Estate Pvt. Ltd. 4,47,50,486 4,34,50,486 15,00,000 Powered Multitrade Pvt. Ltd. 6,76,00,440 6,56,00,440 20,00,000 Sanobar Infrastructure Pvt. Ltd. 4,60,47,775 4,45,47,775 15,00,000 Spectacular Infrastructure Pvt. Ltd. 4,50,30,562 4,25,30,562 25,00,000 Taurus Viniyog Pvt. Ltd. 4,39,59,941 3,14,56,941 1,25,00,000 Vidya Buildcon Pvt. Ltd. 6,22,50,422 6,12,50,422 10,00,000 Adhik Multitrade Pvt. Ltd. 4,46,00,660 3,93,00,660 53,00,000 TOTAL 5,60,00,000 The clear evidence of the above Concise Investment Portfolio prepared from the Balance sheets of those Companies submitted to the Ld. A.O., establishes the fact that all the said Companies were having more than Sufficient Funds of their own to Invest in the Shares of the Assessee Company and that their Current or Past Year's Profits were not at all required to be considered as a parameter of any sort for considering the Creditworthiness of the said Companies. As regards the assumption of the Ld. A.O. that the said companies did not have sufficient share capital, we have to state that the Ld. A.O. has miserably failed to appreciate the fact that the "Reserves and Surplus", is always considered as part of "share holders funds". The same can be appreciated from the above table of all the said companies. The said total shareholder's funds, was very much sufficient, for the said companies, not only to invest in assessee company but in other companies also. As regards the contention of the Ld. A.O. that "this paper companies have no credibility or capacity of their own to advance such huge amounts" as these companies before advancing funds to the Assessee received exactly same amount from other group company, we have to state that the Ld. A.O. has not made any attempt to enquire into the nature of transactions of the said companies with the group companies. Hence just because exactly the same amounts are transferred, it cannot be said that the said Companies do not have any credibility or capacity to advance funds especially when the said companies have invested a very small amount in the Assessee company, as compared to their Total Investments in other companies. It is to be noted that just because the transactions are coming from group companies, it cannot be said that the unaccounted money of Assessee Company has been routed through group companies. Further, neither the Investigation wing nor the Ld. A.O. has given any independent finding with cogent or clinching evidence as required under the Law that the Assessse Company was in possession of any unaccounted money, in the First Place. M/s. Greenedge Construction Pvt. Ltd. ITA no.263/Nag./2018 Page | 11 Further, the Ld. A.O. has failed to appreciate the simple fact that No Prudent Businessman would keep his funds idle and would always like to use it for the purpose of the business of the company, especially when the funds are compulsorily to be maintained in current account, on which no interest is received. The above facts will enable Your Honour to appreciate the fact that in business the funds are never kept idle and are continuously rotated for business purposes. It is also to be noted that time and again, the Ld. A.O. was made aware of the fact that investment itself is a business activity and when a company is engaged in the consistent activity of investing funds in other companies, the same should have been considered as a business activity. Therefore the Ld. A.O. is not justified in contending that these companies do not have any business activities. In view of the above details and evidences, which proved the bonafide of the receipt of Share Application Money and that too by Cheque/RTGS, the Ld. A.O.'s Adamant Attitude of not Applying his mind to any of the Details, which were required to be Examined and Verified by him as per his duties, before coming to a Judicious Conclusion in the matter, is nothing but Suspicious Prejudice leading to Injustice to the Assessee. We would also like to draw Your Honour's attention to the Delhi High Court's Decision in the case of CIT Vs. Gangeshwari Metal Pvt. Ltd. 361 ITR 10, Wherein it is held that "where amounts are shown as share application money it is a simple question of whether the assessee has discharged the burden placed upon it under Section 68 of the Income Tax Act, 1961, to prove and establish the identity and creditworthiness of the share applicant and the genuineness of the transaction. In such a case, the Assessing Officer cannot sit back with folded hands till the assessee exhausts all the evidence or material in its possession and then merely reject it, without carrying out any verification or enquiry into the material placed before him." In the case of Our Client, the Ld. A.O. did not apply his mind to the Investment details of those companies available with him and diverted his attention to the unnecessary data of Profitability of those companies, which was not required. He has just brushed aside the Investment and Balance sheet details and rejected those vital evidences merely on assumptions, presumptions, suspicions and surmises. Also, the Delhi High Court in the case of CIT Vs. Kamdhenu Steel and Alloys Ltd. 361 ITR 220 has held that "the delicate balance has to be maintained while applying Section 68 & 69 of the Income tax Act 1961. On the One hand, no doubt, such kinds of dubious practices are rampant: on the other hand, merely because there is an acknowledgement of such practices that would not mean that in any of such cases, the Court has to presume that the assessee in question has indulged in practise. To make the Assessee responsible there has to be proper evidence. It is equally important that an innocent person is not fastened with liability without cogent evidence. M/s. Greenedge Construction Pvt. Ltd. ITA no.263/Nag./2018 Page | 12 The department is not remediless and is free to proceed to re-open the Individual Assessment of such alleged bogus shareholders in accordance with the Law. The initial burden lies on Assessee to explain the nature and source of Share Application Money received by Assessee. The Assessee has to satisfactorily establish the Identity of the Shareholders, the Genuineness of the Transaction and the Creditworthiness of the Shareholders. Assessee explaining Source of money Identities of Applicants and their Creditworthiness established Burden of Proof Discharged by Assessee Onus Shifted to Department No Evidence to show Transactions were not Genuine - Section 68 and 69 Not Applicable." The Hon. Supreme Court in case of Lovely Exports Put. Ltd. 216 CTR 195 has held that "if Share Application Money is received by Assessee Company from Alleged Bogus Shareholders, whose names are given to A.O. then Department is free to proceed to reopen their individual assessments, but it cannot be regarded as undisclosed income of assessee company." We would like