Desert Infraspace Pvt. Ltd., Ahmedabad V. The Income tax Officer, Ward-1(1)(4), Ahmedabad

ITA 270/AHD/2017

AI Insights

The case involves Desert Infraspace Pvt. Ltd., which appealed against the order of the Commissioner of Income-tax (Appeals)-1, Ahmedabad, for the Assessment Year 2012-13. The primary issues in the appeal were the additions made under Section 68 of the Income Tax Act concerning unexplained share capital and loans, and under Section 69 regarding unexplained investments in land and building. The Tribunal found that the assessee failed to provide sufficient evidence to substantiate the genuineness and creditworthiness of the transactions, leading to the confirmation of the additions and disallowances by the Assessing Officer.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 133677 (ITAT-AHMEDABAD)
• Duration Of Justice: 6 year(s) 1 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-03-2023
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 05-03-2023
• Assessment Year: 2012-2013
• Appeal Filed On: 31-01-2017
• Other Referred Cases: CIT vs. Divine Leasing and Finance Ltd., CIT vs. Lovely Exports Pvt. Ltd., CIT vs. Nova Promoters Fin Lease Private Limited, Kaushal H. Patel vs. Income-tax Officer, Blessing Construction vs. ITO, Commissioner of Income-Tax vs K.Chinnathamban
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: PRODUCING PAN NUMBER; BANK
• Keywords: Unexplained cash credit; Bogus Share capital; Unexplained investment; Income from undisclosed sources; Search and seizure; Additional evidence; Question of law; Corroborative evidences; Assessment record; Onus to prove
• Section: 68; 69; 132; 133A; 260A; 195; 69A; 264; 22

Judgement Text

आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरणआयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण, अहमदाबाद 瀈यायपीठ अहमदाबाद 瀈यायपीठअहमदाबाद 瀈यायपीठ अहमदाबाद 瀈यायपीठ ‘बी’ अहमदाबाद। अहमदाबाद।अहमदाबाद। अहमदाबाद। IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, AHMEDABAD BEFORE MRS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER AND SHRI T.R. SENTHIL KUMAR, JUDICIAL MEMBER ITA No. 270/Ahd/2017 नधा रणवष /Assessment Year: 2012-13 Desert Infraspace Pvt. Ltd., 202, Shyamak Complex, Behind Kamdhenu Complex, Polytechnic, Ahmedabad PAN : AAECD 0517 E Vs. Income Tax Officer, Ward-1(1)(4), Ahmedabad अपीलाथ / (Appellant) यथ / (Respondent) Assessee by : None Revenue by : Shri Rakesh Jha, Sr. DR स ु नवाई क तार ख/Date of Hearing : 06.03.2023 घोषणा क तार ख /Date of Pronouncement: 22.03.2023 आदेश/O R D E R PER ANNAPURNA GUPTA, ACCOUNTANT MEMBER: This appeal is preferred by the assessee against the order of the learned Commissioner of Income-tax (Appeals)-1, Ahmedabad (hereinafter referred to as “CIT(A)”) dated 08.11.2016 passed u/s 250(6) of the Income- Tax Act, 1961 (hereinafter referred to as “the Act”) for Assessment Year (AY) 2012-13. 2. At the time of hearing fixed in this case, none appeared on behalf of the assessee. There was a similar non-compliance on the part of the assessee to the notices issued on the earlier occasions fixing the appeal for hearing from time to time before the Tribunal. We therefore proceed to decide the 2 ITA No. 270/Ahd/2017 M/s. Desert Infraspace Pvt Ltd Vs. ITO AY :2012-13 appeal ex parte qua the assessee-appellant on merits after hearing the arguments of learned DR. 3. Ground No.1 raised by the assessee is as under:- “The ld. Commissioner of Income-tax (Appeals)-1, Ahmedabad [ld. CIT(A) for short] has grossly erred in law and on facts in confirming the addition of Rs.25,00,00/- being addition to the share capital on the ground that the appellant fails to discharge the onus u/s 68 of the Income-tax Act.” 4. The issue raised in this ground of appeal is related to the addition made in the income of the assessee on account of genuineness of the share capital of Rs.25,00,000/- remaining to be explained. The learned CIT(A) has dealt with the facts of the case and has adjudicated the issue at paragraph Nos. 2.3 to 2.7 of his order as under:- “2.3. I have carefully considered the Assessment Order and submission filed by the Appellant. On careful perusal of the Balance sheet, the A.O. has observed that Appellant company has raised share capital of Rs. 25,00,000/-. The A.O. has asked appellant to submit the proof of identity, creditworthiness and genuineness regarding share capital of Rs. 25,00,000/-. The appellant has furnished the detail in respect of share capital raised during the year as under:- Sr No. Name Address No. of share allotted during the year Issue price of the shares Share premium if any with per share amount Total considera- tion received PAN No. Ward/ Circle 1 Hiteshbhai Balubhai Shah PoojanBunglow, Ashwamegh Bunglows-5, Satellite Road, Ahmedabad 1,25,000 10 - 12,50,000 ALOPS10 77N 1(1)(3), Ahd 2 PoojanHit eshbhai Shah PoojanBunglow, Ashwamegh Bunglows-5, Satellite Road, Ahmedabad 1,25,000 10 - 12,50,000 BAWPS30 69Q 1(1)(3 ),Ahd From the above details, the A.O. has observed that assessee has furnished only name, address and PAN of the appellant. The assessee has not proved the creditworthiness and genuineness of the of share capital raised during the year. Further, the appellant has failed to discharge theburden of proof vis a vis credits in the books and the 3 ITA No. 270/Ahd/2017 M/s. Desert Infraspace Pvt Ltd Vs. ITO AY :2012-13 genuineness. Therefore, an amount an of Rs.25,00,000/- is added to the total income of the assessee as unexplained cash credit under section 68 of the Act by the A.O. On the other hand appellant has contended that he has already submitted the details in the prescribed format as asked by the A.O. along with filed the copy of income tax return, PAN, Passport and copy of ROC for issuing of shares. The appellant has also argued that A.O. has not verified all the details submitted at the time of assessment proceedings. The appellant has relied upon the decision of Hon’ble Delhi High Court in the case of CIT vs. Divine Leasing and Finance ltd. and CIT vs. Lovely Exports Pvt. Ltd. (2008) 299 ITR 268 (Del.). Further the appellant has relied upon the various decisions insupport of its claim. Therefore delete the addition made of share capital under Section 68 6fthe I.T. Act. 2.4 I have gone through the above facts of the case carefully. In order to discharge the burden cast upon the appellant u/s 68 of the IT Act, the appellant is required to prove three things (i) the identity of the shareholders, (ii) the genuineness of the transaction, and (Hi) the creditworthiness of the shareholders. The assessing officer stated that the assessee company failed to discharge its onus to prove creditworthiness of the investors. 