DCIT, Circle-1(2), Hyderabad, Hyderabad V. Bramhani Industries Limited, Jammalamadugu, YSR Dist., YSR Dist.

ITA 398/Hyd/2017

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 0498 (ITAT-HYDERABAD)
• Duration Of Justice: 4 year(s) 9 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-01-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Hyderabad
• Assessment Year: 2010-2011
• Appeal Filed On: 06-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: GOWTHAM JAIN
• Keywords: Share purchase agreement; Source of fund; Reasonable cause; Condonation of delay; TDS
• Section: 131; 68; 37; 144; 143(3); 142(1); 250; 251; 143(2); 153C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH “A”, HYDERABAD (Through Virtual Hearing) BEFORE SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER AND SRI CHANDRA MOHAN GARG, JUDICIAL MEMBER ITA No. 512/Hyd/2017 A.Y. 2010-11 Bramhani Industries Limited, Jammalamadugu. PAN: AADCB 1666 M VS. DCIT, Circle-1(3), Hyderabad. (Appellant) (Respondent) ITA No. 398/Hyd/2017 AY: 2010-11 DCIT, Circle-1(2), Hyderabad. Vs. Bramhani Industries Limited, Jammalamadugu. PAN: AADCB 1666 M (Appellant) (Respondent) Assessee by Sri Gowtham Jain Revenue by Sri K.V. Aravind, Sr. Standing Counsel for DR Date of hearing: 12/10/2021 Date of pronouncement: 06/01/2022 ORDER PER A. MOHAN ALANKAMONY, A.M: The captioned two appeals are cross appeals filed by the assessee and the Revenue for the A.Y. 2010-11. Both the appeals are filed against the order of the Ld. CIT(A)-8, Hyderabad in appeal No.0063/CIT(A)- 2 8/Hyd/2016-17, dated 27 th December, 2016 passed U/s. 144 r.w.s 250(6) of the Act for the A.Y. 2010-11. 2. The assessee has raised several grounds in its appeal however, the cruxes of the issues are as follows: 1) The Ld. CIT (A) has erred in upholding the order of the ld.AO who had made addition of Rs. 311,88,97,970/- invoking section 68 of the Act ignoring the original remand report dated 17/3/2015. 2) The Ld. CIT (A) has erred in upholding the order of the ld.AO who had made addition of Rs. 15,99,60,041/- on account of notional gain arising out of the foreign exchange fluctuation relying on the decision of the Hon’ble Apex Court in the case CIT vs. Woodward Governor India Pvt Limited in 312 ITR 254 wherein the facts are not identical. 3) The Ld. CIT (A) has erred in upholding the order of the ld.AO who had made addition of Rs. 61,95,95,194/- by holding that the business of the assessee has not commenced operation accordingly the expense has to be capitalised. 4) The Ld. CIT (A) has erred in upholding the order of the ld.AO who had made additions towards interest charged U/s. 234A, B and C of the Act. 3. The assessee has also raised an additional ground in its appeal stating that” 3 “The Ld. CIT (A)-8, Hyderabad has erred both in law and on facts in not condoning the delay in filing the appeal U/s. 249(3) of the Act.” 4. Since, this is a legal ground raised by the assessee following the decision of the Hon’ble Apex Court in the case NTPC vs. CIT reported in 229 ITR 383, we hereby admit the ground raised by the assessee. 5. The Revenue has raised three grounds in its appeal however, the crux of the issue is that: “The Ld. CIT (A) has erred in adjudicating the appeal of the assessee on merits by granting part relief when he had primarily denied to condoning the delay in filing the appeal.” 6. At the outset, the Ld. DR vehemently argued stating that since the Ld. CIT (A) has denied condoning 125 days in filing the appeal, the appeal has become non-est in the eye of law and therefore, the adjudication of the assessee’s appeal on merits does not survive. To drive his point, the Ld. DR cited various decisions of the higher judiciary. He therefore pleaded that the matter may be remitted back to the file of Ld. CIT (A) for fresh consideration. The Ld. AR on the other hand requested the Bench to adjudicate the issue regarding condonation of the delay in filing the appeal before the Ld. CIT (A) and if the delay in filing the appeal before the Ld.CIT(A) is condoned then consider the issues involved in the appeal on merits since the Ld.CIT(A) 4 has already adjudicated the appeal on merits after obtaining two remand report from the Ld.AO. The Ld. AR further submitted that if the appeal is remitted back to the file of the Ld. CIT (A) by condoning the delay, it will serve no purpose as it will be a futile exercise because there are no fresh evidence to be considered and once again the assessee may have to approach the Tribunal which will be sheer waste of time. 7. Considering the submission of both the parties We proceed to hear the issue with respect to condonation of delay in filing the appeal by the Ld. CIT (A). On perusing the order of the Ld. CIT (A), we find that the assessee had filed the written submissions before the Ld. CIT (A) for delay in filing the appeal stating as follows: Paper Book: Page No: 57: “As stated in the appeal memo the appeal has been instituted as soon as it has come to the knowledge of the appellant. The appellant could not have filed the appeal in respect of which he is not aware of. Hence, the delay has happened due to reasonable cause. This is without prejudice to the position that there is no valid service of the order at all. There may not even be valid services of notices and especially the last notice and the assessment may be invalid on this account alone. The appellant prays that the delay may be condoned in the interests of advancement of substantial justice and the appeal may be decided on merits.” 8. The assessee had further stated before the ld. CIT (A) that the relevant assessment order was served in the hands of the guard who was guarding the premises of the assessee on 26/04/2013 just before the closure of the factory premises. Therefore, there was no one in the 5 factory premises to intimate the concerned person. Only during the month of August 2013, it came to the knowledge of the concerned officers of the assessee company about the order passed by the Ld.CIT(A) and thereafter immediately the appeal was preferred. Reliance was placed in the decision rendered by the Hon’ble Apex Court in the case Collector, Land Acquisition vs. MST. Katiji and Others reported in 167 ITR 471 (SC) and the decision rendered by the Hon’ble Karnataka High Court in the case KTK Forest Development Corporation vs. ACIT (TDS) reported in 196 Taxmann 445. Hence it was prayed that the delay in filing the appeal was due to reasonable cause which is beyond the control of the assessee and therefore the delay in filing the appeal may be condoned. However, the Ld. CIT (A) denied to condone the delay without appreciating the facts by stating that the assessee and its representatives failed to represent before the Ld. AO inspite of sufficient notice. The Ld. AR once again reiterated the submissions made before the Ld. CIT (A) and argued before us by stating that the Ld. CIT (A) without considering the merit of the case denied to condone the delay only for the reason that the assessee had not appeared before the Ld. AO which is not judicious. The Ld. DR on the other hand submitted that the appeal of the assessee may be remitted back to the Ld. CIT (A) for de-novo consideration. 9. We have heard the rival submissions and carefully perused the materials on record. From the facts of the case it is apparent that the 6 Ld. CIT (A) has not appreciated the adverse situation faced by the assessee but proceeded to adjudicate the matter prejudiced by the conduct of the assessee before the Ld. AO for non-appearance. We do not appreciate the action of the Ld. CIT (A) because the Revenue is duty bound to consider the reasons for belated filing of the appeal and thereafter decide the matter judiciously. However, it appears that the Ld. CIT (A) has taken a vindictive action against the assessee for not appearing before the Ld. AO. Further, from the facts submitted before us by the Ld. AR which could not be controverted by the Ld.DR, We are of the view that the assessee had a reasonable cause for filing the appeal belatedly since the factory premises of the assessee was closed and due to that the assessment order could reach in the hands of the officers of the assessee company for a considerable period time. While holding so We rely on the decision of the Hon’ble Apex Court cited by the Ld. AR the gist of which is extracted herein below for reference: Hon’ble Apex Court decision in the case Collector, Land Acquisition vs. MST. Katiji and Others reported in 167 ITR 471 (SC) held as under: “The Legislature has conferred power to condone delay by enacting section 5 of the Limitation Act, 1963, in order to enable the courts to do substantial justice to parties by disposing of matters on merits. The expression “sufficient cause” in section 5 is adequately elastic to enable the courts to apply the law in a meaningful manner which subserves the ends of justice – that being the life-purpose of the existence of the institution of courts. A justifiably liberal approach has to be adopted on principle. 