to draw Your Honour's attention to the fact that the Ld. A.O. has simply contended that Identity, Capacity of those Companies and the Genuineness of the transactions are not proved merely on the basis of the Statement of Shri Rajesh Bhutoria recorded in 2014, without even verifying the Affidavit of Mr. Rajesh Bhutoria, dated 27/12/2017, before the Metropolitan Magistrate, Kolkata, submitted to him, in which he had clearly and unambiguously affirmed that the transactions with Greenedge Constructions Pvt. Ltd. were genuine and were supported by necessary documents. Further, the Ld. A.O. has also not cared to enforce the attendance of Mr. Arun Behra and Mr. Bhutoria, on whose statement of 2014, he is heavily relying on, even though the summons were served on them as the primary burden of producing Mr. Bhutoria is on the Ld. A.O. It is also to be noted that the Ld. A.O. has done grave injustice to the Appellant by not allowing the cross-examination of Mr. Bhutoria even though he was specifically requested for the same, merely by contending that "it is humanly not possible for the brokers to be present for oral cross-examination in all cases where the magnitude of the case is not less than a scam". In this regard we would like to draw Your Honour's attention to the fact that except the said statement of Mr. Bhutoria, the Ld. A.O. has not brought on record any cogent or clinching evidence to show that the said transactions are not genuine. Further, the Ld. A.O. is also not justified in brushing aside the said affidavit of Mr. Bhutoria, by merely stating that it has no legal validity without even taking any legal opinion on the same. If the said affidavit which is affirmed before the Metropolitan Magistrate is not considered to be legally valid then the statement on oath given before M/s. Greenedge Construction Pvt. Ltd. ITA no.263/Nag./2018 Page | 13 the investigation officer of the Income Tax Department also, cannot be considered as legally valid and binding especially when it is not supported by any corroborative evidence. The Ld. A.O. has also failed to appreciate the fact that in majority of the cases, the Parties/Third Parties have retracted their statements given on oath to the Income Tax Department. It is also strange that the Department, who has been given amass powers under the Act, did not take any action from 10/02/2011 on the persons to whom Summons were issued and who did not appear before them, till the passing of the assessment order including the Bank to enforce their attendance before them. We would also like to point out here that all the Judgments cited by the Ld. A.O., in his Order without even verifying the basic facts placed before him as required under the Law, are not applicable to Our Client's case as shown hereunder: While discussing the genuineness of the transactions, the Ld. A.O. has relied on the Supreme Court's Judgements, in the case of Roshan Di Hatti and Kale Khan Mohammad Hanif, wherein the Hon. Apex Courth as held that “where the nature and source of a receipt, whether it be money or other property, cannot be satisfactorily explained by the Assessee, it is open for the revenue to hold that it is income of the Assessee and no further burden lies on the Revenue to show that the income is from any particular source." However, the Ld. A.O. has miserably failed to show as to how the Assessee, even after submitting all the details that are required, has not satisfactorily explained the transaction, even when he has not examined or verified the same by enforcing the attendance of the persons on whose statements, he is relying on. As regards the reliance of the Ld. A.O. on the Allahabad High Court in case of Motilal Padampat Udyog Ltd. for not allowing Cross examination, the Ld. A.O. has disregarded the Hon. Bombay High Court's Judgment in the case of M/s. Ashish International wherein it has been held that "That A.O. should have given an Opportunity to the assessee to cross examine the witness. That veracity of the information can be determined only when assessee is offered an opportunity to cross examines the person providing information to the A.O. That if cross examination is not provided, then it will clearly amount to breach of principle of natural justice." It is also to be noted that the Hon. Bombay High Court in the case of Paradise Inland Shipping Pvt. Ltd., 400 ITR 439, has even struck down the notice U/S.148, when the Ld. A.O. had not allowed the cross examination. Therefore, the said action of the Ld. A.O. in not allowing the Cross- examination and adding the Share Application Money without bringing on record any cogent or clinching evidence or pointing out any anomaly in the evidences placed before him, is totally against the principle laid down by the Hon. Supreme Court and Jurisdictional High Court. M/s. Greenedge Construction Pvt. Ltd. ITA no.263/Nag./2018 Page | 14 Hence, we request Your Honour to kindly delete the said Addition made U/S. 68 as Our Client has not only proved the entity of the Shareholders, the Genuineness of the Transaction and the Creditworthiness of the Shareholders but has proved the source of source also.” 6.0 The paper book filed by the AR was sent to the AO and he was asked to give his remarks on the same. The AO has sent his remand report dated 12.07.2018 accepting the fact that all the papers and the submissions were filed before him while also holding the same contentions. The copy of the said report was forwarded to the appellant for comments on the same. 8. The paper book filed by the AR was sent to the AO and he was asked to give his remarks on the same. The Assessing Officer has sent his remand report dated 12/07/2018, accepting the fact that no additional evidences have been relied upon. In response to the said remand report, the learned A.R. had submitted rebuttal as under:– “With reference to the above appeal and under instructions from our above named client, we submit herewith, their following response to the remand report with a request that the same may please be accepted on record and the relief prayed for as per the grounds of appeal may please be granted to them: At the outset, we would like to point out here that the Ld. A.O. has clearly and unambiguously accepted the fact that all the documents that have been filed before Your Honour alongwith assessee's replies, were submitted during assessment proceedings and that there are no additional evidences or additional facts that have been brought on record. As regards the other observations of the Ld. A.O. in the remand report, we would like to state and submit as under: The Remand Report once again establishes the fact that the Ld. A.O., because of his prejudicial mind and high handedness, though has perused all the said documents that were submitted before him, has not carried out any judicious verification