2.5 Regarding the investments from HiteshbhaiBalubhai Shah &PoojanHiteshbhaiJrhah totaling to Rs.25,00,000/- the necessary details which proves that the genuineness of the transaction, and the creditworthiness of the shareholders were not submitted by the appellant even after reasonable opportunities given both at the time of assessment as well as appellate proceedings. It is a well settled law that once an amount is found credited in the accounts of the assessee; it is the assessee who has to prove that identity, source and creditworthiness of such persons/parties/depositors. In all the decision cited by the appellant the Hon'ble Courts have held that the appellant has to prove the identity, source and creditworthiness of such persons/parties/depositors. The assessing officer has duly discharged his burden in this case by pointing all various contradictions in the claim of appellant while appellant has miserably failed to discharge his burden to prove creditworthiness of these transactions. 2.6 The issue regarding entry (in respect of share application money has been examined in detail by Hon'ble High Court of Delhi in one of its leading judgment in the case of CIT v/s Nova Promoters Fin Lease Private Limited in 18 taxmann.com 217 Delhi. In this case the Hon'ble High Court has considered various case laws on the issue and held that where modus operandi of entry operators taking cash from assessee company and then providing share application money through cheques from various companies to assessee company has been unearthed. The fact that these monies were received through banking channels or that companies existed in the ROC’s register do not meet the burden of proof under section 68 of the I. T. Act. Theevidence adduced by the assessee has to be examined and not superficially but depth and having regard to the test of human probabilities and normal course of hum conduct. The affidavits submitted by the assessee need not be accepted as a reliable at when there is enough material on record to doubt the veracity of the transaction. In such a case it cannot said that the affidavits can be rejected only after 4 ITA No. 270/Ahd/2017 M/s. Desert Infraspace Pvt Ltd Vs. ITO AY :2012-13 cross verification. In this judgement CIT v/s Nova promoters fin lease private limited in 18 taxmann.com 217 Hon'ble Delhi High Court has made the following observation:- 19. The position thus is that even where a reference of a question of law is made to the High Court under Section 66 of the Indian Income Tax. Act, 1922 or Section 256 of the Income Tax Act, 1961 over which the High Court exercises advisory jurisdiction, and not appellate jurisdiction, where normally the findings of fact recorded by the Tribunal are binding on the High Court, it has been held by the Supreme Court that the findings are not binding on the High Court if they are perverse or if the findings are such that no person acting judicially and properly instructed as to the relevant law could have come to the determination under appeal. The position in an appeal under Section 260A of the Act is "a fortiori" as the judgment of the Supreme Court in the case ofDIT v. Bharat Dimond Bourse, (supra ) would show. We shall demonstrate in the following paragraphs as to how both the CIT (Appeals) and the Tribunal have failed to appreciate the evidence in the proper perspective and on the lines indicated by the Hegde J. in the case of Durga Prasad More (supra). The present case is also not one, as we shall show presently, where the conclusion of the Tribunal is a reasonable conclusion which should not normally be disturbed even if the appellate court would have taken a different view on the same evidence and material. In the present appeal the evidence and material on record, properly considered in the light of the surrounding circumstances and without attaching weight to neutral circumstances or circumstances of no relevance, point to only one conclusion, namely, that the monies introduced by the assessee as share subscriptions from 15 companies were its own unaccounted monies. 2.9. Hon'ble High Court also distinguished the decisions in the case of Lovely Exports P. Ltd. in (2008) 299 ITR 268, general exports and credits Ltd and Divine leasing and finance by making the following observation: 32. Since strong reliance was placed by the assessee on the order of the Supreme Court in the case of CIT v Lovely Exports P. Ltd., (2008) 216 CTR (SC) 195 it would be necessary to examine the facts of that case and the ratio laid down therein in order to decide the applicability of that case to the one before us. It would also be necessary to examine the string of decisions of this court on the question of applicability of section 68 of the Act to monies received as share capital. 33. The facts of CIT v Lovely Exports (P) Ltd. (supra) have been set out in the judgment of this court in that case, reported as CIT vs (1) Divine Leasing & Finance Ltd. (2) General Exports and Credits Ltd. and (3) Lovely Exports P. Ltd. in (2008) 299 ITR 268. In that case, the share capital subscription was received through banking channels and complete records were maintained by Divine Leasing & Finance Ltd. The Assessing Officer 5 ITA No. 270/Ahd/2017 M/s. Desert Infraspace Pvt Ltd Vs. ITO AY :2012-13 issued summons u/s.131 and thereafter impounded the shareholders' register, share application forms and share transfer register. It was contended by the assessee in that case that because of the action of the Assessing Officer, it was not able to furnish any details about the share subscribers, The Tribunal found that the allotment of shares was made as per the relevant rules of the Securities Contracts (Regulation) Act, 1956 as well as those of the Delhi Stock Exchange. No evidence had been brought on record by the Assessing Officer to indicate that the shareholders were either benamidars of the assessee-company or fictitious or that the share application monies were the unaccounted income of the assessee-company. The Tribunal accordingly held that the onus that lay on the assessee under sec. 68 stood discharged. 34. In respect of the other assessee, namely, General Exports & Credits Ltd., the monies were received by the said company on issue of rights shares to five companies pursuant to the renunciation of rights by several individual shareholders. A search had been conducted on the premises of the assessee, but those renunciation forms were not found with the assessee. As in the case of Divine Leasing & Finance Ltd., the five companies were registered in Sikkim at the same address. They all filed replies to the department asking for further time to provide the details of their investments. They had also filed returns of income under the Sikkim Taxation Manual and had subscribed to the shares through banking channels. Moreover, the investigations carried out into those companies by the income-tax department at Calcutta and the adverse findings therein had been struck down as being without jurisdiction in appeals filed by those companies and therefore the Assessing Officer having jurisdiction over General Exports and Credits Ltd. in Bulandshahar could not rely upon them. In these circumstances, the Tribunal had deleted the addition made u/s.68 on the ground that the identity of the shareholders had been proved. This court did not approve of the ground on which the Tribunal had cancelled the addition and observed that the judgment of the Full Bench of this court in Sophia Finance (1994) 205ITR 98 (Delhi) could not be understood to have enunciated that once the identity of the shareholders is proved there can be no addition in the hands of the company which received the share monies. The court however refused to attach any importance to the violation of the provisions of the Companies Act, 1956 in the matter of renunciation of the right to subscribe to the shares and held that it was a matter of concern only of the appropriate authority under that Act. Accordingly, the ultimate decision of the Tribunal cancelling the addition was upheld. 