7 “Every day’s delay must be explained” does not imply a pedantic approach. The doctrine must be applied in a rational, common sense and pragmatic manner. The doctrine of equality before law demands that all litigants, including the State as a litigant, are accorded the sae treatment and the law is administered in an even- handed manner. There is no warrant for according a step- motherly treatment when the State is the applicant praying for condonation of delay. “When substantial justice and technical considerations are pitted against each other, the cause of substantial justice deserves to be preferred, for other side cannot claim to have a vested right in injustice being done because of a non- deliberate delay.” Hon’ble Karnataka High Court in the case Karnataka Forest Development Corporation vs. ACIT (TDS) reported in 196 Taxmann 445 has held as under: “The affidavit filed in support of the application for the condonation of delay disclosed that, after the order was passed by the Commissioner (Appeals), there was a change of managing director. Though the chartered accountant of the company opined that it was a fit case for appeal and prepared the requisite papers and even sent them to the managing director for signature, it was because of the change of the managing director, that the importance of the same was not noticed and as it was a Government company, it took its own time to get the papers signed and to file the appeal. It was in these circumstances, there was a delay of 310 days. The Tribunal had viewed the matter from a very narrow angle. No doubt, it is the law that every day's delay has to be explained, but, at the same time, where the Government is the appellant, having regard to the way in which the Government and its officers function, the Courts have been taking a lenient view in condoning the delay in the appeals filed by them. In the instant case, it was not disputed after the order came to be passed, that the Managing Director had changed and thereafter, the Chartered Accountant took a decision to prefer the appeal and, though papers were sent for signature, yet they were not signed and the appeal was not filed. What is to be seen in such matters is that the appellant was negligent and by not filing the appeal within time, whether there was any valuable right of the appellant, which would be taken away by not condoning the 8 delay in the matters arising under the Act. Ultimately the question is, what is the tax payable under law. It is not an adversary litigation. An assessee cannot be charged without statutory authority. Under these circumstances, the approach of the Tribunal could not be accepted. In that view of the matter, the reasoning given by the Tribunal for not condoning the delay was unsustainable in law. Hence, it was to be opined that the assessee had made out a sufficient cause for condoning the delay in preferring the appeal. Hence, the appeal was to be allowed. The impugned order passed by the Tribunal dismissing the appeal as barred by limitation was to be set aside. The application filed for condonation of delay of 310 days in preferring the appeal before the Tribunal was to be allowed. Consequently, the Tribunal was to be directed to take on its file, the appeal presented by the assessee and to decide the appeal on merits without again going into the question of limitation. [Para 6]” The Hon’ble Supreme Court in the case Senior Bhosale Estate (HUF) vs. ACIT reported in [2019] 112 taxmann.com 134 (SC) has held that: “In the case of the assessee the delay of 1754 days in filing the appeal against the order passed by the Tribunal which was not condoned by the Hon’ble High Court is required to be condoned as the assessee had no knowledge about passing of the Tribunal order dated 29/12/2003 until it was confronted with auction notice in June, 2008 issued by competent authority immediately upon which the assessee filed appeal before the Hon’ble High Court.” The Hon’ble Supreme Court in the case Improvement Trust vs, Ujagar Singh & Others (2010) reported in 6 SCC 786 it was held that: “Unless malafide intention exists in the conduct of the party then generally as a normal rule, delay should be condoned. In the legal arena an attention should always be made to allow the matter to be contested on merits rather than to throw it on such technicalities.” The Hon’ble Madras High Court in the case of Vijayeswari Textiles Ltd vs. CIT reported in 256 ITR 560 held that: “6. We, therefore, hold that the Tribunal was in error in not condoning the delay and that it was also in error in holding 9 that the additional bonus of three per cent could not be claimed as expenditure under section 37 of the Act. 7. Matters relating to condonation of delay are indeed discretionary and are normally left to the Tribunal and this court will not ordinarily interfere with the discretion. In this case, as we have already pointed out, the Tribunal did not stop with the order declining to condone the delay, but considered the matter on the merits and has practically treated the appeal as being properly before it and has answered the question brought before it with reference to the material placed on record. It is in the circum- stances, we hold that the Tribunal was in error in not condoning the delay. The question regarding the correctness of the Tribunal’s holding that the delay is not to be condoned is therefore answered in favour of the assessee and against the Revenue. The question regarding the correctness of the Tribunal’s holding on the allowability of the additional amounts paid as bonus is also answered in favour of the assessee and against the Revenue. 10. Further, as pointed out by the Ld. AR it would be a futile exercise to remit the matter back to the file of the ld. CIT (A) because the Ld. CIT (A) has already decided the appeal on merits. Once again remitting back the appeal to the file of the Ld. CIT (A) will result only in waste of time and it will go against the very purpose of this Institution whose motto is “Easy & Speedy Justice” which is embedded in the logo of the Tribunal. 11. The Ld. DR’s submission was that if the Ld. CIT (A) refused to condone the delay then he refuses to assume jurisdiction to decide the appeal and therefore according to him any finding recorded by the Ld. CIT (A) on merits after refusing to condone the delay is void. We are not in agreement of this proposition of the Ld. DR. In fact, when the Ld. 10 CIT (A) has decided the issue on merits there could be a presumption that the Ld. CIT (A) has condoned the delay in filing the appeal before him. Further, the decision relied by the Ld. DR in the case Mela Ram & Sons vs. CIT reported in 29 ITR 607 does not support the case of the Revenue. In fact, the Hon’ble Apex Court applied the ratio that if an appeal by the assessee is admitted without the fact of delay in its presentation having been noticed, it is open to the Department to raise the objection at the time of hearing of the appeal. However, in the case of the assessee the assessee had filed condonation petition citing reasonable cause for belated filing of the appeal and the Ld. AO at no point of time had refuted the condonation plea before the Ld. CIT (A) nor did he object to the disposal of the appeal on merits in his remand report. Hence, this decision relied by the Ld. DR has no merits. Further, in none of the decisions cited by the Ld. DR it has been held that, if the appellate authority had decided the appeal on merits, even after refusing to condone the delay, then the findings of the appellate authority are non- est in the eye of law. Moreover, all the judgments cited by the Ld. DR are factually distinguishable from the facts of the case of the assessee and it has no application to the case of the assessee. 12. For the above stated reasons, we hereby condone the delay of 125 days in filing the appeal before the Ld. CIT (A) and proceed to adjudicate the grounds raised by the assessee on merits. Accordingly, the grounds raised by the Revenue are devoid of merits and therefore appeal of the 11 Revenue does not survive. Consequently, the additional ground raised by the assessee is allowed. 13. The brief facts of the case are that the assessee is a Limited Company engaged in the business of manufacturing steel, filed its return of income for the AY 2010-11 on 31/11/2011 admitting total income of Rs. 1,08,92,060/-. Thereafter, the case was taken up under CASS and assessment was completed U/s. 144 of the Act vide order dated 22/3/2013 wherein the above-mentioned additions were made by the Ld. AO. On appeal before the Ld. CIT (A) belatedly, the Ld. CIT (A) denied to condone the delay in filing the appeal however, confirmed the order of the Ld. AO on merits by relying on the second remand report obtained from the Ld. AO dated 8/11/2016 and by disregarding the first remand report dated 17/3/2015. Submitted by the Ld.AO. Aggrieved by the order of the Ld. Revenue Authorities, the assessee is in appeal before us. 14. Before proceeding to adjudicate the issues on merits, it is worthwhile to mention the events that had transpired during the time of hearing. After several adjournments due to various reasons, the assessee filed early hearing petition and the Hon’ble President posted the appeal for hearing on 10/06/2001. On that day, the ld. DR expressed his inability to argue the case as he was not ready with the appeal since he was under the belief that the hearing was only with 12 respect to early hearing petition. Thereafter, the appeal was posted for hearing on 11/6/2021. The Ld. DR again expressed his inability to argue the case on 11/6/2021. However, the Ld. AR was ready with the case on both the dates of hearing and vehemently submitted that the Revenue had invoked the provisions of section 68 in the hands of the assessee though the entire funds received by it are from its sister concerns which are already assessed to tax. The Ld. AR further submitted that the amount of addition made by the Revenue is more than Rs. 300 Crs and recovery of demand at this stage would bring irreparable loss to the assessee and therefore, the appeal may be taken up for hearing instantly. Therefore, the Bench presided by the Hon’ble President posted the appeal for hearing on 6/7/2021 by treating the appeal as part heard with the following direction: Order sheet page No.6 (ITA No. 512/Hyd/2017), Dated 11/06/2021 1. The Ld. AR is hereby directed to produce before us the return of income, Balance Sheet and Assessment Order of the following Eight Companies highlighting the funds advanced by these companies (either for investment in equity share or otherwise) to the assessee company for the relevant AY: 2010-11:- (i) M/s. Obulapuram Mining Co. Pvt. Ltd, No.6(4), Raghava Chari Road, Bellary. (ii) M/s. Tubular Rivets (P) Ltd., Flat No.22; Parijatha Apartments, Race Course Road, Bangalore. (iii) M/s. Kireeti Power Corporation Pvt Ltd., Plot No.1121; S.No. 403/1; Road No. 54, Jubilee Hills, Hyderabad. (iv) Lakshmi Aruna Oxygen Pvt. Ltd., Plot No. 1121, S.No. 403/1; Road No. 54, Jubilee Hills, Hyderabad-500 034. (v) Mudita Properties Pvt Ltd, Flat No.22; Parijatha Apartments, Race Course Road, Bangalore. (vi) Sri G. Janardhana Reddy, Shok Nagar, Havambhavi, Bellary – 583 101. 