worth its name nor has conducted any independent inquiry as is requested and required of him. He has just blindly relied on the statement of Mr. Bhutoria dated 14/11/2014 and that too without appreciating/understanding the fact that Mr. Bhutoria, in his statement, had specifically mentioned the name of Bazar Group companies only. Further, the Ld. A.O. has also not been able to differentiate between the paper companies and investment companies and has considered all the companies as M/s. Greenedge Construction Pvt. Ltd. ITA no.263/Nag./2018 Page | 15 paper companies without bringing on record any cogent or clinching evidence clearly establishing the fact that the said companies were paper companies. It is to be noted that even though the Ld. A.O., time and again has been harping on the theory that the assessee was having unaccounted money and that has been brought back, he has not established the said fact, with any cogent or clinching evidence. He has also failed to appreciate the fact that all the companies, whose all the documents including certificate of incorporation, audited financial statements, bank statements, copies of income tax returns that were submitted to him during assessment proceedings, could not be considered as "Bogus Companies", without thoroughly examining all the said documents and cross verifying the said details from the concerned income tax officers of the said companies. The Ld. A.O. has also miserably failed to appreciate that merely because the companies do not have profits or do not have sufficient capital as per his assumption, presumption, suspicion and surmises, it cannot be said that they do not have creditworthiness, or they are bogus. If that was the case, no businessman would ever be able to do business with bank's or outsider's funds. It is also to be noted that the Ld. A.O. has miserably failed to appreciate the fact that "Reserves and Surplus" are part of shareholders funds and hence he was not justified in assuming and presuming that all the said companies did not have sufficient share capital. The Ld. A.O. has once again harped on his presumed myth that Affidavit of Mr. Bhutoria has no legal validity, without even ascertaining about the position and importance in Law as regards the Sworn Affidavit made before Metropolitan Magistrate. It is also to be noted that the Ld. A.O. has relied on the Judgement in case of [2017] 394 ITR 27 (Calcutta) Pragati Financial Management (P.) Ltd. Vs. CIT Hon. Kolkata High Court wherein it is held that, "an Income Tax Officer is not precluded from making an enquiry as to the true nature and source therefore even if the same is credited as receipt of Share Application Money" However, from the facts of Our Client's case, it is clear that the Ld. A.O. has not made any inquiry worth its name including cross verifying the transactions from the concerned assessing officers of those companies and enforcing attendance of Mr. Bhutoria even though he was not satisfied with the Legality of the Sworn Affidavit of Mr. Bhutoriaand he was having sufficient powers to do so. Instead, he has made up his mind to sit with folded hands and put the blame on assessee company for not producing Mr. Bhutoria without appreciating the fact that the primary responsibility to produce Mr. Bhutoria, was casted on him, especially when he was relying on the statement of Mr. Bhutoria. M/s. Greenedge Construction Pvt. Ltd. ITA no.263/Nag./2018 Page | 16 Further, as regards the contention of the Ld. A.O. that "all the corroborative and circumstantial evidences clearly state that the transactions are sham and are way to route Assessee's own unaccounted money back to its books of accounts", we have to state that No evidence has been brought on record to prove that the Assessee was having unaccounted money, in the first place. As regards the other judgement relied on by the Ld. A.O., we have to state that the same is relating to the Loan transactions and not relating to Share Application Money and hence is not applicable to Our Client's case. We would also like to point out here that the Ld. A.O. was not justified in assuming and presuming that the "paper companies have taken entries from the group companies of the assessee (which in turn are also mere shell companies) itself to advance loan to assessee", without even enquiring with the said companies about the nature of transactions the said companies had with the group companies. In view of the above, we humbly reiterate that the share application money received by Our Client should be accepted as genuine as Our Client has proved the identity, capacity and credit worthiness of all the parties and the Ld. A.O. has merely rejected all the evidences by blindly relying on the earlier statement of Mr. Bhutoria, which has not been supported with any corroborative evidence worth its name. We would like to once again draw Your Honour's attention to the fact that the notice U/S.148 is void ab initio and Bad in Law as mentioned in our earlier submissions and as the said notice has been issued without affording the cross examination of the concerned person as held by the Bombay High Court. Under the circumstances, we humbly request Your Honour, to kindly quash the reassessment proceedings in the interest of justice and equity.” 9. The learned CIT(A), after considering the remand report of the Assessing Officer, reply of the learned A.R. and other documents available before him, deleted the addition of ` 5,60,00,000, made by the Assessing Officer under section 68 of the Act. The observations of the learned CIT(A) are reproduced below:– “Decision: 7.0 I have perused the assessment order, remand report and submissions of the appellant. As regards the first ground of appeal, the appellant company had during re-assessment proceedings, vide letter dated 29/12/2017, submitted the following documents in respect of all the said companies: The copy of their PAN Card Issued to them by the Income Tax Department. M/s. Greenedge Construction Pvt. Ltd. ITA no.263/Nag./2018 Page | 17 Income Tax Return alongwith their Computation of Total Income for the relevant year. Copy of Memorandum of Association and Articles of Association along with the copy of Certificate of Incorporation. Complete set of Audited Financial Statements of all the Companies for the relevant year. The Bank Statements, establishing that all the impugned transactions were by Cheque payment only. The above documents were resubmitted during the appellate proceedings alongwith the Affidavit of Shri Bhutoria, based on which the entire assessment has been framed. It is also noted that all the said documents were submitted during the reassessment proceedings and were always available with the A.O. These were sent back to the AO for re-examination, and the remand report was obtained. I find that the AO has