35. The facts of Lovely Exports P. Ltd., as noted by this court, are these. The assessee-company in that case had furnished the necessary details such as PAN No./income tax ward no./ration card of the share applicants and some of them were assessed to tax. The monies were received through banking channels. In some case, affidavits/confirmations of the share applicants containing the above information were filed. The Assessing Officer did not carry out any inquiry into the income tax records of the persons who had 6 ITA No. 270/Ahd/2017 M/s. Desert Infraspace Pvt Ltd Vs. ITO AY :2012-13 given their file numbers in order to ascertain whether they were existent or not. He neither controverted nor disapproved the material filed by the assessee. Further, the assessee had specifically invited the Assessing Officer to carry out an enquiry and examine the assessment records of the share applicants whose income tax rile numbers were given. Though the Assessing Officer had sufficient time to carry out the examination, he did not do so, but put forth an excuse that the assessee was taking several adjournments. This court observed that it is for the Assessing Officer to manage his schedule and he should have ensured that because of the adjournments he did not run out of time for discharging the duties cast on him by law. It was held that when details were furnished by the assessee, the burden shifted to the Assessing Officer to investigate into the creditworthiness of the share applicants which he was unable to discharge. Thus, the order of the Tribunal deleting the addition was held not giving rise to any question of law, much less any substantial question of law. 36. It is not only relevant to note the above facts, which distinguish those three cases (supra) from the case before us, but it is also relevant tonote the following observations made by this court in the above three cases: “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 assessed it should not be harassed by the revenues 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 AO for his perusal, all the information contained in the statutory shareapplication 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 69of the IT Act. The burden of proof can seldom be discharged to the hilt by the assessed; if the AO harbours doubts of the legitimacy of any subscription he is empowered, nay duty bound, to carryout thorough investigations. But if the AO 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." We may also note that a reference was made by this court to several authorities, including at least seven judgments of this court on the question of applicability of section 68 to share application monies, and the position was pithily summed up as follows at page 282 (of 299ITR): "In this analysis, a distillation of the precedents yields the following propositions of law in the context of Section 68 of the IT Act. The assessed has to prima facie prove (1) the identity of the creditor/subscriber; (2) the genuineness of the transaction, namely, whether it has been transmitted 7 ITA No. 270/Ahd/2017 M/s. Desert Infraspace Pvt Ltd Vs. ITO AY :2012-13 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 furnished 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 assessed. (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 assessed nor should the AO take such repudiation at face value and construe it, without more, against the assessed. (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." 2.10. Hon’ble High Court also considered other decisions on this issue and held that: 38. The ratio of a decision is to be understood and appreciated in the background of the facts of that case. So understood, it will be seen that where the complete particulars of the share applicants such as their names and addresses, income tax file numbers, their creditworthiness, share application forms and share holders' register, share transfer register etc. are furnished to the Assessing Officer and the Assessing Officer has not conducted any enquiry into the same or has no material in his possession to show that those particulars are false and cannot be acted upon, then no addition can be made in the hands of the company under sec. 68 and the remedy open to the revenue is to go after the share applicants in accordance with law. We are afraid that we cannot apply the ratio to a case, such as the present one, where the Assessing Officer is in possession of material that discredits and impeaches the particulars furnished by the assessee and also establishes the link between self-confessed "accommodation entry providers", whose business it is to help assessees bring into their books of account their unaccounted monies through the medium of share subscription, and the assessee. The ratio is inapplicable to a case, again such as the presentone, where the involvement of the assessee in such modus operandi is clearly indicated by valid material made available to the Assessing Officer as a result of investigations carried out by the revenue authorities into the activities of such "entry providers". The existence with the Assessing Officer of material showing that the share subscriptions were collected as part of a pre-meditated plan - a smokescreen - conceived and executed with the connivance or involvement of the assesses excludes the applicability of the ratio, in our understanding, the ratio is attracted to a case where it is a simple question of whether the assessee has discharged the burden placed upon him under sec. 68 to prove and establish the identity and creditworthiness of the share applicant and the genuineness of the transaction. In such a case, the 8 ITA No. 270/Ahd/2017 M/s. Desert Infraspace Pvt Ltd Vs. ITO AY :2012-13 Assessing Officer cannot sit back with folded hands till the assessee exhausts all the evidence or material in his possession and then come forward to merely reject the same, without carrying out any verification or enquiry into the material placed before him. The case before us does not fall under this category and it would be a travesty of truth and justice to express a view to the contrary. 