13 (vii) Smt. G. Lakshmi Aruna, Ashok Nagar, Havambhavi, Bellary, 583101. (viii) M/s. GJR Holding International Ltd., 5; Athol Street, Douglas, Isle of Man. The Ld. AR shall also submit the above-mentioned particulars within a week before the Ld. DR. 2. The Ld. DR is hereby directed to verify the genuineness of the assessment order and details furnished by the Ld. AR and submit a report on the same from the Revenue before the Bench. The above information is called for because the Ld. AR has submitted before the Bench that all the above-mentioned companies’ income were assessed to tax U/s. 143(3) of the Act and the source of funds received by the assessee-company are from the assessed income of those companies. 3. The Ld. DR is further directed to submit a report from the Revenue before the date of next hearing of the case, as to why the first remand report submitted by the Ld. AO before the Ld. CIT (A) forming part of the paper book page 65 is not acceptable and the genuineness of the second remand report taken into consideration by the Ld. CIT (A) which is extracted in his order dated 27/12/2016. 4. Since this bench while deciding the early hearing application has also heard the preliminary arguments in respect of the grounds of appeals, it is desirable to hear and decide these appeals by this Bench. Even Ld. Advocate for the assessee and the Ld. DR have also endorsed the said view. Accordingly, these appeals (ITA No. 512 and 398/Hyd/2017) shall be listed before this Bench on 06 th July, 2021 as part heard.” 15. On 6/7/2021, the Ld. DR submitted that the Revenue desires to appoint a Special Counsel and therefore, requested for adjournment. Thereafter, the Benched Presided by the Hon’ble President adjourned the case to 27/07/2021 to be heard by the Regular Bench. On 27/07/2021 again the Ld. DR sought time stating that the Revenue is yet to appoint Special Counsel. Accordingly, the appeal was adjourned to 28/07/2021. On 28/07/2021 Standing Counsel Sri K.V. Aravind appeared however, sought for adjournment and the appeal was 14 adjourned to 9/08/2021. On 09/08/2021, the Bench did not function and the appeal was posted for hearing on 10/08/2021. When the matter came up on 10/08/2021, the Ld. AR pointed out that the Revenue had not complied with the direction of the Bench dated 11/06/2021 therefore once again the case was adjourned to 06/09/2021 with direction to the Ld. DR to comply with the earlier direction of the Bench. On 06/09/2021 also the directions were not complied by the Revenue, therefore the appeals were adjourned to 11/10/2021. Once again on 11/10/2021, the Ld. DR asked for adjournment and the appeals were posted for hearing on 12/10/2021 first on board. Finally, the appeal was heard on 12/10/2021. This lethargic attitude of the Revenue in such a case having high pitch additions does not hold the Revenue in high esteem. 16. Ground No.1: Addition of Rs. 311,88,97,970/- invoking section 68 of the Act. From the balance sheet filed by the assessee, the Ld. AO observed that the assessee company had received aggregate amount of Rs. 311,88,97,970/- towards share subscription from various parties as detailed herein below: Sl no Name of the shareholder No. of shares Amount received upto 31/3/2010 (Rs.) Amount received upto 31/3/2009 (Rs.) 1. M/s. Obulapuram Mining Co. Pvt. Ltd, No.6(4), Raghava Chari Road, Bellary 102,07,15,960 1020,07,15,960 479,52,00,000 15 2. M/s. Tubular Rivets (P) Ltd., Flat No.22; Parijatha Apartments, Race Course Road, Bangalore. 80,000 8,00,000 8,00,000 3 M/s. Kireeti Power Corporation Pvt Ltd., Plot No.1121; S.No. 403/1; Road No. 54, Jubilee Hills, Hyderabad. 9,24,20,000 92,42,00,000 8,00,000 4 Lakshmi Aruna Oxygen Pvt. Ltd., Plot No. 1121, S.No. 403/1; Road No. 54, Jubilee Hills, Hyderabad-500 034. 8,23,20,000 82,32,00,000 8,00,000 5 Mudita Properties Pvt Ltd, Flat No.22; Parijatha Apartments, Race Course Road, Bangalore. 80,000 8,00,000 8,00,000 6 Sri G. Janardhana Reddy, Shok Nagar, Havambhavi, Bellary – 583 101. 1,95,80,000 7,08,00,000 7,08,00,000 7 Smt. G. Lakshmi Aruna, Ashok Nagar, Havambhavi, Bellary, 583101. 2,50,80,000 25,08,00,000 12,58,00,000 8 M/s. GJR Holding International Ltd., 5; Athol Street, Douglas, Isle of Man. 4,89,09,836 48,90,98,360 NIL TOTAL 128,91,85,796 1289,18,57,960 499,50,00,000 As seen from the balance sheet for FY 2008-09, share application money pending allotment in FY 2008-09 is Rs. 477,79,60,000. Also, as seen from the balance sheet for FY 2007-08, share application money pending allotment in FY 2007-08 is Rs. 39,00,00,000/-. Thus, the total amount received in FY 2009-10 is Rs.. =Share capital as on 31/3/2010- {share capital as on 31/3/2009 + share application money pending allotment as on 31/3/2009} = Rs. 1289,18,57,970 – {Rs. 499,50,00,000 + Rs. 477,79,60,000} = Rs. 1289,18,57970 – Rs. 977,29,60,000} = Rs. 311,88,97,970. However, the party-wise amounts of share application money received in FY 2009-10 were not furnished by the assessee.” 17. It appears that during the course of assessment proceedings, the assessee did not respond to the several notices issued calling for 16 information. In some instances, adjournments were sought. Finally, the notice sent to the assessee was returned by the Postal Authorities with remarks “The assessee has left”. Therefore, the Ld. AO completed the assessment U/s. 144 of the Act. Since the assessee had not responded to the notice, the Ld. AO arrived at the conclusion that the amount of Rs. 311,88,97,970/- received by the assessee was not genuine as he opined that the identity and creditworthiness of the parties from the whom the amount was received is not established. Therefore, he made the addition of Rs. 311,88,97,970/- in the hands of the assessee invoking the provisions of section 68 of the Act. On appeal, the Ld. CIT (A) after hearing the Ld. AR on few occasions upheld the order of the Ld. AO as he was also of the view that the identity, creditworthiness, genuineness of the transaction have not been established. While arriving at such decision, he relied on the second remand report obtained from the Ld. AO dated 8/11/2016 without considering the first remand report dated 17/3/2015. The relevant portion of the Ld. AO’s remand report dated 08/11/2016 & 17/3/2015 is extracted herein below for reference: Remand Report dated 8/11/2016 “3. During the course of remand proceedings, the assessee submitted certain information based on which a remand report was submitted by my predecessor on 17/03/2015. However, in the light of the information available on record, a revised remand report is being submitted for your kind perusal as under: (i) Share application money brought to tax U/s. 68. During the scrutiny proceedings, the A.O. noticed that the assessee had received Rs. 311,88,97,970/- being share subscription during the year 17 from various parties. The assessee was asked to prove the genuineness of the transactions along with creditworthiness of sources in the hands of the subscribers. However, there was no response from the assessee. The A.O. then issued letters to the share subscribers U/s. 131 of the IT Act to ascertain the genuineness of the transactions. All the letters were returned unserved except in the case of M/s. Obulapuram Mining Co. Pvt Ltd., which also did not respond to the summons. As the genuineness of the transaction was not proved, the same was added to the income returned u/s. 68 of the Act. ............. ............. 4. During the course of remand proceedings, the assessee had submitted the details as given below: (a) Issue of Share Capital: The assessee merely submitted the ledger extract of share capital a/c, share application money pending for allotment, bank ledger a/CIT(A), bank statement and Form-2. The assessee was asked to prove the genuineness of the transaction. No confirmation letters, bank statements of the share subscribers, Annual reports etc., which prove the creditworthiness had been submitted. Therefore, the addition may kindly be sustained. ............. ............” ----------&&&&&---------- Remand Report dated 17/3/2015. “............ Share capital: The assessee company has issues equity shares value of Rs. 789,68,57,960/- out of which an amount of Rs. 311,88,97,960/- has been received during the FY 2009-10. The assessee company furnished the ledger extract of share capital a/c, share application money pending for allotment, bank ledger a/c, bank statement and ROC copy. In this case M/s OMC is the major investor, during the remand proceedings the assessee company produced the assessment order passed in the Central Circle, Benglore wherein no addition is made on capital account, hence the money introduced is prima facie explained. ...........” 