not made any further enquiries with the ROC, nor with the AOs of the other companies, and nor has the AO deemed it fit to investigate the money trail through bank account to ascertain the grave allegations being levelled at the appellant. Seemingly, this non-action of the AO reveals a pre-determined mind because no other reason appears evident from the reluctance of the AO to carry out independent investigations in the present case. 7.1 find that the AO has placed a heavy reliance on the statement of one Mr. Shutoria to prove the contentions of unexplained cash credits. However, I find substance in the submissions of the appellant that even though the said statement of Mr. Bhutoria, was with the department since 14/11/2014, no action was taken by the AO on the said statement till 30/03/2017. Further, the said statement is not supported by any cogent or clinching evidence proving the escapement of income in the hands of Greenedge Construction P. Ltd (appellant), nor has the AO enforced the attendance of Mr. Bhutoria even though the summons was served on him. 7.2 Against this, the appellant has submitted all the details and evidences including the Affidavit of Mr. Bhutoria, before the Metropolitan Magistrate, clearly stating that the transactions entered into by his company with the appellant company are genuine. Therefore, there were two sets of statements by the same person before the AO. The logical and responsible action of any Assessing Officer would be rule out the anomalous statement or prove with certainty which of these two statements was related directly to the appellant and had evidentiary value against the appellant. I find that the AO, other than issuing summons u/s. 131, did not think it important to pursue the matter and enforce the summons- as it was convenient to proceed on the basis of the first statement which was beneficial for his cause. Be that as it may, the AO's action in outright rejection of the sworn statement before the Metropolitan Magistrate is found to be irregular as this statement / evidence has not been controverted by him through any 'adverse evidences'. 7.3 On the issue of the statement recorded by the officer of the Investigation wing, Mr. Bhutoria did not provide any evidences supporting such statement. M/s. Greenedge Construction Pvt. Ltd. ITA no.263/Nag./2018 Page | 18 The most important point here is that even that statement does not make any mention of the involvement of the appellant company. This coupled with the fact that no corroborating evidences were provided makes this statement a dumb document, and cannot be used against the appellant. It is a settled law that confession in the form of a statement is a weak kind of evidence and hence needed to be corroborated. It may be used to corroborate or contradict a statement made in the court in the manner provided under section 157 and 145 of Indian Evidence Act. The statement cannot be used as a substantive piece of evidence but it can be used for the purpose of corroboration and can be used to contradict by cross- examining the person who made. 7.4 The issue of the sworn affidavit before the Metropolitan Magistrate was examined. The AO has summarily dismissed the later Affidavit of Mr. Bhutoria by stating that merely making a statement in a court stamped paper does not have evidentiary value. The Court, Magistrate, or other officer as aforesaid, before whom an affidavit is made, certifies at the foot of the affidavit the fact of the making of such affidavit before him, and for the purpose of identification, mark, date, and initial every exhibit referred to in the affidavit. It is pertinent to note that under Order XIX, Rule 3 of the Code of Civil Procedure it was mandatory for the affiant to disclose the nature and source of his knowledge and information with sufficient particulars. Affidavit attested by a magistrate and an affidavit attested by a notary are equally accepted by all courts in India. The authenticity of the attestation by a magistrate or a notary is at par in the eyes of law and equal weightage is given to both of the said documents when entertained in evidence. Both of the said affidavits are appraised equally in all Spheres wherever they intend to take effect. Therefore, to dismiss such evidence as Having no evidentiary value is itself an act of imprudence and thoughtless, and portrays a lack of understanding of law. 7.5 It is noted that Mr. Bhutoria has given a sworn affidavit that the share application money invested in the appellant company was in the normal course of business. He has further stated that no accommodation entries were given. It was thus the judicial duty of the AO to probe further and refute the later sworn statement, in case the AO disbelieved such affidavit. I find that no further attempt other than brushing aside this statement, was made by the AO. I find that the A.O. has failed to show as to how the appellant, even after submitting all the details that are required, has not satisfactorily explained the transaction, even when he has not examined or verified the same by enforcing the attendance of the person on whose statements, he is relying on. 7.6 The A.O. has also failed in his judicial duties by denying the opportunity to the appellant, even though he was specifically requested for the same. The contention of the AO that providing such opportunity is not necessary for the Assessing authority reflects a dismal ignorance of due processes of law. It is noted that Mr. Bhutoria's statement which was given before the Investigation Wing was not backed by any evidences, and Mr. Bhutoria has also not mentioned the name of the appellant company in his said statement on which the AO has heavily relied on, as being a beneficiary of the alleged accommodation entries. Therefore, the statement of Mr. Bhutoria given in matters NOT pertaining to the appellant has no legal footing in a court of law, M/s. Greenedge Construction Pvt. Ltd. ITA no.263/Nag./2018 Page | 19 and an assessment of unexplained income in the hands of the appellant on the basis of such unrelated third party statement, would amount to an assessment on the basis of conjectures and surmises in the least, and deserves to be deleted. The AO has not proved that the share application money received by the appellant was its own money, and once the appellant has provided all the details and evidences to the AO, the onus of disproving the evidences furnished was on the Assessing Officer- which he has not discharged. 