39. The case of Orissa Corporation (1986) 159 ITR exemplifies the category of cases where no action is taken by the Assessing Officer to verify or conduct an enquiry into the particulars about the creditors furnished by the assessee, including their income-tax file numbers. In the same category fall cases decided by this court in Dolphin Canpack (2006) 283 ITR 190, CIT v Makhni and Tyagi P. Ltd. (2004) 267 ITR 433, CIT v Antartica Investment P. Ltd. (2003) 262 ITR 493 and CIT vAchal Investment Ltd. (2004) 268 ITR 211. To put it simply, in these cases the decision was based on the fundamental rule of law that evidence or material adduced by the assessee cannot be thrown out without any enquiry. The ratio does not extend beyond that. The boundaries of the ratio cannot be, and should not be, widened to include therein cases wherethere exists material to implicate the assessee in a collusive arrangement with persons who are self-confessed "accommodation entry providers". 40. Reference was also made on behalf of the assessee to the recent judgment of a Division Bench of this court in CIT v. Oasis Hospitalities Private Limited, (2011) 333 ITR 119. We have given utmost consideration to the judgment. It disposes of several appeals in the case of different assessees. Except the case of CIT v Oasis Hospitalities P Ltd. (ITA Nos. 2093 & 2095/2010), the other cases fall under the category of Orissa Corporation (supra). However, in the case of Oasis Hospitalities P Ltd., there is reference to information received by the Assessing Officer from the investigation wing of the revenue on the basis of which it was found that six investors belong to one Mahesh Garg Group who were not carrying on any real business activity and were engaged in the business of providing accommodation entries. They were entry operators and the assessee in that case was alleged to be a beneficiary. While disposing of these appeals, this court observed: - "The Assessees filed copies of PAN, acknowledgement of filing income tax returns of the companies, their bank account statements for the relevant period, i.e., for the period when the cheques were cleared. However, the parties were not produced in spite of specific direction of the AO instead of taking opportunities in this behalf. Since the so-called Directors of these companies were not produced on this ground coupled with the outcome of the detailed inquiry made by the Investigating Wing of the Department, the AO made the addition. This addition could not be sustained as the primary onus was discharged by the Assessee by producing PAN number, bank account, copies of income tax returns of the share applicants, etc. We also find that the Assessing Officer was influenced by the information received by the Investigating Wing and on that basis generally modus operandi by 9 ITA No. 270/Ahd/2017 M/s. Desert Infraspace Pvt Ltd Vs. ITO AY :2012-13 such Entry Operators is discussed in detail. However, whether such modus operandi existed in the present case or not was not investigated by the AO. The Assessee was not confronted with the investigation carried out by the Investigating Wing or was given an opportunity to cross-examine the persons whose statements were recorded by the Investigating Wing." These quoted observations clearly distinguish the present case from CIT v Oasis Hospitalities P Ltd. (supra). Except for discussing the modus operandi of the entry operators generally, the Assessing Officer in that case had not shown whether any link between them and the assessee existed. No enquiry had been made in this regard. Further, the assessee had not been confronted with the material collected by the investigation wing or was given an opportunity to cross examine the persons whose statements were recorded by the investigation wing. 41. In the case before us, not only did the material before the Assessing Officer show the link between the entry providers and the assessee- company, but the Assessing Officer had also provided the statements of Mukesh Gupta and RajanJassal to the assessee in compliance with the rules of natural justice. Out of the 22 companies whose names figured in the information given by them to the investigation wing, 15 companies had provided the so- called "share subscription monies" to the assessee. There was thus specific involvement of the assessee- company in the modus operandi followed by Mukesh Gupta and RajanJassal. Thus, on crucial factual aspects the present case stands on a completely different footing from the case of CIT v Oasis Hospitalities P. Ltd. (supra). 42. In the light of the above discussion, we are unable to uphold the order of the Tribunal confirming the deletion of the addition of Rs. 1,18,50,000 made under section 68 of the Act as well as the consequential addition of Rs.2,96,250. We accordingly answer the substantial questions of law in the negative and in favour of the department. The assessee shall pay costs which we assess at Rs. 30,000/-. The jurisdictional High Court (Hon'ble Gujarat High Court) in the case of Kaushal H. Patel vs. Income-tax Officer [2014] 50 taxmann.com 136 (Gujarat) the Hon’ble High Court had held that: “Where assessee received huge amount through banking channels as cash credits in its bank account but failed to render an explanation for same, said amount was to be treated as income in hands of assessee”. 2.7. In view of the above-mentioned facts and legal position, I hold that the assessing officer is justified in coming to the conclusion that the received of Rs.25,00,000/- shown by the appellant and share application money from 2 individuals HiteshbhaiBalubhai Shah &PoojanHiteshbhai Shah are not genuine. The assessing officer has given detailed reason in the assessment order for coming to this conclusion (as discussed supra) which is not repeated here. In view of various 10 ITA No. 270/Ahd/2017 M/s. Desert Infraspace Pvt Ltd Vs. ITO AY :2012-13 discrepancies pointed out by the assessing officer the appellant was not able to prove the creditworthiness of the persons as discussed above in these cases. The appellant has failed to discharge this onus as he has failed to discharge the onus of the third limb (creditworthiness) of the section 68 of the IT Act. The addition on share application money of Rs.25,00,000/- made u/s 68 of the IT Act by the assessing officer is confirmed. The ground of the appellant dismissed.” 