18. Before us, the Ld. AR has filed a written submission which is reproduced herein below for reference: "4 The basis of the addition of Rs. 311,87,97,960/- is tabulated hereunder: 18 Sr. No. Name of sharehold er No. of shares (page 143 of Paper Book) Amount received upto 31.3.2010 (Rs.) (A) Amount received upto 31.3.2009 (Rs.) (B) Share application money pending allotment as on 31.3.2009 (Rs.) (C) Total (D) = (A-B-C) 1 M/s Obulapur am Mining Co. (P) Ltd. 102,07,15,960 1020,71,59,600 479,52,00,000 296,80,61,640 244,38,97,960 2 M/s Tubualar Rivets (P) Ltd. 80,000 8,00,000 8,00,000 --- --- 3 M/s Kireeti Power Corporatio n (P) Ltd. 9,24,20,000 92,42,00,000 8,00,000 65,64,00,000 26,70,00,000 4 Lakshmi Aruna Oxygen (P) Ltd. 8,23,20,000 82,32,00,000 8,00,000 66,44,00,000 15,80,00,000 5 Mudita Properties (P) Ltd. 80,000 8,00,000 8,00,000 ----- ----- 6 Sri G. Janardha na Reddy 1,95,80,000 19,58,00,000 7,08,00,000 ----- 12,50,00,000 7 Smt. G. Lakshmi Aruna, 2,50,80,000 25,08,00,000 12,58,00,000 ----- 12,50,00,000 8 M/s GJR Holding Internatio nal Ltd. 4,89,09,836 48,90,98,360 Nil 48,90,98,360 ----- Total 128,91,85,796 1289,18,57,960 499,50,00,000 477,80,60,000 311,88,97,960 5 It will be apparent that amounts brought to tax is in respect of five shareholders out of eight shareholders: Sr. No. Name of shareh older No. of shares (pages of Paper Book) Amount received upto 31.3.2010 as share capital (Rs.) (pages of Paper Book) (A) Amount received upto 31.3.2009 as share capital (Rs.) (B) Share application money pending allotment as on 31.3.2009 (Rs.) (C) Total (D) = (A-B-C) (pages of Paper Book) 1 M/s Obulap uram Mining Co. (P) Ltd. 102,07,15,960 (151) 1020,71,59,600 (151) 479,52,00,000 296,80,61,640 244,38,97,96 0 2 M/s Kireeti Power Corpor ation (P) Ltd. 9,24,20,000 92,42,00,000 (209) 8,00,000 65,64,00,000 26,70,00,000 3 Laksh mi Aruna 8,23,20,000 82,32,00,000 (228) 8,00,000 66,44,00,000 15,80,00,000 19 Oxygen (P) Ltd. 4 Sri G. Janard hana Reddy 1,95,80,000 19,58,00,000 7,08,00,000 ----- 12,50,00,000 (293) 5 Smt. G. Laksh mi Aruna 2,50,80,000 25,08,00,000 12,58,00,000 ----- 12,50,00,000 Total 124,01,15,960 1240,11,59,600 499,34,00,000 428,88,61,640 311,88,97,96 0 Accepted by the revenue Amount in dispute 6 It is thus submitted that each of the shareholder who has contributed capital in the instant year is also made such contribution in preceding year which stands accepted and not in dispute. Moreover the investment has been made by promoters and their companies. 7 The amount accepted and added in the order of assessment alongwith copies of return of income / balance sheet and orders of assessment as placed in paper book are tabulated as under: Sr. No. Name of share holders Amount Added (Rs.) Amount Accepted (Rs.) Pages of Paper Book Order of assessment framed by 1 M/s Obulapuram Mining Co. (P) Ltd. Address: No. 6/4, Ennoble House, Raghavachari Road, Bellary No. of shares: 1020715960 PAN: AAAC05753D Ward: DCIT, CC 1(3), BLR/DLC/CC/06 8/03 244,38,97,960 776,32,61,640 i) Copy of acknowledgment of return of income dated 14.10.2010 alongwith computation of income for the financial year 2009- 10 relevant to assessment year 2010-11 in the case of M/s Obula Puram Mining Co. (P) Ltd. (page 148-149 of Paper Book) ii) Copy of balance sheet alongwith its schedules for the financial year 2009- 10 relevant to assessment year 2010-11 in the case of M/s Obula Puram Mining Co. (P) Ltd (pages 150-161of Paper Book) iii) Copy of order of assessment u/s 143(3) of the Act for Assessment year 2010-11 in the case of M/s Obula Puram Mining Co. (P) Ltd. (pages 162-184 of Paper Book) Shivanand H Kalakeri, Deputy Commissioner of Income Tax, Central Cirlce- 1(3), Bangalore 2 M/s Kireeti Power Corporation (P) Ltd. 26,70,00,000 65,72,00,000 i) Copy of balance sheet alongwith its Suman Malik 20 Address:. Plot No. 1121, Sr. No. 403/1, Road No. 54, Jubilee Hills Hyderabad Hyderabad TG No. of shares: 92420000 PAN No. AADCK2296A Ward: DCIT, Circle 2(1), Hyderabad schedules for the financial year 2009- 10 relevant to assessment year 2010-11 in the case of M/s Kireeti Power Corporation (P) Ltd. (pages 204-218 to Paper Book) ii) Copy of order of assessment dated 31.3.2013 u/s 143(3)/144 of the Act for Assessment year 2010-11 in the case of M/s Kireeti Power Corporation (P) Ltd. (pages 219-221 of Paper Book) Deputy Commissioner of Income Tax Cirlce-2(1), Hyderabad 3 Lakshmi Aruna Oxygen (P) Ltd. Address: Plot No. 1121, S. No. 403/1, Road No. 54, Jubilee Hills Hyderabad Hyderabad TG No. of shares: 82320000 PAN No. AABCL3634K 15,80,00,000 66,52,00000 i) Copy of balance sheet alongwith its schedules for the financial year 2009- 10 relevant to assessment year 2010-11 in the case of M/s Lakshmi Aruna Oxygen (P) Ltd (pages 223-234 of Paper Book) ii) Copy of order of assessment dated 20.3.2013 u/s 144 of the Act for Assessment year 2010-11 in the case of M/s Lakshmi Aruna Oxygen (P) Ltd. (pages 372-376 of Paper Book) A.Sridhar Income Tax Officer Ward-16(1). Hyderabad 4 Sri G. Janardhana Reddy Address: No. 8, Ashok Nagar, Havambhavi, Shriguppa Road, Bellary-583101 No. of shares: 19580000 PAN No. AFBPR9737D Ward: DCIT, Central Circle, 1(3), Bangalore 12,50,00,000 12,50,00,000 i) Copy of acknowledgment of return of income dated 13.10.2010 alongwith computation of income for the financial year 2009- 10 relevant to assessment year 2010-11 in the case of Shri G Janardhana Reddy (pages 289-290 of Paper Book) ii) Copy of balance sheet for the financial year 2009-10 relevant to assessment year 2010-11 in the case of Shri G Janardhana Reddy (pages 291-294 of Paper Book) iii) Copy of order of assessment dated 31.3.2013 u/s Shivanand H Kalakeri, Deputy Commissioner of Income Tax, Central Cirlce- 1(3), Bangalore 21 153C/144 of the Act in the case of Shri Janardhana Reddy for Assessment year 2010-11 (pages 290-371 of Paper Book) 5 Smt. G. Lakshmi Aruna Address: No. 8, Siruguppa Road, Havambhavi Bellary-583101 No. of shares: 25080000 PAN No. AFJPA5974P Ward: DCIT, Central Circle 1(3), Bangalore 12,50,00,000 12,50,00,000 i) Copy of acknowledgment of return of income dated 14.10.2010 alongwith computation of income for the financial year 2009- 10 relevant to assessment year 2010-11 in the case of G. Lakshmi Aruna (pages 236-238 of Paper Book) ii) Copy of balance sheet alongwith its schedules for the financial year 2009- 10 relevant to assessment year 2010-11 in the case of Shri G Janardhana Reddy (pages 239-262 of Paper Book) iii) Copy of order of assessment dated 31.3.2013 u/s 153C/144 of the Act in the case of G. Lakshmi Aruna for Assessment year 2010-11 (pages 263- 288 of Book) Shivanand H Kalakeri, Deputy Commissioner of Income Tax, Central Cirlce- 1(3), Bangalore Total 311,88,97,960 933,56,61,640 It is submitted that paper book was filed on 10.6.2021 comprising of 376 sheets and judgment paper book comprising of 229 sheets. 8 In such circumstances it is submitted that share capital addition made u/s 68 of the Act is not in accordance with law and untenable.” 19. The details of the share application money received during the relevant assessment year for Rs. 311,88,97,960/- from the five parties mentioned herein above as extracted from the written submission of the Ld. AR is not disputed. From the first remand report of the Ld. AO dated 17/3/2015 it is apparent that the Ld. AO has not drawn any adverse 22 inference on the receipt of share application money of Rs. 311,88,97,960/-. It appears that in the second remand report, the assessee has not cooperated and therefore, the ld. AO held that the genuineness of the transaction are not proved. While doing so, the Ld. AO also has not made any finding in order to disturb the earlier finding of the erstwhile AO. The Ld. CIT (A) relying on the second remand of the Ld. AO confirmed the addition made by the Ld. AO in his ex-parte order. 20. The Ld. AR submitted before us that the order of the Ld. CIT (A) is perverse for the reason that he did not consider the first remand report dated 17/3/2015 wherein the Ld. AO had accepted the genuineness of the transaction and accordingly reported that the cash credit in the books of the assessee is prima facie explained. The Ld. AR further submitted that when there was no change in facts and circumstances of the case, it was not necessary for the Ld. CIT (A) to demand for a second remand report. The Ld. AR vehemently argued by stating that the Ld. CIT (A) had failed to examine the documents available with the Revenue before arriving at his conclusion. It was further submitted that the action of the Ld. CIT (A) was vindictive in nature because there was no reasons stated by the Ld. CIT (A) for rejecting the first remand report. The Ld. AR further cited the paper book produced before us wherein the IT Acknowledgements, financial statements, PAN etc., of the investors were enclosed in order to substantiate the identity, creditworthiness of 23 the investors and to prove the genuineness of the transactions. The Ld. AR also pointed out to the assessment orders passed U/s. 143(3) of the Act in the case of the investors. 21. At this juncture the ld. DR referred to the third remand report dated 31/08/2021 obtained from the Ld. AO on the direction of the Bench dated 11/6/2021 which was produced before the Bench. The relevant portion is extracted herein below for reference: F.No.DCIT-1(1)/ITAT Corres/Brahmani/2021-22, Date: 31.08.2021 To, The Commissioner of Income Tax (DR)-1, A-Bench, CGO Complex, Kavadiguda, Hyderabad. Respected Sir, (Through the O/o. The Addl. CIT, Range-1, Hyderabad) Sub: Proceedings in the case of Brahmani Industries Ltd for the AY 2010-11 – Submission of requisite information called for - Reg. Ref: 1) Your letter in F.No. CIT(DR)/A-Bench/2020-21 dated 11/6/2021 2) This office letter in F.No. DCIT-1(1)/ITAT.Corres/2021-22 dtd 23/6/2021. *** Kind reference is invited to the above. Vide letter referred at (1) above, it was requested clarification on three items. The item No.1 was already replied to vide letter dated 23/06/2021 and received by your office also (a copy of the same is enclosed for ready reference). As stated earlier, it is requested that the Hon’ble Bench may please be appraised to take note of the revised remand report. With regard to item Nos.2 & 3, partial information was furnished, which is being elaborated as under: 1) During the course of assessment proceedings for AY 2010-11 in the case of M/s. Brahmani Industries Limited, the assessee has received share application money to an extent of Rs. 311,88,97,970/- from following eight (8) investors. 