7.7 As regards the merits of the case, I have carefully considered the facts of the ase and the written submissions of the appellant. I find substantial force in the submissions made by the appellant. It is seen that the A.O. during the course of reassessment proceedings, has not made any efforts to summon the directors of the said companies. No letter u/s. 133(6) has been sent by the AO to the any of the said companies at the addresses provided to the AO. In any case, the appellant has furnished sufficient evidences to the AO to not only to establish the identity and creditworthiness of the said party but also to establish the genuineness of the transactions i.e. source of the monies, and has also provided all the documents to prove the source of source as well. 7.8 It was the duty of the AO to make independent enquiries with said companies or with their jurisdictional AOs to come to a considered conclusion with regard to the genuineness of the documents furnished and with regard to the various claims of the appellant. In the absence of contrary evidence being brought on record, the assertions and the submissions of the appellant are required to be accepted. It is also important to take note of the evidence that have been submitted by the appellant during the course of assessment proceedings to establish the identity, creditworthiness and genuineness of the transaction entered into by the appellant with the said companies, which have not been faulted by the AO. 7.9 To establish the identity of the said company the appellant had provided PAN, copies of Income Tax Return and Form No. 18 filed by the appellant with ROC. The appellant has also filed full set of Audited Financial Statements of the said companies. The amount of investment is clearly shown as investment made by them in the appellant company along with the investment made in other companies. The said evidences prove the availability of funds with the said company and its creditworthiness. The appellant has also submitted their bank statements. The bank statements of the appellant company as well as of the said companies were also furnished which clearly establish the fact that share application money has been received by the appellant through RTGS from the bank account of the said companies and thus the genuineness of the transaction is also established. In the face of such overwhelming evidence there was no basis what so ever for the AO to come the conclusion that the share application money received by the appellant from the said companies was unexplained. To 7.10 It is necessary to go through the balance sheets of these companies to understand if the said companies are paper companies as concluded by the AO. The investment schedule annexed to the balance sheet of all the above companies showed that these two companies had made investment in many other companies and that these companies were having their own sufficient funds for investment in the shares of the appellant company also. Thus it can be seen that each of the companies have huge funds available with them and M/s. Greenedge Construction Pvt. Ltd. ITA no.263/Nag./2018 Page | 20 have made huge investments in various other companies and the investments made in the appellant company is only a small percentage of their total investments. The table prepared from the financial statements as included in Page 7 of this order provides a clear evidence to establish that the two said companies were having more than sufficient funds of their own to invest in the shares of the assessee company and that their current or past year's profits were not all required to be considered as a parameter of any sort for considering the creditworthiness of the said companies. Hence the AO is not justified in concluding that the said companies are merely paper companies only on the basis that their profit/income are very low or that they have received funds from the group companies without even inquiring into the nature of transactions the said companies had with the group companies. The Hon. Supreme Court in case of Lovely Exports Pvt. Ltd. 216 CTR 195 has held that "if share application money is received by Assessee Company from alleged bogus shareholders, whose names are given to A.O. then Department is free to proceed to reopen their individual assessments, but it cannot be regarded as undisclosed income of assessee company." 7.11 In the case of the appellant there is no evidence that there was any activity of providing accommodation entry at any point in the chain of movement of funds. No fresh confessional statement by any party has been brought on record by the AO. in the assessment order to establish the fact that accommodation entries were provided by the alleged company at any point in the movement of fund. In light of the above facts, it is incorrect to add the entire amounts just because the said companies have meagre profit especially when the appellant has given plethora of information of the said companies to establish the identity and creditworthiness of the creditors and the genuineness of the transaction. It is also to be noted that all the audited financial statements of all the said companies, which have been discussed in the assessment order, have been accepted by the AO and he has not doubted the genuineness of those audited statements. In such circumstances, the AO was not justified in simply brushing aside those evidences. 7.12 On perusal of the documents and submissions pertaining to the said share allotment transactions, it is found that the appellant has discharged its onus of establishing the identity of the purchaser/investor and genuineness of the transaction. Taking into consideration of all the above, I find merit in the argument of the counsel for the appellant that the primary burden cast on the appellant was duly discharged. The issue of primary onus is to be weighed on the scale of evidence available on the record and the discharge of burden by the appellant is also to be decided on the basis of documents filed by the appellant and facts and circumstances of the case and on that basis a reasonable view is to be taken as to whether the appellant has discharged the primary onus of establishing the identity of share applicant, its creditworthiness and genuineness of the transaction. In this regard, the Hon'ble Delhi High Court in Commissioner of Income Tax Vs. Divine Leasing & Finance Ltd. 2008 (299) ITR 268 (Del.) had held as under:- 13. There cannot be two opinions on the aspect that the pernicious practice of conversion of unaccounted money through the masquerade or channel of investment in the share capital of a company must be firmly excoriated by the revenue. Equally, where the preponderance of evidence indicates absence of culpability and complexity of the assessee it should not be harassed by the M/s. Greenedge Construction Pvt. Ltd. ITA no.263/Nag./2018 Page | 21 Revenue's insistence that it should prove the negative. In the case of a public issue. the Company concerned cannot be expected to know every detail pertaining to the identity as well as financial worth of each of its subscribers. The Company must, however, maintain and make available to the Assessing Officer for his perusal, all the information contained in the statutory share application documents. In the case of private placement the legal regime would not be the same. A delicate balance must be maintained while walking the tightrope of sections 68 and 69 of the IT Act. The burden of proof can seldom be discharged to the hilt by the assessee: if the Assessing Officer harbours doubts of the legitimacy of any subscription he is empowered, nay duty-bound, to carry out thorough investigations. But if the Assessing Officer fails to unearth any wrong or illegal dealings, he cannot obdurately adhere to his suspicions and treat the subscribed capital as the undisclosed income of the Company. 