5. As is evident from the above, the issue relates to share capital of Rs.12,50,000/- each received from two persons, i.e. (i) Shri Hiteshbhai Balubhai Shah and (ii) Shri Poojan Hiteshbhai Shah, remaining unproved for the genuineness of the share capital. A perusal of the order of the Ld.CIT(A) reveals that the assessee had furnished only the name, address and PAN of the aforesaid two parties to evidence the genuineness of the transactions. Nothing was filed to prove the creditworthiness. The learned CIT(A) has held that the above, therefore, was insufficient for discharging the onus to prove the creditworthiness and genuineness of the said transaction. In the absence of any submissions made on behalf of the assessee before us controverting the aforestated facts as noted by the Ld.CIT(A), we see no reason to interfere in the order of the learned CIT(A) who has rightly appreciated the facts of the case and held that the evidences furnished by the assessee did not establish the creditworthiness of the parties to make the impugned investment in share capital, and the genuineness of the transactions therefore remained unproved. The order of the learned CIT(A) upholding the addition made on account of unexplained share capital of Rs.25,00,000/- is accordingly upheld. Ground of appeal No.1 is accordingly dismissed. 6. Ground of appeal No.2 reads as under:- “2. The ld. CIT(A) has grossly erred in law and on facts in confirming the addition of Rs.5,00,000/-, being loan taken from Smt. Bhavna Hitesh Shah, u/s 68 of the Income-Tax Act.” 11 ITA No. 270/Ahd/2017 M/s. Desert Infraspace Pvt Ltd Vs. ITO AY :2012-13 7. The learned CIT(A) has dealt with the facts of the case and has adjudicated the issue in this regard at paragraph Nos. 3.3 to 3.5 of his order as under:- “3.3 I have carefully considered the Assessment Order and submission filed by theAppellant. The Assessing Officer has observed that appellant has accepted unsecured loan of Rs. 5,00,000/-. The A.O. has asked to appellant to furnish copy of ledger account, address, PAN of persons from whom unsecured loan has been taken. The appellant has submitted return of income of Bhavnaben Hitesh Shah from whom unsecured loan of Rs.5,00,000/- has been accepted during the year under consideration but appellant has not furnished the confirmation in this regard. The appellant has failed to prove the creditworthiness and genuineness before A.O. Therefore, an amount an of Rs.5,00,000/- is added to the total income of the assessee as unexplained cash credit under section 68 of the Act by the A. O. The appellant has submitted that the Assessing Officer has made addition of Rs. 5,00,000/- u/s.68 after holding that the appellant has failed to prove genuineness of transaction. The A.R. in the written submissions has stated that unsecured loan of Rs.5,00,000/- which is taken from family members of the promoters and funds has been received though banking channels only from the relative of the directors. Further, the appellant has relied upon the decision of Hon’ble Gujarat High Court in the case ofNemi Chand Kothari vs. CIT (2003) 264 ITR 254. 3.4. After going through the assessment order and the submission of the appellant, itis seen that during the course of assessment proceedings the appellant has not provided the full details before the AO. It is a well settled law that once an amount is found credited in the accounts of the assessee; it is the assessee who has to prove that identity, source and creditworthiness of such persons/parties/depositors. In all the decision cited by the appellant the Hon'ble Courts have held that the appellant has to prove the identity, source and creditworthiness of such persons/parties/depositors. The issue regarding credit entry has been examined in detail by Hon'ble High Court of Delhi in one of its leading judgement in the case of CIT v/s Nova Promoters Fin Lease Private Limited in 18 taxmann.com 217 Delhi. In this case the Hon'ble High Court has considered various case laws on the issue and held that where modus operand! of entry operators taking cash from assessee company and then providing share application money through cheques from various companies to assessee company has been unearthed. The fact that these monies were received through banking channels or that companies existed in the ROC’s register do not meet the burden of proof under section 68 of the LT. Act. The evidence adduced by the assessee has to be examined and not 12 ITA No. 270/Ahd/2017 M/s. Desert Infraspace Pvt Ltd Vs. ITO AY :2012-13 superficially but in depth and having regard to the test of human probabilities and normal course of human conduct. The affidavits submitted by the assessee need not be accepted as a reliable when there is enough material on record to doubt the veracity of the transaction. In such a case it cannot said that the affidavits can be rejected only after cross verification. In this judgement CIT v/s Nova promoters fin lease private limited in 18 taxmann.com 217 Hon'ble Delhi High Court has made the following observation:- 19. The position thus is that even where a reference of a question of law is made to the High Court under Section 66 of the Indian Income Tax Act, 1922 or Section 256 of the Income Tax Act, 1961 over which the High Court exercises advisory jurisdiction, and not appellate jurisdiction, where normally the findings of fact recorded by the Tribunal are binding on the High Court, it has been held by the Supreme Court that the findings are not binding on the High Court if they are perverse or if the findings are such that no person acting judicially and properly instructed as to the relevant law could have come to the determination under appeal. The position in an appeal under Section 260A of the Act is "a fortiori" as the judgment of the Supreme Court in the case ofDIT v. Bharat Dimond Bourse, (supra) would show. We shall demonstrate in the following paragraphs as to how both the CIT (Appeals) and the Tribunal have failed to appreciate the evidence in the proper perspective and on the lines indicated by the Hegde J. in the case of Durga Prasad More (supra). The present case is also not one, as we shall show presently, where the conclusion of the Tribunal is a reasonable conclusion which should not normally be disturbed even if the appellate court would have taken a different view on the same evidence and material. In the present appeal the evidence and material on record, properly considered in the light of the surrounding circumstances and without attaching weight to neutral circumstances or circumstances of no relevance, point to only one conclusion, namely, that the monies introduced by the assesses as share subscriptions from 15 companies were its own unaccounted monies. The jurisdictional High Court (Hon'ble Gujarat High Court) in the case of Kaushal H. Patel vs. Income-tax Officer [2014] 50 taxmann.com 136 (Gujarat) the Hon’ble High Court had held that: “Where assessee received huge amount through banking channels as cash credits in its bank account but failed to render an explanation for same, said amount was to be treated as income in hands of assessee". 13 ITA No. 270/Ahd/2017 M/s. Desert Infraspace Pvt Ltd Vs. ITO AY :2012-13 3.5. In view of the above-mentioned facts and legal position, I hold that the assessing officer is justified in coming to the conclusion that the loan taken of Rs. 5,00,000/- from Bhavnaben Hitesh Shah is not genuine. The assessing officer has given detailed reason in the assessment order for coming to this conclusion (as discussed supra) which is not repeated here. In view of various discrepancies pointed out by the assessing officer, the appellant was not able to prove source and creditworthiness of the person as discussed above in this case. The appellant has failed to discharge the onus of the two limbs (source and creditworthiness) of the section 68 of the IT Act. The addition on loan taken from Bhavanaben Hitesh Shah of Rs.5,00,000/- made u/s 68 of the IT Act by the assessing officer is confirmed. The ground of the appellant is dismissed.” 