24 Sl no Name of the assessee (Sri/Smt/M/s.) 1. Obulapuram Mining Co., Pvt Ltd., 2. Mudita Properties Pvt Ltd., 3. Tubular Rivets Pvt Ltd., 4. G. Janardhan Reddy 5. G. Lakshmi Aruna 6. Kireeti Power Corporation Pvt Ltd., 7. Lakshmi Aruna Oxygen Private Limited 8. M/s. GJR Holding International Ltd As can be seen from the assessment record, notice U/s. 143(2) dated 30/08/2011 was issued and served on the assessee on 10/09/2011. A notice U/s. 142(1) was issued on 04 -07 2012 for which, there was no response from the assessee. This was followed by a fresh notice' u/s.142(1), along with the detailed clarification. In response to this notice, the assessee sought adjournment and the case was adjourned accordingly to 06-09-2012. The assessee again sought adjournment to 2nd week of October, 2012 which was granted. Further, a notice u/s.143(2) was issued on 05-10-2012 fixing the hearing on 22-10-2012. The said notice was returned unserved by the postal authorities with the remark 'addressee left'. This clearly shows that the tax payer despite opportunities, did not utilize the same. Despite the above, the Assessing Officer in all sense of fairness took it upon himself by Issuing notice u/s.131 of the I.T. Act to the eight shareholders requesting them to prove their identity, creditworthiness and genuineness of the transaction. As mentioned in the assessment order, all the letters / notices were returned unserved except in the case of M/s. Obulapuram Mining Co., Pvt. Ltd., which also did not respond to the summons. Therefore, the Assessing Officer had no other option but to resort to 144 of the IT Act based on the information available with him. The Assessing Officer provided an opportunity to the assessee to prove identity, creditworthiness of the parties and genuineness of the transaction along with source in the hands of the investors. The assessee failed to avail the opportunity, hence the Assessing Officer completed the assessment under section 144 of the Act dated 22-03- 2013 on the basis of the material available on record by making the addition of the share application money to an extent of Rs.311 ,88,97,970 /. 2) Aggrieved by the said order, the assessee preferred an appeal before the Ld.CIT(Appeal)-2, Hyderabad. The said case was notified to Ld.CIT(Appeal)-8, Hyderabad vide Pr.CCIT notification dated 30-8- 25 2016. The Ld.CIT(Appeal) ultimately passed the order in this case. Attention of the Hon'ble Bench is kindly drawn to the order of the Ld.CIT(A) from Para 3 onwards to Para 3.2 of Page Nos.1, 2 & 3. The Ld.CIT(A) has categorically mentioned that there is a delay of 125 days and went on to reject the petition for condonation of delay and clearly at Para 3.2 has held that delay is not condoned. However, the Ld.CIT(A) instead of closing the appeal at that stage, has proceeded to adjudicate on the merits of the case, thereby, granting partial relief to the assessee. The assessee earlier challenged only the order of the Ld.CIT(Appeals) to the extent of denial of relief on merits, the refusal to condone the delay was not challenged. Subsequently, an additional ground has been raised challenging the order of the Ld.CIT(Appeal) in rejecting the condonation of delay. Once the condonation is rejected, the appeal become non-est and the Ld.CIT(A) should not have proceeded to take up the appeal on merits. Even on merits, the following is submitted for kind consideration of the Hon'ble Bench. In respect of status of assessment of companies/shareholders who contributed the share capital of Rs, 311 crores, and the contribution of share capital from the companies/shareholders are explained in their hands, it was already submitted by the then AO dated 08.11.2016 in the revised remand report wherein it was stated that the asseessee was asked to prove the genuineness of the transactions along with creditworthiness of sources in the hands of the subscribers. However, there was no response from the assessee. The AO issued letters to the share subscribers u / s. 131 of the IT Act to ascertain the genuineness of the transactions. All the letters were returned unserved except in the case of M/s. Obulapuram Minding Co. Pvt. Ltd. which also did not respond. It is further submitted that the Ld.CIT(A) has also given opportunity to the assessee to submit objections/comments on remand report. There was no response from the assessee. (i) M/s. Obulapuram Mining Co. Pvt. Ltd. (PAN: AAACO5753D): The assessee has produced return of income filed for the Assessment Year 2010-11 at page 148-16] of the paper book. Assessment order passed under section 143(3) of the Act under section 143(3) of the I.T.Act for Assessment Year 2010-11 is produced at page 162 to 184. On perusal of the said documents it is seen that the balance sheet of the investor assessee reflects investments of Rs.I02,071.60 lakhs at. Page No. 151 of Paper book. The assessment order for A.Y.2010-11 would not reflect the issue regarding investment in the above assessee-company. The burden is on the assessee to establish identity and creditworthiness of the investor and genuineness of the transaction. The mere production of the accounts and assessment orders of the investor company, would not amount to 26 discharge burden imposed on the assessee as held by the various High Courts and the Hon 'ble" Supreme Court. (ii) M/s. Tubular Rivest P Ltd., (PAN - AAACT0122B) : The assessee has not produced any material regarding its transaction of investing in shares of M/s.Brahmani Industries. Hence, it is very clear that the precondition for proving the transaction be as per law has not fulfilled. Therefore, the addition may kindly be sustained. (iii) M/s.Kireeti Power Corporation Private Limited (PAN - AADCK2296A): Though the balance sheet of the investor assessee reflects investment of Rs.92,42,00,000/- at Page No.209 of Paper Book, it may please be noted that the assessment order was passed under section 143(3) rws 144 of the I.T. Act dated 31-03-2013 for the Assessment Year 2010-11. The burden is on the assessee to establish identity and creditworthiness of the investor and genuineness of the transaction. The mere production of the accounts and assessment order (143(3) rws 144) of the investor company, would not amount to discharge of burden imposed on the assessee as held by the various high courts and the Hon 'ble Supreme Court on establishing identity and creditworthiness of the investor and genuineness of the transaction. (iv) Lakshmi Aruna Oxygen Private Limited (PAN - AABCL3634K): Assessment has been completed under section 144 dated 20/03/2013 for the Assessment Year 2010-11 which is placed in page nos.372 - 376 of paper book. Here also, it is very clear that the assessee has not produced any evidence in paper book and t he assessee has not discharged its burden of onus before the Assessing Officer. Mere production of the accounts and assessment orders of the investor company would not amount to discharge of burden imposed on the assessee as held by various High Courts and the Hon 'ble Supreme Court on establishing identity and creditworthiness of the investor and genuineness of the transaction. (v) Mudita Properties Pvt. Ltd., (PAN - AABCM9291K) : 27 The assessee has not produced any material regarding its transaction of investing in shares of M/s. Brahmani Industries, therefore, the entire investment worked out in the assessment order is liable to be taxed. Hence, it is very clear that the precondition for proving the transaction be as per law has not fulfilled. Therefore, the addition may kindly be sustained. [vi] Sri G. Janardhana Reddy (PAN - AFBPR9737D) : The balance sheet of the investor assessee reflects investment of Rs.1,010,697,098/-. The breakup of investment is provided in Schedule 5 (Page No.293 of Paper Book), wherein, it was shown at S1. No.9 'Investment in Shares BIL' of Rs.12,50,00,000/ -. The assessment has been completed under section 153C rws 144 of the Act, 1961 on 31-03-2013 by the DCIT, Central Circle-1(3), Bangalore. However, the burden is on the assessee to establish identity and creditworthiness of the investor and genuineness of the transaction. The mere production of the accounts and assessment orders of the investor company, would not amount. to discharge burden imposed on the assessee as held by the various High Courts and the Hon'ble Supreme Court. (vii) Smt. G. Lakshmi Aruna (PAN - AFJPA6974P) : The balance sheet reflects investments of Rs.1,13,81,47,548/ -. Schedule 6 reflects investment in shares of Rs.39,63,25,600/-. However the same would not reflect the investment in the above company. Assessment has been completed under section 153C rws 144 for Assessment Year 2010-11 dated 31/3/2013. The assessment order does not deal with investment in shares of the above assessee-company. It is submitted that burden is on the assessee to establish identity and creditworthiness of the investor and genuineness of the transaction, which was not discharged by the assessee during the assessment proceedings and appellate proceedings. The mere production of the accounts and assessment orders of the investor company would not amount to discharge of burden imposed on the assessee as held by the various High Courts and the Hon’ble Supreme Court establishing identity and creditworthiness of the investor and genuineness of the transaction. (viii) M/s. GJR Holding International Ltd: The assessee has not produced any material regarding its transaction of investing in shares of M/s. Brahmani Industries. Hence, it is very clear that the precondition for proving the 28 transaction be as per law has not fulfilled. Therefore, the addition may kindly be sustained. 3) The assessee had an opportunity to discharge its burden before the AO as well as the Ld. Commissioner of Income Tax (Appeals). The assessee having failed to avail the opportunities before the AO and the Ld. Commissioner of Income Tax (Appeals) during the course of assessment proceedings or appeal proceedings. The burden of the assessee cannot be sought to be discharged by the revenue, in contravention of the law laid down by l he Hon'ble Supreme Court. 