16. In this analysis, a distillation of the precedents yields the following propositions of law in the context of Section 68 of the Income Tax Act. The assessee has to prima facie prove (1) the identity of the creditor/subscriber; (2) the genuineness of the transaction, namely: whether it has been transmitted through banking or other indisputable channels: (3) the creditworthiness or financial strength of the creditor/subscriber: (4) If relevant details of the address or PAN identity of the creditor/subscriber are fumished to the Department along with copies of the Shareholders Register, Share Application Forms, Share Transfer Register etc. it would constitute acceptable proof or acceptable explanation by the assessee. (5) The Department would not be justified in drawing an adverse inference only because the creditor/subscriber fails or neglects to respond to its notices: (6) the onus would not stand discharged if the creditor/subscriber denies or repudiates the transaction set up by the assessee nor should the Assessing Officer take such repudiation at face value and construe it, without more, against the assessee. (7) The Assessing Officer is duty- bound to investigate the creditworthiness of the creditor/subscriber the genuineness of the transaction and the veracity of the repudiation" 7.13 The preceding enumeration of the circumstances of the case shows that the appellant had furnished all relevant data before the AO, which, however, were not inquired into by the AO. Instead he obdurately adhered to his initial understanding that the entire transaction was neither creditworthy nor genuine. The appellant has relied upon the documents to prove that the monies had been received through banking channels from all the investor related companies; it had produced copy of bank statement, copy of Form 2 filed before ROC etc. for the years 2011-12 and the confirmation given by the remitters towards remittance of share capital etc. This was all that the appellant could have furnished in the circumstances. It could not be expected to prove the negative that the monies received by it were suspicious or not genuine infusion of capital etc. The appellant had discharged its burden of proof in terms of the settled dicta in Divine Leasing (supra). It is only logical to expect that if the AO was not convinced about the genuineness of the said documents, he would have inquired into their veracity from the bank(s) to ascertain the truth of the appellant's claims. Having not done so, he was not justified in disregarding the appellant's contentions that the infusion of advance/ capital into its accounts was legitimate. Where the appellant adduces evidence in support of the advances received, it is open to the AO to examine M/s. Greenedge Construction Pvt. Ltd. ITA no.263/Nag./2018 Page | 22 it and reject it on tenable grounds. In case he wishes to rely on the report of the investigation authorities, or some statement of an unconnected party, some meaningful enquiry ought to be conducted by him to establish a link between the appellant and the alleged accommodation entry providers. Consequently, the AO was not justified in making additions of the amounts under Section 68 of the Act. The A.O. has failed to show as to how the appellant, even after submitting all the details that are required, has not satisfactorily explained the transaction, even when he has not examined or verified the same by enforcing the attendance of the persons on whose statements, he is relying on. 8.0 I am also aware of the fact that the Finance Act, 2012 inserted two provisos to Section 68, with effect from 1-4-2013 (assessment year 2013-14). First proviso is to enlarge the onus of a closely held company and provides that if a closely held company receives any share application money or share capital or share premium or the like, it should also establish the source of source (that is, the resident from whom such money is received). Second proviso provides that the first proviso will not apply if the receipt of sum (representing share application money or share capital or share premium etc.) is from a VCC or VCF [referred in Section 10(23FB)]. However, in the year under consideration, no such provisions or stipulation existed. The amended provisions therefore, would be effective only from the Assessment Year 2013- 14 onwards and not for the subject Assessment Year. In any view of the matter, the three essential tests while confirming the pre-proviso Section 68 of the Act laid down by the Courts, namely, the genuineness of the transaction, identity and the capacity of the investor have all been examined and on facts it is found satisfied. 9.0 Lastly, the appellant is aggrieved that the assessment has been reopened on the basis of a statement which the Assessing Officer was in possession of the since 14/11/2014, and holding the factually incorrect belief that Aadita Construction P. Ltd., Aarjav Commodities P. Ltd., Priyank Multitrade P. Ltd., Adshaj Multitrade P. Ltd., had given accommodation entry to the appellant of Rs. 1.47 crs. The assessment was completed by making an addition of Rs. 5. 60 crs. This indicates that the AO was himself not sure of the authenticity of the statement of the third party on which the reopening was made. Therefore, the action of the AO in reopening the case based on incorrect information is clearly unjustified, as the material facts and evidences proved otherwise. In this regard, the Hon. Andhra Pradesh High Court has held that "Income Tax Department cannot be permitted to bring fresh litigations because of new views they entertain on facts or new versions which they present as to what should be the inference or proper inference either of the facts disclosed or the weight of the circumstances" - Sirpur Paper mills Ltd. v. ITO[1978] 114 ITR 404 (AP). 