8. We have gone through the order of the learned CIT(A) and we have noted that, as evidence of the genuineness of the unsecured loan of Rs.5,00,000/- received by the assessee from one Bhavnaben Hitesh Shah, the assessee submitted only the return of income of Bhavnaben Hitesh Shah. No confirmation was filed by the said party. The case of the assessee was that the amount was received through banking channel. We are in agreement with the learned CIT(A) that the documents submitted by the assessee are insufficient to discharge the onus cast upon it to prove the genuineness of the transactions. In the absence of confirmation filed by the said party, as also the creditworthiness of the party being not established, the learned CIT(A) has rightly held the unsecured loan as remaining unexplained and thus confirming the addition made by the Assessing Officer. Ground of appeal No.2 of the assessee is thus dismissed. 9. Ground of appeal No.3 raised by the assessee reads as under:- “3. The ld. CIT(A) has grossly erred in law and on facts in confirming the addition of Rs.36,00,000/-, being part consideration paid in cash out of total purchase price of land and building of Rs.1,10,00,000, u/s 69 of the Income Tax Act even though the whole purchase price of land and building were recorded in the books.” 14 ITA No. 270/Ahd/2017 M/s. Desert Infraspace Pvt Ltd Vs. ITO AY :2012-13 10. The learned CIT(A) has dealt with the facts of this case and has adjudicated the issue at paragraph Nos. 4.3 to 4.5 of his order as under:- “4.3 I have carefully considered the Assessment Order and submission filed by the Appellant. It is seen from balance sheet that assessee has purchased land and building of Rs.1,12,88,865/-. The A.O. has asked to appellant to submit the details regarding purchase deed of land and source of investment in immovable property with supporting evidences during the year consideration. Further on careful perusal of purchase deed, the A.O. has observed that appellant has paid as consideration in cash as under: Sr. No. Amount Rs. Cheque / Pay order no /Cash Date Bank Details City 1 1,00,000/- Cash 27.03.2012 N. A. N.A. 2 15,00,000/- Cash 28.03.2012 N.A. N.A. 3 10,00,000/- Cash 29.03.2012 N. A. N.A. 4 10,00,000/- Cash 30.03.2012 N.A. N.A. Total 36,00,000/- The appellant has not submitted any evidences in support of source of cash payment made for purchase of land. In the absence of supporting evidence, the A.O. has made disallowance of Rs. 36,00,000/- applying the provision of section 69 of the I.T. Act. On the other hand appellant has contended that appellant has purchase land and building of Rs.1,12,88,865/-, and the same has been recorded in the books of accounts. The appellant has further stated that share capital received in cash has been invested in the Land for cash payments and the whole value of purchase deed already recorded in the books of accounts, and the same reproduced before A.O. at the time of assessment proceedings. Thus is not the unrecorded investment, accordingly addition for consideration mentioned in the purchase deed considering the same as unexplained Investment is required to be deleted. 4.4 On careful consideration of observation of Assessing Officer and contention of the Appellant, it is observed that the Assessing officer has made addition on the basis of cash payment made for purchase the land and appellant has not provided the supporting evidences regarding cash payment before the A.O. at the time of assessment proceedings. It is observed Appellant has nowhere proved or submitted any evidences which can establish that source ofcash payments for investment in land should be allowed. Further, the appellant has not submitted any detail during the time of appeal proceedings before me. Hence as the appellant could not justify his claim even after reasonable opportunities given both at the time of assessment 15 ITA No. 270/Ahd/2017 M/s. Desert Infraspace Pvt Ltd Vs. ITO AY :2012-13 as well as appellate proceedings it can be presumed that he has nothing to say in the matter. In the case of Blessing Construction v/s ITO in 32 Taxmann.com 366(Guj) has been held as under:- “6.1 Counsel further submitted that assesses had not only established the identity of the depositors, had received the amount through cheque. Genuineness of the transaction therefore, could not have been doubted. The creditworthiness of the depositors also was sufficiently established. Assessee thereafter could not have been asked to establish the source of the income of such creditors. With respect to the legal contention that the Revenue cannot insist on assessee supplying the source of source is impeccable. However, the facts of the present case are vastly different. It is of-course true that some of the observations made by the Tribunal may suggest that the Tribunal did concern itself with the source of the source. However,such observations cannot be picked in isolation as to treat that as the conclusion of the Tribunal. When one reads the order of the Assessing Officer, that of the Commissioner (Appeals) and also of the Tribunal, inescapable conclusion one arrives at is that the Revenue authorities as well as the Tribunal found the entire transaction not genuine. There was sufficient evidence on record to suggest that in case of all the depositors, their bank accounts contained meager balance shortly before sizable amount of Rs. 1 lakh and upward were given to the assessee through such account. In such bank accounts, cash amounts werecredited and immediately entire amounts were withdrawn through issuance of such cheques in favour of the assessee. It was noticed that such creditors did not maintain any books of account. Nowhere their capacity to raise such amount for drawing cheque of sizable amounts was established. In short therefore, the very genuineness of the transaction was not established. This therefore, is not a case where the Revenue makes addition on the assessee failing to establish source of the source. All issues are essentially based on facts and appreciation of evidence on record. No question of law arises. Tax Appeal is dismissed”. In the case of Commissioner of Income-Tax. Vs K.Chinnathamban of 292 ITR 682 (SC) has been held as under:- "S.H. KAPADIA J- Leave granted. The short question which arises for determination in this group of civil appeals is: Whether in the facts and circumstances of the case the Tribunal was right in holding that income on the unexplained investments should be considered in the 16 ITA