4) The Ld.CIT(Appeal) at Para 8.2 of Page No.13 has clearly mentioned the copy of the remand report was given to the tax payer to furnish its comments with a clear mention that if no comments / objections are received by 22-12-2016, it is presumed that the tax payer has no objection to the comments in the remand report. There is no response from the assessee on the remand report of the Assessing Officer. Neither any submissions were filed nor adjournment was taken and therefore, the Ld.CIT(Appeal) disposed the appeal based on the information (or) material available on record. At Page No.1S, the Ld.ClT(Appeal) clearly holds that the addition made by the Assessing Officer is upheld and ground No.3 is dismissed. Therefore, it is once again humbly submitted that once the appeal fails at the threshold level, the Ld.CIT(Appeal) ought not to have proceeded with the adjudication on merits of issues. Therefore, it is once again humbly reiterated that the same may kindly be sustained as the tax payer repeatedly chosen not to avail opportunities before the Assessing Officer and subsequently before the Ld.CIT(Appeal) also. Therefore, the same may kindly be sustained. 5) Submitted for kind perusal of Ld. Commissioner of Income Tax (DR)-I, A-Bench, Hyderabad to be placed before Hon’ble Bench for favourable consideration. Yours faithfully, Sd/- [P. SRINIVAS] Dy. Commissioner of Income Tax, Circle-1(1), Hyderabad. 22. The Ld. AR further submitted that the Ld. AO neither examined the assessee nor examined the records available with the Revenue while 29 framing the third remand report. The Ld. AR further submitted that the Ld. Revenue Authorities till this date has not stated the reason for rejecting the first remand report of the Ld. AO. The Ld. AR further submitted that the assessee has filed paper book before the Ld. Revenue Authorities which is also now placed before the Tribunal wherein the details of the share applicants who had infused funds in the assessee’s company for allotment of shares, such as acknowledgement of the return of income filed, assessment orders u/s. 143(3) of the Act, PAN, Balance Sheet and statement of accounts etc. The Ld. AR argued that even at this stage the Ld. Revenue Authorities has not made any negative inference regarding the particulars filed in the paper book. It was therefore pleaded that based on the facts placed before the Tribunal which are already available with the Revenue, justice may be rendered. The Ld. DR on the other hand relied on the orders of the Ld. Revenue Authorities and prayed for confirming the same. 23. We have heard the rival submissions and carefully perused the materials on record. On examining the paper book filed by the assessee we observed the following particulars regarding the five entities who had infused funds aggregating to Rs. 311,88,97,960/- in the assessee company during the relevant assessment year for allotment of shares. 30 1. Obulapuram Mining Co. Pvt Ltd: (i) This company/entity has invested Rs. 1020,71,60,000/- (paper book page no. 151) towards allotment of equity share in the assessee company as evident from the statement of affairs of the assessee company. Hence, it is a holding company of the assessee company. (ii) The Ld. AR’s submission that the Directors of the holding company and the assessee company are the same is not disputed. (iii) Page No. 148 & 149 of the paper book contains the acknowledgement for filing the Return of income for the AY 2010-11 wherein the entity has returned Gross Total Income of Rs. 228,99,19,735/- and the PAN of the entity is stated as AAACO 5753 D. (iv) Page No. 150 to 161 of the paper book contains the audited balance sheet and statement of accounts from which it is evident that entity has reserves and surplus of Rs. 958,29,97,000/- and in page no. 157 the entity has declared profit before tax of Rs. 189,48,39,000/-. (v) Page No. 162 to 184 consists of the assessment order U/s. 143(3) of the Act of the entity for the AY 2010-11 by the DCIT, Central Circle-1(3), Bangalore wherein the 31 entity’s income of Rs. 225,13,29,740/- is accepted and further addition is made. (vi) Page No.185 to 200 consists of the assessment order U/s. 143(3) r.w.s 144C(13) of the Act for the AY 2009-10 by the DCIT, Central Circle-1(3), Bangalore wherein entity’s income of Rs. 491,38,96,684/- is accepted and further addition is also made. (vii) Page No.202 consists of the CIN No. of the entity viz., U13209KA2001PTC029707. 2. Kireeti Power Corporation Pvt Ltd: (i) This company/entity has invested Rs. 92,42,00,000/- (page no.209 of the paper book) towards allotment of equity share in the assessee company hence, it is a associate company of the assessee company. (ii) The Ld. AR’s submission that the Directors of the associate company and the assessee company are the same is not disputed. (iii) Page No. 204 to 218 of the paper book contains the audited balance sheet and statement of accounts from which it is evident that the entity has equity share capital and reserves & surplus aggregating to Rs. 75,72,31,920/- and in page no. 210 the entity has declared profit before tax of Rs. 89,53,549/-. 32 (iv) Page No. 219 to 221 consists of the assessment order U/s. 143(3) r.w.s 144 of the Act of the entity for the AY 2010-11 dated 31/3/2013 by the DCIT, Central Circle- 2(1), Hyderabad wherein the entity’s income of Rs. 85,99,740/- is accepted and further addition is also made. The PAN of the assessee is stated as AADCK 2296 A in the assessment order. (v) Page No.222 consists of the CIN No. of the entity viz., U40102TG2007PTC053773. 3. Lakshmi Aruna Oxygen Private Limited: (i) This company has invested Rs. 82,32,00,000/- (Page No. 228 of the Paper Book) allotment of equity share in the assessee company hence, it is an associate concern of the assessee company. (ii) The Ld. AR’s submission that the Directors of the associate company and the assessee company are the same is not disputed. (iii) Return of income was filed by the entity on 26/09/2010 declaring NIL income. (Page no. 372 of paper book) (iv) Page No. 223 to 234 of the paper book contains the audited balance sheet and statement of accounts from 33 which it is evident that the entity has equity share capital to the extent of Rs. 75,12,50,000/-. (v) Page No. 372 to 376 consists of the assessment order U/s. 144 of the Act of the entity for the AY 2010-11 dated 20/03/2013 by the ITO, Ward-16(1), Hyderabad wherein it was observed by the Ld. AO that the entity had obtained loan to the extent of Rs. 8,23,40,000/- and since no explanation was given the same was treated as unexplained loan and added to the income of the entity on substantive basis. The PAN of the entity is stated as AADCL 3634 K in the assessment order. (vi) Page No.235 consists of the CIN No. of the entity viz., U24117TG2007PTC053783 4. Sri G. Janardhana Reddy : (i) Sri. G. Janardhana Reddy has invested Rs. 12,50,00,000/- (paper book page no.293) towards allotment of share in the assessee company during the relevant assessment year. Shri G. Janardhana Reddy is one of the promoter of the assessee company. (ii) Page No. 289 of the paper book contains the acknowledgement for filing the Return of income for the AY 2010-11 wherein the Shri G. Janardhana 34 Reddy has returned Gross Total Income of Rs. 33,23,50,203/- and the PAN is stated as AFBPR 9737 D. Page no.290 of the paper book contains the computation statement wherein the total income of Shri G. Janardhana Reddy is declared at Rs. 33,22,21,233/-. (iii) Page No. 291 to 294 of the paper book contains the balance sheet and statement of accounts from which it is evident that Shri G. Janardhana Reddy has capital of Rs. 112,55,35,986/-. (iv) Page No.295 to 371 consists of the assessment order U/s. 153C r.w.s 144 of the Act of the Shri G. Janardhana Reddy for the AY 2010-11, dated 31/3/2013 by the DCIT, Central Circle-1(3), Bangalore wherein his returned income was accepted at Rs. 33,22,21,230/- and further several high-pitched additions were made. 5. Smt. G. Lakshmi Aruna : (i) Smt. G. Lakshmi Aruna has invested Rs. 12,50,00,000/- (paper book page no. 243) towards allotment of equity share in the assessee company during the relevant assessment year and the overall 35 aggregate investment in equity shares is Rs, 39,63,25,600/- (ii) The Ld. AR’s submission that Smt. G. Lakshmi Aruna is a promotor of the assessee company is not disputed. (iii) Page No. 236 of the paper book contains the acknowledgement for filing the Return of income for the AY 2010-11 wherein Smt. G. Lakshmi Aruna has returned Gross Total Income of Rs. 23,48,11,430/- and the PAN of Smt. G. Lakshmi Aruna is stated as AFJPA 5974 P. Page No. 237 consists of computation statement of Smt. G. Lakshmi Aruna wherein the total income rounded off as per section 288A of the Act is stated as Rs. 22,76,50,890/-. Page No. 239 consists of Form No. 3CB certified by Chartered Accountant. (iv) Page No. 240 to 247 of the paper book contains the audited balance sheet and statement of accounts from which it is evident that Smt. G. Lakshmi Aruna has capital of Rs. 121,79,36,516/- and in page no. 242 she has declared excess of income over expenditure of Rs.26,78,56,375/-. Form 3CD is filed in page No. 254 to 261 certified by the auditor. (v) Smt. Lakshmi Aruna’s proprietary concern M/s. Lakshmi Aruna Minerals statement of accounts are 36 filed in paper book page no. 246 to 250 and the consolidated balance sheet and P & L Account are filed in paper book page No. 251 to 253. In the consolidated P & L Account Smt. G. Lakshmi Aruna has declared a profit of Rs. 31,32,38,610/- (Page No. 253). (vi) Page No. 263 to 288 consists of the assessment order passed U/s. 153C r.w.s 144 of the Act of Smt. G. Lakshmi Aruna for the AY 2010-11 dated 31/3/2013 by the DCIT, Central Circle-1(3), Bangalore wherein her returned income is accepted at Rs. 23,47,11,430/- and certain further additions are also made. 24. The above-mentioned facts could not be refuted by the Ld. DR. Further it is apparent that factually the all the entities