9.1 Further the Hon. Kolkata High Court in the case of S. P. Agarwalla alias Sukhdeo Prasad Agarwalla. ITO [1983] 140ITR 1010(Cal.) has held that "A mere confessional statement by a third party (who is a lender of the assessee) that he was a mere name-lender and that all his transactions of Loans were bogus, without blaming the assessee as one who had obtained bogus loans, would not be sufficient to hold that the Assessee's income had escaped assessment" - M/s. Greenedge Construction Pvt. Ltd. ITA no.263/Nag./2018 Page | 23 9.2 Also in a recent decision of Hon. Bombay High Court in case of 'Paradise Inland Shipping Pvt. Ltd., 400 ITR 439, on appeal by the Revenue, the Bombay High Court upheld the decision of the Tribunal and held as under - iv) The Notice of Reassessment had been issued on the Ground that the shareholders of the Assessee Company were fictitious persons. The Shareholders were other companies. The documents which had been produced were basically from public offices, which maintain records of companies. The documents also included the assessment orders of such companies for the three preceding years. Besides the documents also included the registration of the companies which disclosed their registered addresses. v) The Commissioner (Appeals) as well as the Tribunal on the basis of the appreciation of the evidence on record, concurrently came to the conclusion that the existence of the companies was based on documents produced from public records. vi) The revenue was seeking to rely upon the statements recorded of two persons who had admittedly not been subjected to cross examination. Hence the question of remanding the matter for re-examination of such persons would not at all be justified. The notice was not valid and had to be quashed. The appeal stands rejected. 9.3 In view of the above facts and circumstances of the case and in view of the judgments of Andhra Pradesh High Court in the case of Sirpur paper mills Ltd. v. ITO[1978] 114 ITR 404 (AP), the Hon. Kolkata High Court in the case of S. P. Agarwalla alias Sukhdeo Prasad Agarwalla, ITO [1983] 140ITR 1010(Cal.) and the jurisdictional High Court in the case of Paradise Inland Shipping Pvt. Ltd., 400 ITR 439, I am of the considered opinion that the said notice issued u/s.148 is void ab initio and hence the assessment framed on such a void notice is required to be cancelled. 10.0 Considering the above totality of facts and clear evidences furnished by the appellant to establish the identity and creditworthiness of the investors and the genuineness of the transaction, and respectfully following the judgments in the cases as discussed hereinabove, the addition made u/s. 68 of Rs.5,60,00,000/- is hereby deleted. The grounds of appeal are therefore allowed. The Revenue being aggrieved filed appeal before the Tribunal. 10. Before us, the learned Departmental Representative vehemently argued that the matter is a part of nation–vide scam and the assessee is one of the beneficiaries ploughing back its own unaccounted money in the form of share M/s. Greenedge Construction Pvt. Ltd. ITA no.263/Nag./2018 Page | 24 capital and premium. Thus, he submitted that the learned CIT(A) has erred in both law and facts`````````in grating relief. 11. On the other hand, the learned A.R. requested that the order of the learned CIT(A) is watertight and cogent and no interference is required at this stage. He relied upon the judgment of the Hon’ble Madhya Pradesh High Court in PCIT v/s Chain House International Pvt. Ltd., [2018] 408 ITR 561 (M.P) to buttress his submissions (SLP dismissed on 18/12/2019). The relevant part of the judgment is reproduced below:– “Held, there was no dispute about receipt of funds through banking channel nor there was any dispute about identity, creditworthiness and genuineness of investors and, therefore, same had been established beyond any doubt and there should not had been any question or dispute about premium paid by investors- Unless there was a limitation put by law on amount of premium, transaction should not be questioned merely because assessing authority thinks that investor could had managed by paying a lesser amount as Share Premium as a prudent businessman-Test of prudence by substituting its own view in place of businessman's had not been approved by Supreme Court-It was well settled that if creditworthiness of investor company and genuineness of transaction was proved no addition u/s 68 could be made and no substantial question of law arises-Question raised by revenue in regard to issuing share at a premium was purely a question of fact-There was no reason to interfere with decision of lower authorities- Revenue's appeal dismissed. Held: The Tribunal after due examination of the order of CIT(A) and the documents on record insofar as identity creditworthiness, genuineness of transaction of Aadhaar ventures, Dhanush Technologies, Emporis Projects and L.N. Industries (formarly known as L.N. Polyster) came to the conclusion that the assessee company having receipt share application money through bank channel and furnished complete details of bank statements, copy of accounts and complied with notices issued and the directors of the subscriber company also appeared with books of account before the appellate authority and confirmed the investment made by them with the assessee company, therefore, the identity and creditworthiness of investor and genuineness of transaction of the share applicant has been proved in the light of the ratio laid down by the M.P. High Court, Delhi High Court and the Supreme Court and were of the opinion that the onus cast upon the assessee as provided under section 68 has been duly discharged by the assessee the identity of the share subscriber, creditworthiness and genuineness of the transaction is not to be doubted. The Tribunal considered the case of the each company in great detail and recorded its finding. Such finding of fact recorded by the Tribunal is based M/s. Greenedge Construction Pvt. Ltd. ITA no.263/Nag./2018 Page | 25 on the material available on record which is a finding based on appreciation of evidence on record. Issuing the share at a premium was a commercial decision. It is the prerogative of the Board of Directors of a company to decide the premium amount and it is the wisdom of shareholder whether they want to subscribe the shares at such a premium or not. This was a mutual decision between both the companies. In day to day market, unless and until, the rates is fixed by any Govt. Authority or unless there is any restriction on the amount of share premium under any law, the price of the shares is decided on the mutual understanding of the parties concerned. Once the genuineness, creditworthiness and identity of investors are established, the revenue should not justifiably claim to put itself in the armchair of a businessman or in the position of the Board of Directors and assume the role of ascertaining how much is a reasonable premium having regard to the circumstances of the case. There is no dispute about the receipt of funds through banking channel nor there is any dispute about the