No. 270/Ahd/2017 M/s. Desert Infraspace Pvt Ltd Vs. ITO AY :2012-13 hands of the firm, M/s. V. V. Enterprises. For the sake of convenience, we mention herein below the facts of the civil appeal arising out of Special Leave Petition (C.) No.11596/2006. K. Chinnathamban, the respondent-assessee, was connected with the firm by the name V. V. Enterprises, having its premises at Nos. 2 and 3A, East Perumanoor Road, Salem. There was a search in the premises by police officers on August 19, 1991, when Rs. 1.18 crores (approx.) was seized. This seizure was followed by a survey under section 133A and investigations under section 132 of the Income-tax Act, 1961 (hereinafter referred to as the "said Act"). The firm was managed by one K. Palanisamy who had filed his return and who appeared on summons and gave statements. In the course of assessment proceedings, it was detected that the books of accounts were incomplete. K. Palanisamy was not in a position to explain the source of the deposit amount of Rs. 1.18 crores (approx.). Therefore, the Assessing Officer ("the AO") treated the said amount as undisclosed income of the persons in whose names the deposit appeared. The assessment made in respect of K. Chinnathamban was Rs. 5.16 lakhs consisting of Rs. 16,148 as salary and Rs. 5lakhs as undisclosed income under section 69. This order of assessment was upheld by the Commissioner of Income-tax (Appeals). The assessee, K. Chinnathamban, carried the matter in appeal with the Tribunal. By the impugned judgment, the Tribunal held that since the claim was made by the members of the public, it was not proper to treat the amount as income from undisclosed source of various assessees and, therefore, according to the Tribunal, it was necessary to link up all these amounts with the books of the firm. It is this part of the reasoning given by the Tribunal which is the subject-matter of these civil appeals. At the outset, we may state that none appeared for the assessees though served. M/s. V.V. Enterprises ostensibly was a firm floated for carrying on the business of prize tickets and for collecting deposits from the public. K. Palanisamy was the man behind the said activity. His statement was recorded on various dates. He has admitted that the partners were fictitious. They were not eligible to any shares in the profits of the firm.K. Palanisamy has further stated that monies were lying in various banks in FDRs. in the names of these so-called partners. He further claimed that part of this amount belonged to the members of the public. This part of the statement was not accepted by the Department. In view of the aforestated position the Assessing Officer proceeded to frame the assessment in the hands of Palanisamy on protective basis and in the hands of deposit holders for unexplained deposits. The most important aspect of the case is that although M/s. V.V. Enterprises was stated to be a registered firm, there were no bank accounts in the name of such a firm. There were no 17 ITA No. 270/Ahd/2017 M/s. Desert Infraspace Pvt Ltd Vs. ITO AY :2012-13 accounts in the name of any of the partners of the alleged firm. There were no deposits in the name of the alleged firm. There were no deposits in the name of any of the partners of the alleged firm. None of the asses sees have been able to explain the source of the deposits in the names of the relatives. When asked, they have pointed their fingers to K. Palanisamy. In the circumstances, the Department was right in coming to the conclusion that the alleged firm of M/s. V. V. Enterprises was not genuine. The assessee could not establish the source of deposits. The Department was right in coming to the conclusion that there was no evidence in support of the claim of the assessee that the aforestated amount was collected from the members of the public. The assessee had failed to show that the collections did not represent his income. In order to find out whether the assessee is the owner of any money in terms of section 69A of the said Act, the principle of common law jurisprudence in section 110 of the Evidence Act, 1872 can be applied. In the case of Chuharmal Vs. CIT reported in [1988] 3 SCO 588 it has been held by this court that the word "income" in section 69A of the Income-tax Act has wide meaning which meant anything which came in as gain. In the present case, the assessee did not adduce any evidence to show that the aforestated amount did not belong to him. In the facts of this case, therefore, the Department was right in drawing inference that the assessee had the aforestated amount as his income which was subject to tax under section 69A. In our view, the Tribunal should not have interfered with these findings of fact rightly recorded by the Assessing Officer and the Commissioner of Income-tax (Appeals). In the present case, the Tribunal has further held that the partners were employees of public sector undertakings; that they had acted as partners; that the firm was floated and, therefore, though the firm was illegally constituted, however, the very existence of the firm was never in doubt. The Tribunal held that the members of the public have placed their deposits with the said firm through the relatives and friends. The Tribunal has further held that though the aforestated amount ought to have been deposited in the name of the firm, it was not so done and, therefore, it was necessary to link up the said amounts with the books of the firm and to the extent possible should be shown as amounts received by the said firm as deposits from various persons. We do not see any basis for recording the aforestated findings. There is no evidence to show that members of the public have been placing their deposits with the said firm through their relatives and friends, therefore, there was no question of linking up all these amounts with the books of the firm as ordered by the Tribunal. In the above facts, the Department was right in holding that income on unexplained investments cannot be considered in the hands of the firm found to be fictitious. Therefore, the 18 ITA No. 270/Ahd/2017 M/s. Desert Infraspace Pvt Ltd Vs. ITO AY :2012-13 Tribunal had erred in directing linking up of the deposits with the accounts of the alleged firm. Where a deposit stands in the name of a third person and where that person is related to the assessee then in such a case the proper course would be to call upon the person in whose books the deposit appears or the person in whose name the deposit stands should be called upon to explain such deposit. In the present case, there is no evidence recording registration of the firm. In the present case, books of accounts are not properly maintained. In the present case, there is no explanation regardingthe source of investment. . In the present case, the evidence of K. Palanisamy,indicates that even the partners of the firm were fictitious. In the above circumstances, the Tribunal had erred in directing linking up of the deposits with the accounts of M/s. V. V. Enterprises. In fact, the directions given by the Tribunal to the Assessing Officer for such linking up was not even capable of compliance. The onus of proving the source of deposit primarily rested on the persons in whose names the deposit appeared in various banks. In the circumstances, the Department was right in making individual assessment in the hands of the respondent-assessee, K. Chinnathamban. Similarly, the Department was right in making the individual assessment in the names of other respondent-assessees, who are parties to connected civil appeals herein. Accordingly, the above civil appeals filed by the Department are allowed with no order as to costs". 