were assessed to tax and additions were made on substantive basis with respect to certain entities. It is also apparent that all the entities had sufficient funds within their means to make investment in the assessee company. All the entities have filed their returns of income. The accounts of all the entities were also audited. It is also not in dispute that the entire money were infused into the assessee company towards share application money through banking channels. Therefore, from the factual matrix of the issue it is crystal clear that identity, creditworthiness and genuineness of the entities who had infused money into the assessee company are established and the evidence of 37 the same are forming part of the paper book containing 1 to 376 pages filed by the assessee company which were also before the Ld. Revenue Authorities. The submission of the ld. AR that “the above five entities had also infused funds in the assessee company during the preceding assessment year 2009-10 could not be controverted by the Ld. DR. Further, the Ld. AO in his remand report dated 8/11/2006 had stated that “the concerned Directors of the group were in judicial custody and for such reason the summons and notices issued upon them were returned unserved” itself justifies the reason that the entities could not cooperate during the assessment proceedings. It also establishes the fact that the relevant individuals managing the affairs of the assessee company were not in receipt of the notices sent by the Revenue Authorities during the course of assessment proceedings. Further, before us the Ld. DR could not state any reason as to why the first remand report of the Ld. AO was rejected. 25. From the above facts it is evident that the assessee has established the genuineness of the transaction with cogent evidence which are forming part of the paper book. The Ld. Revenue Authorities could not draw any adverse inference from the documents filed by the assessee company in its paper book. Hence the assessee has satisfied the initial onus cast upon it to establish the identity of the investors, the creditworthiness of the investors and the genuineness of the transactions. The Ld. DR has also argued stating that the onus lies 38 upon the assessee to substantiate the source of the share applicants in order to escape the rigor of section 68 of the Act. On the other hand, the Ld. AR of the assessee pointed out that there was no such requirement in law, as it stood, on the first day of the relevant AY 2010-11. The Ld. AR invited our attention to the proviso to section 68 of the Act, which was inserted by the Finance Act, 2012, putting further onus upon the assessees to substantiate the source of source of funds, where such funds are received by way of share capital or share application money. Having perused the same, we find merit in the submission of the Ld. AR of the assessee that, the proviso to section 68 of the Act, inserted by the Finance Act, 2012 was made effective by the Legislature from 01/04/2013 ie., AY 2013-14 and onwards; and thus it was not applicable in the relevant AY 2010-11. For this, reference is made to the Memorandum as well as the Notes to Clauses of the Finance Bill, 2012 which also makes it explicitly clear that the Legislature had introduced the proviso to section 68 of the Act prospectively and thus, the same was made applicable only from AY 2013-14 and onwards. One may also rely on this regard, to the judgment of the Full Bench of the Hon’ble Supreme Court in the case of CITR vs. Vatika Township Pvt. Ltd (367 ITR 466) where the Hon’ble Supreme Court categorically held that any legislation which imposes new obligation or new duties or a new levy shall have to be necessarily treated as prospective in nature. Reliance is also placed in certain decision viz., (i) CIT vs. Gagandeep 39 Infrastructure Private Limited (394 ITR 680); (ii) Pr. CIT vs. Apeak Infotech (88 taxmann.com 695); (iii) ACIT vs. Swiftsol (I) Pvt Ltd ( 171 ITD 577 (ITAT Nag); (iv) ACIT vs. Goldmohur Design & Apparel Park Ltd (96 Taxmann.com 375) (ITAT Mum.); (v) DCIT vs. RCP Infratech (P) Ltd (95 Taxmann.com 103) (ITAT Raipur). Moreover, it is also apparent that all the entities who had infused funds in the assessee company had filed their return of income and they were assessed to tax. From the return of income and the statement of accounts furnished by the assessee it is also evident that the entities who infused funds in the assessee company had sufficient funds for making such investments. 26. Further, in spite of the opportunity given to the Ld. AO by the Bench to submit a third remand report with respect to the genuineness of the return of income, balance sheet and other particulars filed before the Ld. Revenue Authorities, the Ld. AO has not brought out any substantial material on record to dispute that the documentary evidence placed by the assessee on record is not genuine. In the third remand reported dated 31/8/2021 the Ld. AO had made only three effective common comments with respect to our directions recorded in the order sheet dated 11/6/2021 ie., to verify the genuineness of the assessment order regarding the five relevant share applicants M/s. Obulapuram Mining Co. Pvt Ltd., M/s. Kireeti Power Corporation Pvt Ltd., M/s. Lakshmi Aruna Oxygen Pvt ltd., Shri G. Janardhan Reddy and Smt. G. Lakshmi Aruna. These three comments made by the Ld. 40 AO in his third remand report are (i) the assessment order does not reflect the investment (ii) the burden is on the assessee to establish the identity and creditworthiness of the investor and the genuineness of the transaction (iii) the mere production of the accounts and assessment order of the investor company would not amount to discharge of burden imposed on the assessee as held by various higher judiciary. In the case of the assessee, the assessee has produced the entire details and the assessment orders of the share applicants. The details of the investment made by the share applicants clearly appears in the statement of accounts of all the share applicants as observed by us herein above from the paper book produced by the assessee. On examining the facts of the case it is apparent that the ld. AO had made scrutiny assessment in the case of all the share applicants under the relevant sections of the Act. In these circumstances, we are of the view that the revenue does not have anything to hold against the assessee in a constructive manner. As regards the Revenue's contention that there has been a violation of Rule 29 of the Appellate Tribunal Rules, 1963 by the assessee, we find the same to be baseless and factually misconceived. This Tribunal on 11-06-2021, in exercise of the powers conferred under Rule 29-31 of the Appellate Tribunal Rules, 1963, had directed the assessee to furnish the income-tax acknowledgments, financial statements and assessment orders of the shareholders. It was in compliance with the directions issued by us that the assessee had furnished a compilation of these 41 documents in the form of paper book and a copy of the same was also submitted with the Revenue. Admittedly, these documents were forwarded to the Ld. AO for his comments and report. It was only after the receipt of remand report from the Ld. AO/ Ld.CIT that this Tribunal has taken these documents on record. The Ld. AR of the assessee has rightly pointed that neither the AO in his report dated 31-08-2021 nor the CIT in his report dated 01-09-2021 have raised any objection to the admissibility of the documents furnished by the assessee in terms of Rule 29 of the Appellate Tribunal Rules, 1963. Hence, in view of the facts as set out in the foregoing, we are unable to agree with the Ld. Standing counsel that there was any violation of Rule 29 of Appellate Tribunal Rules, 1963. Instead, the documents furnished by the assessee, at the instance of this Tribunal, are found to be in compliance with the said Rule. Moreover, these documents were already available with the revenue. 27. Further, the contention of the Ld. Revenue Authorities that the assessee has not appeared before them by itself will not make the transactions to be bogus. We have placed reliance in the decision of the Hon’ble Bombay High Court in the case CIT vs. Orchid Industries Limited Pvt Ltd (397 ITR 136) wherein it was held that: “6. The Tribunal has considered that the Assessee has produced on record the documents to establish the genuineness of the party such as PAN of all the creditors along with the confirmation, their bank statements showing payment of share application money. It was also observed by the Tribunal that the assessee has also produced the entire record 42 regarding issuance of shares ie allotment of shares to these parties, their share application forms, allotment letters and share certificates, so also the books of accounts. The balance sheet and profit and loss account of these persons discloses that these persons had sufficient funds in their accounts for investing in the shares of the assessee. In view of these voluminous documentary evidence, only because those persons had not appeared before the Assessing Officer would not negate the case of the assessee. The judgment in case of Gagandeep Infrastructure (P) Ltd., (supra) would be applicable in the facts and circumstances of the present case. SLP filed against the decision of the Hon’ble High Court was dismissed by the Hon’ble Supreme Court” 28. Similar view was taken by, the Hon’ble Rajasthan High Court in the case CIT vs. Jalan Hard Coke Limited reported in 95 taxmann.com 330, Hon’ble Kolkata High Court in the case of Crystal Networks Pvt Ltd vs. CIT reported in 353 ITR 171, Hon’ble Delhi High Court in the case PCIT vs. Hitech Residency Private Limited reported in 96 Taxmann.com 402, Hon’ble Bombay High Court in the case PCIT vs. Paradise India Shipping Pvt Ltd reported in 84 Taxmann.com 58, Hon’ble Madhya Pradesh High Court in the case CIT vs. Chain House International Private Limited reported in 98 Taxmann.com 47. 