identity, creditworthiness and genuineness of the investors and, therefore, the same has been established beyond any doubt and there should not have been any question or dispute about premium paid by the investors; therefore, unless there is a limitation put by the law on the amount of premium, the transaction should not be questioned merely because the assessing authority thinks that the investor could have managed by paying a lesser amount as Share Premium as a prudent businessman. The test of prudence by substituting its own view in place of the businessman's has not been approved by the Supreme Court. It is well settled that if the creditworthiness of the investor company and genuineness of the transaction is proved no addition under Section 68 could be made and no substantial question of law arises. The question raised by the revenue in regard to issuing the share at a premium is purely a question of fact. It is a prerogative of the Board of Directors of a company to decide the premium amount and it is the wisdom of shareholder whether they want to subscribe to shares at such a premium or not and moreover the section 68 does not envisages any law on share premium it only requirement is to identity of the investors, the genuineness of the transaction and the creditworthiness of the share applicants which same has been discharged by the respondent authority and the same has been accepted by the appellate authorities thus, the same cannot be reconsidered in these appeals as it is a pure question of fact. 12. We have heard both the parties and gone through the entire material available before us. The addition was made solely on the basis of the statement of Shri Rajesh Bhutoria, which has been retracted subsequently just two days before passing the assessment order. However, the Assessing M/s. Greenedge Construction Pvt. Ltd. ITA no.263/Nag./2018 Page | 26 Officer has not made any independent enquiry of the detailed and voluminous evidences adduced by the assessee. Even the statement so relied upon does not specifically implicate the assessee and it is apparent that the same has been taken in connection with the investigation of one Baazar Group of Companies. Further, the reasons for re–opening his full of infirmities and mismatch in the amount and in the name of investors. We are surprised to note that the statement was available with the Department right from November 2014, but till the date of re–opening, no enquiry whatsoever to carry out the authenticity of the report of the Investigation Wing as applicable to the present case. The learned CIT(A) has correctly concluded that the entire re–assessment has been done out of mere suspicion and is not backed by independent reason to believe by the Assessing Officer. The statement of Shri Rajesh Bhutoria, cannot be held to be a gospel truth specifically when the same has been retracted before the Metropolitan Magistrate. Even in the remand report, the Assessing Officer has not done any verification to contradict the humongous evidences adduced by the assessee and to challenge its authenticity. Accordingly, the entire addition made by the Assessing Officer is based on mere surmises and conjectures and has no legal legs to stand upon. Accordingly, we find no merit in the grounds of appeal raised by the Revenue. The re–opening was initiated on the basis of barrowed satisfaction and the Assessing Officer could not bring out the live nexus of information leading to re–assessment. There are lots of infirmities in the reasons recorded. At this juncture, let us once again draw attention to the reasons recorded in the order of assessment. M/s. Greenedge Construction Pvt. Ltd. ITA no.263/Nag./2018 Page | 27 “As per the information received in this office from O/o Deputy Director of Income Tax (Inv.), Unit–2(3), Kolkata, that in F.Y. 2010–11 credits in assessee’s account from following companies are under mentioned. Sr. No. Name of Company Beneficiary Amount (`) 1. Aadita Construction Pvt. Ltd. M/s. Greenedge Construction 22,00,000 2. Aarjav Commodities Pvt. Ltd. M/s. Greenedge Construction 79,00,000 3. Priyank Multitrade Pvt. Ltd. M/s. Greenedge Construction 35,00,000 4. Adshaj Multitrade Pvt. Ltd. M/s. Greenedge Construction 11,00,000 TOTAL 1,47,00,000 As per information from Kolkata Investigation that the money was routed through a number of bank accounts of jamakharchi/ accommodation entry provider companies into assessee's bank account. There were number of directors viz Mr. Arun Behra, Mr. Vimlesh Kumar Singh for: the Adhik Multitrade P. Ltd. Further it was informed that STR No. 1000020462 shri Arun Behera is linked other STR bearing No. 1000020459 and 1000020461 in respect of Shri Anil Kumar Verma. Mr. Rajesh Buthoria in his statement dated 14.11.2014 has accepted that he was one of the directors of the above mentioned company. On going through the bank statement of Adhik Multitrade P. Ltd one of the ultimate beneficiary is identified as Green edge construction P. Ltd. As the creditworthiness identity and genuineness of this company is itself not proved, the source of credit in assessee's book of Rs. 1,47,00,000/- is not proved. Income of the assessee introduced as credit in his books has therefore escaped assessment. I have therefore reason to believe that the income has escaped as on part of failure of assessee to disclose fully and truly all the material facts necessary for its assessment for the assessment year Therefore, the case is fit for proceeding u/s 147 of the IT Act 1961. 13. Certain persons are named. But it is not clear as to how they are connected with the company. The Bank Statement of Adhik Multitrade Pvt. Ltd. was examined. But significantly, the name of such company does not appear in list of four companies mentioned. The reasons only speak of the conclusions and do not bring out independent application of mind. In fact, Aadita Construction Pvt. Ltd., has subscribed shares for ` 37 lakh and not ` 22 lakh as per reasons. There is no company named Adshaj Multitrade Pvt. M/s. Greenedge Construction Pvt. Ltd. ITA no.263/Nag./2018 Page | 28 Ltd. in the list of shareholders. These glaring observations of the facts are a clear pointer to the fact that basis of re–opening is fragile. The learned CIT(A) has correctly decided which needs no interference at our end. Thus, we uphold the order passed by the learned CIT(A) by dismissing the grounds raised by the Revenue. 14. In the result, appeal filed by the Revenue is dismissed. Order pronounced in the open Court on 18/07/2024 Sd/- V. DURGA RAO JUDICIAL MEMBER Sd/- K.M. ROY JUDICIAL MEMBER NAGPUR, DATED: 18/07/2024 Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The PCIT / CIT (Judicial); (4) The DR, ITAT, Nagpur; and (5) Guard file. True Copy By Order Pradeep J. Chowdhury Sr. Private Secretary Sr. Private Secretary ITAT, Nagpur