4.5. At the time of hearing the appellant has requested for additional evidences under rule 46A of LT. Act regarding addition made by the A.O. u/s 69 of the LT. Act as undisclosed investments. The same has been accepted when finalizing the appeal. It is seen that the appellant has given the copies of cash book of Poojan Shah, Hitesh Shah and P&L A/c., balance sheet and its annexure of the appellant company. It is to be noted that these details are already submitted to the A.O. at the time of assessment proceedings and has been taking note of them. It is further seen that these papers are no help as per as the unexplained investment u/s. 69 has been made and do not prove the source of investments. Considering the facts discussed herein above and following the decision of Hon'ble Supreme Court and Gujarat High Court referred supra, the appellant has not justified the same. The appellant has In view of the above, disallowance made by the A.O. of Rs. 36,00,000/- is being confirmed. The ground of appeal is dismissed. 11. As is evident from the above, the addition of Rs.36 lacs has been made on account of cash payment noted to have been made by the assessee for investment in land; the source of which was not explained. No evidences 19 ITA No. 270/Ahd/2017 M/s. Desert Infraspace Pvt Ltd Vs. ITO AY :2012-13 were filed to the Assessing Officer, nor to the learned CIT(A)explaining the source of investment. The Ld.CIT(A) has recorded a finding to this effect that the assessee has failed to prove the source of investment in cash in the land purchased. Even additional evidences filed by the assessee were considered by the Ld.CIT(A) and found to be of no relevance. In the absence of any representation of the assessee before us to counter the findings of the Ld.CIT(A) we see no reason to interfere in the order of the Ld.CIT(A) confirming the addition of unexplained investment to the tune of Rs.36 lacs. Ground No.3 of the assessee’s appeal is accordingly dismissed. 12. Ground of appeal No.4 taken by the assessee reads as under:- “4. The ld. CIT(A) has grossly erred in law and on facts in confirming the disallowance of Rs.13,54,000/- (actual Rs.13,54,854/-), detailed as under, in total disregard of the facts and nature of the expenditure. (i) Employee Expenses Sr. No. Name of expenditure Amount (Rs). 1 Remuneration to Director 5,00,000/- 2 Salary 1,44,000/- Total 6,44,000/- (ii) Other Expenses:- Sr. No. Name of expenditure Amount (Rs). 1 Accounting charges 15,000/- 2 Audit Fees 10,000/- 3 Bank Charges 625/- 4 Conveyance Expenses 30,215/- 5 Documentary Charges 50,000/- 6 Legal Expenses 23,500/- 7 Machinery Purchase 5,00,000/- 8 Miscellaneous Expenses 6,334/- 9 Preliminary Expenses W/off 17,324/- 10 Property Valuation Charges 50,000/- 11 Telephone Expenses 7,856/- Total 7,10,854/- (iii) Total (i + ii) 13,54,854/-” 20 ITA No. 270/Ahd/2017 M/s. Desert Infraspace Pvt Ltd Vs. ITO AY :2012-13 13. The learned CIT(A) has dealt with the facts of this case and has adjudicated the issue in this regard at paragraph Nos. 5.3 and 5.4 of his order as under:- “5.3. I have carefully considered the Assessment Order and submission filed by the Appellant. On careful perusal of Profit & loss account, it is seen that the appellant has claimed employee benefit expenses of Rs. 6,44,000/- which included Salary, Wages and bonus & director’s remuneration and other expenses which included machinery expenses, property valuation charges and documentation charges etc. of Rs. 7,10,000/- The A.O. has asked to appellant to submit the copy of ledger account of various expenses with supporting evidences. However, in spite of issuing various notices/letters, the assessee has not filed the details in support of various expenses with supporting evidences. However, the assessee has not furnished any details. In the absence of supporting evidence, the A.O. has made disallowance of Rs. 13,54,000/- and added back to the total income. On the other hand appellant has contended that purchase of Rs. 5,00,000/- relates the machinery purchase from which the sales affected and relates to the Director Remuneration which is already shown in the return of income of the promoters and the same reproduced before A. O. at the time of assessment proceedings. The appellant has also argued that during the course of assessment proceedings A.O. has neither gives any neither opportunity of being heard nor gives time to produce the additional evidence and records. Hence, disallowance made by the A.O. should be deleted. 5.4 After going through the facts of the case, it is seen that the A. O. has disallowed expenses of Rs.13,54,000/- out of employee benefit expenses and director’s remuneration and other expense as appellant has not provided the supporting evidences for expenses claimed before the A.O. at the time of assessment proceedings. Further, the appellant has not submitted any details and evidences to claim the above expenses during the time of appeal proceedings before me to substantiate the above. Hence, as the appellant could not justify his claim even after reasonable opportunities given both at the time of assessment as well as appellate proceedings it can be presumed that he has nothing to say in the matter. Thus, in this case the appellant has not justified the same. In view of the above, a sum of Rs.13,54,000/-, disallowed by the A.O. is being confirmed. The ground of appeal is dismissed.” 14. We have gone through the order of the Ld.CIT(A) and have noted that he has upheld the disallowance of employee benefit expenses and other expenses of Rs.13,54,000/- in the absence of any evidence filed by the 21 ITA No. 270/Ahd/2017 M/s. Desert Infraspace Pvt Ltd Vs. ITO AY :2012-13 assessee to substantiate its claim. In the absence of representation of the assessee before us, the findings of the Ld.CIT(A) remain uncontroverted. We therefore see no reason to interfere in the order of the Ld.CIT(A) upholding the disallowance of employee benefit and other expenses of Rs.13,54,000/-. Ground of appeal No.4 is dismissed. 15. In effect, the appeal of the assessee is dismissed. Order pronounced in the open Court on 22 nd March, 2023 at Ahmedabad. Sd/- Sd/- (T.R. SENTHIL KUMAR) JUDICIAL MEMBER (ANNAPURNA GUPTA) ACCOUNTANT MEMBER Ahmedabad; Dated 22/03/2023