29. As noted from the judicial precedents cited above, where any sum is found credited in the books of an assessee then there is a duty casted upon the assessee to explain the nature and source of credit found in his books. In the instant case, the credit is in the form of receipt of share application money from share applicants. The nature of receipt towards share capital is seen from the entries passed in the respective balance sheets of the companies as share capital and investments. In respect of 43 source of credit, the assessee has to prove the three necessary ingredients i.e. identity of share applicants, genuineness of transactions and creditworthiness of share applicants. For proving the identity of share applicants, the assessee furnished the name, address, PAN of share applicants together with the copies of balance sheets and Income Tax Returns. With regard to the creditworthiness of share applicants, as we noted supra, these shareholders not only had capital running in several crores of rupees but their income had also been assessed in several crores and the investment made in the assessee company is only a small part of their capital. All the transactions are also duly reflected in the balance sheets of the share applicants, so creditworthiness is proved. Now if still the Ld.AO had any doubt regarding the creditworthiness of the shareholders, then the only course available with the Ld.AO was to have proceeded against the shareholders as held in the several judgments cited above, but no adverse view could have been drawn against the assessee. The third ingredient is genuineness of the transactions, for which we note that all the shares were allotted within the group entities/ promoter-individuals. It is therefore not a case that the shares privately placed by the assessee were to unknown or complete strangers. The assessee has demonstrated that it was in need of funds for its business and accordingly it had sought equity investment from its group entities/holding company/promoter- individuals. From the above facts it is obvious that the Ld.AO of the 44 shareholders have examined the sources of income of these shareholders U/S 143(3) of the Act and have not drawn any adverse inferences. The income-tax assessment orders passed U/S 143 (3) of the Act in the matters of these shareholders show that the Ld.AOs of the shareholders did not doubt their bona fide existence or the genuineness of their transaction with the assessee. Hence, in our considered view, all the three ingredients set out in Section 68 of the Act had been met by the assessee. 30. Further, we are of the view that the decisions cited by the Ld. CIT (A) and those cited by the ld. AR, the facts are not identical with the facts of the assessee as discussed herein below. (i) CIT vs. NR Portfolio Pvt Ltd reported in 263 CTR 456:- In this case the assessee has only furnished PAN and no other documents. (ii) Nova Promoters and Finlease Pvt Ltd reported in 342 ITR 169:- This is a case where the assessee had received accommodation entries in the garb of share application monies from the entry operators. But in the case of the assessee it pertains to associate companies in the same management / promoters / shareholders viz., sister companies. 45 (iii) Onassis Axles Pvt Ltd vs. CIT reported In 364 ITR 53:- in this case the entire share application money were brought in the form of cash deposits in the bank account of the share applicants on the same day from which pay order was obtained in favour of the assessee for issue of shares. (iv) Shri Chakra Cements Ltd vs. ITO reported in 221 Taxman 181: In this case, no documents were produced to prove the genuineness of the share applicants such as their statement of accounts, IT acknowledgements, bank statements. The source of the share applicants was also not established. (v) Gayathri Associates vs. ITO (221 Taxmann.com 143), Dr. D.S.S. Rao vs. ITO reported in 356 ITR 117, Vijay Kumar Talwar vs. CIT reported in 330 ITR 1: In these cases none of the creditors were traceable and in some instances cash deposits were found in their accounts. (vi) Dhingra Global Credence Pvt Ltd vs. ITO reported in 1 ITR(T) 529:- In this case the assessee had failed to prove even the basic identity of the shareholders and the letters sent to them were returned as ‘unserved’. The shareholders were also not traceable. 31. The Ld. DR placed reliance in 19 decisions of various higher judiciary enclosed in paper book page 1 to 227 with respect to condonation of delay and on merits however, the facts of those cases are 46 not identical with the facts of the assessee’s case before us and therefore those decisions cannot be applied to the case of the assessee. The decisions relied by the Ld. DR are as follows: Mela Ram & Sons (29 ITR 607); Commissioner Nagar Parishad vs. Labour Court (3 SCC 525); Asst. Commissioner LTU vs. Glaxo smith Consumer Health Care Ltd (CA No. 2413/2020); Brahampal @ Sammay & Anr vs. National Insurance Company (CA No. 2926/2020); C.N. Nagaraja and Ors. Vs. The Chief Secretary, Zilla Parishad, Bangalore (2001(3) KCCR 1653); B. Bhadragiri Gowda vs. The State of Karnataka and Ors (2007 (2) KCCR 1021; S.R. Vediappan vs. S.P. Ramalingam (CMP No.7730/2017); S.V. Matha Prasad vs. Lalchand Meghraj and Ors (14 SCC 772); State of M.P. and Anr vs. Pradeep Kumar and Anr ( 7 SCC 372); State of UP vs. Sudhir Kumar Singh and Ors (CA No. 3498/2020); Tuticorin Alkali Chemicals & Fertilizers Ltd vs. CIT ( 93 Taxmann 502); CIT vs. Woodward Governor India (P) Ltd (312 ITR 254); PCIT vs. I-Ven Interactive Ltd (418 ITR 662); PCIT vs. NRA Iron & Steel (P) Ltd (412 ITR 161); NRA Iron & Steel (P) Ltd vs. PCIT 273 Taxman 14; Kale Khan Mohammed Hanif vs. CIT (50 ITR 1); Roshan Hatti vs. CIT (107 ITR 938); CIT vs. P. Mohankala ( 291 ITR 278) and CIT vs. N.R. Portfolio (P) Ltd (42 Taxmann.com 339). 31. To sum up, Section 68 of the Act provides that, if any sum found credited in the year in respect of which the assessee fails to explain the nature and source, shall be assessed as its undisclosed income. In the facts of the present case, we find that both the nature & source of the 47 share application received during the year stands fully explained by the assessee. The PAN details audited financial statements, Income Tax acknowledgments and their respective assessment orders passed U/S 143(3) of the Act have been placed on record. The assessee had discharged its onus to prove the identity, creditworthiness, and genuineness of the shareholders. We find that, the Revenue has been unable to point out any infirmity or defect in these documentary evidence. Hence, the addition impugned before us, which is based on conjectures and surmises is held to be unjustified. For the elaborate reasons as discussed in preceding paragraphs, we have no hesitation in holding that the addition of Rs.311,88,97,960/- made under Section 68 of the Act is completely unwarranted in the given facts of the present case, and hence the same is directed to be deleted. Accordingly, concise Ground No.1 of the assessee’s appeal mentioned herein above is held in favour of the assessee. 32. Ground No.2: Addition of Rs. 15,99,60,041/- on the notional gain arising out of the foreign exchange fluctuation. The Ld. AO has made addition towards gain on foreign exchange fluctuation by relying on the decision of the Apex Court in the case CIT vs. Woodward Governor India Pvt Ltd reported in 312 ITR 254. The Ld. CIT (A) confirmed the addition made by the Ld. AO by stating that assessee has not produced any details towards the same. On perusing 48 the orders of the Ld.AO and the Ld. CIT (A) we find that the addition is made on notional foreign exchange gain and that is not in dispute. As per the provisions of the Act, notional gain or profit cannot be tax unless it has crystalized. Further, fluctuation in foreign exchange will vary from year to year and if there is a loss as per the accounting standards, it has to be casted in the statement of affairs of the entity by providing due provision for the loss. This aspect in case of loss arising out of foreign exchange fluctuation has been upheld by the Hon’ble Apex Court and the same ratio cannot be applied when there is a notional gain. Therefore, the addition made and sustained by the Ld. Revenue Authorities is erroneous. Hence, we direct the Ld. AO to delete the addition made on this count. Accordingly, concise Ground No.2 mentioned herein above in the assessee’s appeal is decided in favour of the assessee. 33. Ground No.3: Addition of Rs. 61,95,95,194/- by capitalising the expenditure as the business of the assessee has not commenced operation. This ground was not pressed by the Ld. AR during the course of hearing. Hence, this ground does not survive. 34. Ground No.4: Additions towards interest charged U/s. 234A, B and C of the Act. 49 This ground raised by the assessee is consequential in nature as the levy of interest U/s. 234A, B & C of the Act are mandatory. Therefore, the ground raised by the assessee is devoid of merits. 35. In the result, appeal of the assessee is partly allowed and the appeal of the Revenue is dismissed. Pronounced in the open Court on 06 th January, 2022. Sd/- Sd/- (CHANDRA MOHAN GARG) (A. MOHAN ALANKAMONY) JUDICIAL MEMBER ACCOUNTANT MEMBER Hyderabad, Dated: 06 th January, 2022. OKK Copy to:- 1) (i) Bramhani Industries Limited, Bramhani Hills, Ambavaram Post, Jammalamadugu, Kadapa District, Andhra Pradesh – 516434. (ii) Bramhani Industries Limited, Bramhani Hills, Ambavaram Post, Jammalamadugu, YSR District, Andhra Pradesh – 516434. 2) (i) The Deputy Commissioner of Income Tax, Circle-1(3), Aayakar Bhavan, AC Guards, Hyderabad – 500 004. (ii) The DCIT, Circle-1(2), B-Block, 7 th Floor, IT Towers, AC Guards, Masab Tank, Hyderabad. 3) The CIT(A)-8, Hyderabad. 4) The Pr. CIT-1, Hyderabad. 5) The DR, ITAT, Hyderabad 6) Guard File